Islamic Hire Purchase (Al-Ijarah Thumma Al-Bay’)
Al-Ijarah is an Arabic, which means leasing, having its origins in the Islamic fiqh, while literally means to letting something on leasing or renting. Islamic principles permit the purchase of personal and real property for subsequent leasing at a mutually agreed periodic rent. Under the concept of Ijarah, the assets are rented with full maintenance. Therefore, in addition to owning an inventory of leasable assets, the lessor may also own repair and maintenance facilities. So Al-Ijarah is a contract whereby an asset is transferred from the owner, known as the lessor, to another person, known as the lessee, at an agreed-upon price called the rent, and for an agreed-upon period of time called the term of lease. There are two types of usufruct in al-Ijarah.