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Ijarah Muntahia Bittamleek. 1 definition. Ijarah Muntahia Bittamleek. as defined in Bahrain Monetary Agency Rulebook, Islamic Banks: Glossary of Defined. Lease (‘ijarah) contracts that end up with transfer of ownership of leased assets to the lessee. It can take one of the following forms: (i) A contract tha. Shari’ah Standard No. (9): Ijarah and Ijarah Muntahia Bittamleek Statement of the Standard 1. Scope of the Standard This standard covers operating leases.

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The rental may be paid entirely in advance or in instalments during a period equivalent, or more or less, to the duration of the Ijarah.

Ijarah and Ijarah Muntahia Bittamleek damage to the leased asset by misuse through misconduct or negligence. The excess of the bittanleek part of the rental shall be treated as an advance to the lessor on account, while the lessor shall bear any shortage. However, it is preferable for the Institution to forgo any amount in excess of the actual damage it has suffered.

Islamic Finance | Types of Ijarah Muntahia Bittamleek

Ijarah and Ijarah Muntahia Bittamleek also apply to the case of early ownership of the asset where a sale contract is concluded during the Ijarah. The lessor in this case is not entitled to rent for the period during which the lessee was not able to benefit from the asset unless the lessor makes it up by agreement with the lessee with a like benefit after the expiry of the period specified in the contract.

Ijarah and Ijarah Muntahia Bittamleek covering the duration of the Ijarah contract, or by instalments for parts of the duration.

By IM Research 9 months ago. The lessee should carry out operating or periodical ordinary maintenance. Thus, if the customer, in case of Ijarah associated with a promise to transfer ownership, breaches his promise, the promisor shall be charged either the difference between the cost of the asset intended to mujtahia leased and the total bittamleei rentals for the asset which is leased on the basis of Ijarah Muntahia Bittamleek to a third party, or, in case of operating Ijarah, the promisor breaching his promise shall be charged the difference between the cost of acquisition and the total selling price if sold to a third party by the Institution promisee.

In this case, he is obliged to replace the asset if it is replaceable; otherwise, he is liable for the amount of the damage to be determined by valuation. By using this site, you agree to this use. The period of Ijarah should commence on the date of bitta,leek of the contract, unless the two parties agree on a specified future commencement date, resulting in a future Ijarah, that is, an Ijarah contract to be executed at a future date.

None of these rules should be breached under the pretext that the leased asset was bought by the lessor on the basis of a promise by the lessee that he would acquire it or that ownership of it would devolve upon him, or that he would pay rentals in excess of those payable in respect of a similar property which are similar in amount to the instalments of an instalment sale, or that local laws and conventional banking practices consider such a transaction as an instalment sale with a deferred transfer of the ownership.


In this case, each lessee may benefit from the property during the time assigned to him in accordance with specified rules. If the property is sub-leased after the co-owners having owned the usufruct each co-owner is entitled to a share in the sub-lease rental iiarah rata to his share in the usufruct.

“Ijarah and Ijarah muntahia bittamleek” carried out by Islamic Banks: definition & accounting

However, it is permissible to have a master agreement drawn up coveringa number of Ijarah transactions between the Institution and the customer, setting out the general ijaarh and conditions bittam,eek agreement between the two parties.

It is also permissible to make the rent payable in instalments, in which case the lessor may stipulate that the lessee should immediately pay the remaining instalments if he, after receiving a specified period of due notice, delays, without a valid reason, payment of one instalment or more, provided that the asset shall be made available for the lessee to use for the remaining period of time.

Protection of Capital and Investments – Adoption of the Standard. In this case, the Ijarah transaction should not be stipulated as a condition of the purchase contract by which the Institution acquires the asset.

For example, it is not permissible, if the first rental is one hundred dinars payable on a spot basis, for the lessee to sublet it to the lessor for one hundred and ten dinars payable on a deferred basis, or if the first rental is one hundred and ten dinars payable on a deferred basis, for the second to be for one hundred dinars payable instantly, or if the two rentals are of the same amount, but the payment of the first rental is deferred for one month and the second rental is deferred for two months.

Monetary and Banking Developments – September However, it is for a customer to request an Institution to acquire the asset or to acquire the usufruct of an existing asset which the customer wishes to take on lease. Scope of the Standard This standard covers operating leases of properties or Ijarah Muntahia Bittamleek, whether the Institution is the lessor or the lessee.

Ijarah and Ijarah Muntahia Bittamleek have not yet been paid become a debt owed to the lessor by the lessee, and therefore cannot be increased.

Ijarah and Ijarah Muntahia Bittamleek – Scope of Standard –

Ijarah and Ijarah Muntahia Bittamleek of rental for previous periods, and not all rental instalments, including instalments which have not yet fallen due and in respect of periods for which the lessee has not had the benefit of the leased asset.

However, if the asset is made available only after a period longer than what customary practices deem proper, then no payment shall be obligatory. An Ijarah may be renewed for another term, and such renewal may be made before the expiry of the original term or automatically by adding a provision in the new contract for such renewal when the new term starts, unless either party serves a notice on the other of its desire not to renew the contract.


In this case, the rental specified as receivable by the Institution should only be in proportion to its share in the ownership of the asset, since the lessee is a co-owner of the asset and therefore has to pay rent only on the share that he does not own.

If it is not possible to provide a substitute asset, the contract will be terminated. This website uses cookies to improve services, analyse traffic to our site, deliver content and provide tailored ads.


Termination is also possible when one party secures an option to terminate the contract in which case the party who holds the option may exercise it during the specified period.

In this case, they become co-owners in the usufruct of the leased property. This benchmark should be subject to a ceiling, on both maximum and minimum levels. In this case, there may either be a separate lease contract for each transaction, in a specific written document signed by the two parties, or alternatively the two parties may exchange notices of offer and acceptance by referring to the terms and conditions contained in the master agreement.

The lessor may take this into account implicitly when the lease rental is to be fixed. The lessor may take out permissible insurance on it whenever possible, and such insurance expenses must be borne by the lessor.

In this case the lessee may benefit from the leased share in the same way in which the lessor used to benefit from it, i. In this case, an bittmleek is reached to make the described asset available during the duration of the contract, giving the lessor the opportunity to acquire or to produce it.

This can only be done before entering into a sub-lease.

Ijarah and Ijarah Muntahia Bittamleek an asset that does not conform to the description, then he is entitled to reject it and demand an asset that conforms to the description. In all these muntahja, the separate document evidencing a promise of gift, promise of sale or a promise of gift contingent on a particular event, should be independent of the contract of Ijarah Muntahia Bittamleek and cannot be taken as an integral part of the ijarzh of Ijarah.

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See our Cookie Policy. In such a case, it may not be stipulated that the rest of the instalments should be paid. That is, the difference between the prevailing rate of rental and the rental specified in the contract must be refunded to the lessee if the latter rental is higher than the former. Such benchmark must be based on a clear formula which is not subject to dispute, because it becomes the determining factor for the rentals of the remaining periods.

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