Ijarah & Murabahah
Understanding Islamic Contracts • Module 2 of 4
Ijārah (Leasing)
A leasing contract where the owner of an asset (lessor) transfers its right to use (usufruct) to another person (lessee) for an agreed period and rental payment. The ownership of the asset always remains with the lessor, who is responsible for major maintenance. It must be a real asset, not a debt obligation.
Example: Example: A company leases construction equipment for a project, paying a fixed monthly rental fee. The leasing company owns the asset.
Murābaḥah (Cost-Plus Sale)
A sale contract where the seller explicitly discloses the cost of an asset and adds a specified profit margin (markup). The key condition is that the seller MUST own the asset before selling it to the client. It is widely used for asset financing but is sometimes criticized when used to synthetically replicate loans.
Example: Example: A business needs a truck. The financier buys the truck for $50k, then sells it to the business for $55k on a deferred payment plan.
Key Difference
Ijarah is a rental contract where ownership never transfers. Murabahah is a sale contract where ownership transfers for a pre-agreed markup.