What is Ijarah?


Explaining Ijarah

The term Ijarah is derived from the Arabic language and means “lease”. In terms of financing a property, Ijarah refers to the process in which a financier and client enter into a contract together enabling the client to purchase a property, vehicle or commercial asset in compliance with Islamic Law. 

Ijarah Finance operates under the principle of Rent-To-Own otherwise known as Ijarah Muntahiya Bil Tamleek – A Lease Agreement with the option to own the leased asset at the end of the lease period. In this lease or Ijarah agreement, the rights of both parties are protected via an agreed contract that they each party signs, otherwise known as a letter of offer or Ijarah contract. This contract conforms with the National Consumer Credit Protection Act 2009 (NCCP).

A fundamental aspect to Islamic finance is the importance of sharing risk, avoiding usury and uncertainty. With the Muslim population in Australia sitting at 2.6%, there is a growing demand for finance options that comply with the Islamic faith. This is where Ijarah Finance can make this happen. We provide an opportunity for people to enter the property market and own their property, vehicles or business asset equipment whilst avoiding an interest-based contract.

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