Kariman Samir Assignment no 3.docx

Kariman Samir Assignment no 3.docx - Islamic Finance...

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Islamic Finance Assignment no.#3 Ijara Contract case study Presented to Dr: Lobna El Dessouky Email: [email protected]
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CASE STUDY QUESTIONS 1. Outline the key differences between conventional leasing and Islamic leasing. Ijara and conventional lease both are types of leasing and are two similar concepts. However there are some specific prohibitions which render conventional lease to be forbidden under Shariah, like as: Conventional Leasing Islamic Leasing (ijara) Scheme: The conventional financing schemes provide financing for purchasing a car; that is, in essence the financier is giving a loan and charged an interest . Ijara – is based on a lease contract. It is not a financing scheme; rather it is a lease contract. Leasing is a contract whereby usufruct rights to an asset are transferred by 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 . Rentals versus Instalments A conventional car financing scheme is actually an interest- based loan given by the financial institution, with interest being charged on the loan. Islamic car financing is based on pure rentals. In Car Ijara the asset remains at the ownership and risk of the bank and the customer only pays the rental for use of the asset, just like the rent for a house. Ownership: (banks, leasing companies etc.) retains the ownership of the asset throughout the term of the contracts. (lessor) is the owner of the leased property Risk bearer & Loss: The lessor assumes and manages the risk of the asset. The loss or any other damage to asset is lessee’s responsibility. The car is purchased in the name of the bank from the dealer and so the risk remains entirely with the bank . The lessee is responsible for any loss caused to the asset by misuse or
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negligence. The lessee can also be made liable for the wear and tear, which normally occurs during its use. But the lessee cannot be made liable for a loss caused by factors beyond his control. Down- Payment versus Security Deposit The down-payment and the security deposit are one-time payments. The down-payment remains with the bank, and no buy-back of the car can occur against the down- payment. Down-payment is made by the buyer of the car. The down-payment and the security deposit are one-time payments. because the buyer can buy back the car against the security deposit in the case of Ijara , There is a minimum and a maximum requirement for the security deposit.
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  • Fall '18
  • Leasing, Car, Leasehold estate, Rental agreement

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