What is the Islamic equivalent of a lease?

What is the Islamic equivalent of a lease?

• A. Ijara
• B. Murabaha
• C. Sukuk
• D. Mudarabah

Answer: (A)

Ijara is the correct answer because it represents a leasing arrangement in Islamic finance. Under Ijara, the asset is leased to a client while the ownership remains with the lessor. The lessee pays rental payments, which are agreed upon, making it similar to conventional leasing but compliant with Islamic principles that prohibit interest (riba). In this context, Ijara can be perceived as a financing method that allows individuals or businesses to use an asset without owning it outright. This modality aligns with the Islamic prohibition against earning income from loans or financing that involve interest. The contract may also lead to the possibility of ownership transfer at the end of the lease period, thereby providing a path to ownership while adhering to Islamic regulations. The other options represent different financial contracts or instruments. Murabaha refers to a cost-plus financing arrangement, where the seller discloses the cost and profit margin. Sukuk are Islamic financial certificates similar to bonds that represent ownership in an asset or project. Mudarabah is a partnership where one party provides capital while the other manages the investment. While all of these terms are important in Islamic finance, none fulfill the specific definition of a lease as Ijara does.

Ijara is the correct answer because it represents a leasing arrangement in Islamic finance. Under Ijara, the asset is leased to a client while the ownership remains with the lessor. The lessee pays rental payments, which are agreed upon, making it similar to conventional leasing but compliant with Islamic principles that prohibit interest (riba).

In this context, Ijara can be perceived as a financing method that allows individuals or businesses to use an asset without owning it outright. This modality aligns with the Islamic prohibition against earning income from loans or financing that involve interest. The contract may also lead to the possibility of ownership transfer at the end of the lease period, thereby providing a path to ownership while adhering to Islamic regulations.

The other options represent different financial contracts or instruments. Murabaha refers to a cost-plus financing arrangement, where the seller discloses the cost and profit margin. Sukuk are Islamic financial certificates similar to bonds that represent ownership in an asset or project. Mudarabah is a partnership where one party provides capital while the other manages the investment. While all of these terms are important in Islamic finance, none fulfill the specific definition of a lease as Ijara does.