19 ijarah ijarah vs conventional financial leasing 8

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19 Ijarah
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Ijarah Vs Conventional Financial Leasing 8. The Residual Value of the Leased Asset At the maturity of the finance lease, the asset is normally transferred to lessee for a nominal residual value. (Security Deposit = Residual Value). Excel Sheet Lessor has no further interest in the leased asset. On the other hand, the lessee wants to retain the asset after the expiry of the leased period. This condition, whether express or implied, is not in accordance with the principles of Shari‘ah as one transaction cannot be tied up with another transaction so as to make the former a pre-condition for the other. 20 Ijarah
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Ijarah Vs Conventional Financial Leasing 8. The Residual Value of the Leased Asset The asset is the sole property of the lessor, and after the expiry of the lease period, the lessor shall be at liberty to take the asset back, or to renew the lease or to lease it out to another party, or sell it to the lessee or to any other person. The lessee cannot force him to sell it to him at a nominal price, nor can such a condition be imposed on the lessor in the lease agreement. Therefore, a separate unilateral promise by the lessor is given. It means that lessee has an option to purchase or not. However, if he wants to exercise his option to purchase, the promisor cannot refuse it because he is bound by his promise. 21 Ijarah
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Ijarah Vs Conventional Financial Leasing 9. Sub-Lease The lessee cannot sub-lease the leased asset except with the express permission of the lessor. 22 Ijarah
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Ijarah Vs Conventional Financial Leasing 10. Assigning of the Lease The lessor can sell the leased property to a third party whereby the relation of lessor and lessee shall be established between the new owner and the lessee. Sale of a leasing company. However, the assigning of the lease itself (without assigning the ownership in the leased asset) for a monetary consideration is not permissible. Financing against receivables of leasing companies. Assignment only allowed without monetary consideration. Usually done to collect rentals. 23 Ijarah
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Ijarah Vs Conventional Financial Leasing 11. Securitization of Ijarah Since the lessor in Ijarah owns the leased assets, he can sell the asset, in whole or in part, to a third party who may purchase it and may replace the seller in the rights and obligations of the lessor with regard to the purchased part of the asset. The arrangement of Ijarah has a good potential of securitization which may help create a secondary market for the financiers on the basis of Ijarah. ‘Ijarah Certificates’ being an evidence of proportionate ownership in a tangible asset, can be negotiated and traded in freely in the market and can serve as an instrument easily convertible into cash. 24 Ijarah
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SBP Legal Documents For Ijarah Transactions A. Lease Agreement 1. Definitions 2. Lease 3. 4. Security 5. 6. 7. Delivery of the Lease Asset 8. Use of the Leased Asset 9. Maintenance of Leased Asset 10. Insurance, Accidents, Injuries & Indemnities 11. 12. Return of Leased Asset 25 Ijarah
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SBP Legal Documents For Ijarah Transactions 13. Limitation of Liability 14. 15. Inspection 16. Prudential Regulations 17. Report of Business 18. 19. Lease Key money / Security Deposit 20. Penalty 21. Assignment 22. Force Majeure 23. General 26 Ijarah
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SBP Legal Documents For Ijarah Transactions A. Lease Agreement B. Written Request For Purchase of Assets C. Schedule of Assets D. Receipt of Leased Assets E. Undertaking by Lessee to Purchase the Leased Asset 27 Ijarah
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