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Corporate Banking
Ijarah


Ijarah to Lease-to-own – Real Estate or Assets
When to use Ijarah Lease-to-Own?

Ijarah is an agreement where the Bank purchases and possesses a property or asset identified by the customer and leases it to the customer at agreed rent and terms, with a promise from the bank to sell the property or asset back to the Customer at the end of the lease period at a market price through a separate sale contract.

Product Description:

Under this contract, the Bank acquires the property or asset identified by the customer and leases it to the customer at an agreed rent for an agreed lease term. The customer shall promise to purchase the property at the end of the lease period at a pre–agreed price.

Features & Benefits:
  • Rental payment could be monthly, quarterly, semiannually or annually.
  • Period of the lease shall be determined in clear terms at the time of the contract.
Requirements:
  • Audited financial statements for the last three financial years along with the cash flow statements for these three years
  • New evaluation of the property or asset.
  • Legal documents of the customer.
  • Official facility request
Cost of Financing

Rate: fixed rate (CBK discount rate + %).

Terms & Conditions:
  • The property or asset shall be purchased by the Bank from the seller (initial owner) and shall be registered under the Bank’s name.
  • Ownership of the leased property or asset remains with the Bank and all rights and liabilities relating to ownership are borne by the Bank.
  • The lessee (customer) shall be responsible for the consumerism property’s /asset’s maintenance.
  • Granting the facilities are subject to internal assessment and approvals.
  • The Bank may reconsider its margin of profits in respect of any funding transaction, provided that, the Bank shall inform the customer with the new profit margins.
  • The customer shall disclose to the Bank all parties which are considered legally or financially related to the customer pursuant to the definition specified in the Central Bank’s directives in respect of maximum limits of credit.
Q & A:
  • Q: What are the assets that can be facilitated through Ijarah to Lease-to-own?
  • A: Assets include but not limited to cars, Machines, etc. as long as it is acceptable by Shariaa’ view.
  •  Q: Can the lessee (customer) request to terminate the Ijarah contract prior the maturity date and purchase the rented property or asset?
  • A: Yes, subject to the Bank approvals.

Ijarah Sale Leaseback – Real Estate or Assets
When to use Ijarah Sale Leaseback?

Ijarah Sale Leaseback is an agreement where the Bank purchases and acquires the property or asset from the Customer and leases it to the customer at an agreed rental for an agreed lease term through a different lease contract. The Bank will then sell the same property or asset back to the customer at the end of the lease period at a market price through separate sale contract.

Product Description:

Under this contract, the Bank acquires the property or asset that is owned by the customer and leases it to him/her at an agreed rent for an agreed lease term. The Bank shall promise to sell the property back to the customer at the end of the lease period at the market price. The benefit of Leaseback is granting the customer funds to utilize for other purposes such as purchasing another asset/property.

Features & Benefits:
  • Rental payment could be monthly, quarterly, semiannually or annually.
  • Period of the lease shall be determined in clear terms at the time of the contract.
Requirements:
  • Audited financial statements for the last three financial years along with the cash flow statements for these three years
  • New evaluation of the property or asset.
  • Legal documents of the customer.
  • Official facility request
Cost of Financing

Rate: fixed rate (CBK discount rate + %).

Terms & Conditions:
  • The property or asset shall be purchased by the Bank from the customer and shall be registered under the Bank’s name.
  • Ownership of the leased asset remains with the Bank and all rights and liabilities relating to ownership are borne by the Bank.
  • The lessee (customer) shall be responsible for the consumerism property’s /asset’s maintenance and the bank shall be responsible for the main property’s/asset’s maintenance.
  • Granting the facilities are subject to internal assessment and approvals.
  • The Bank may reconsider its margin of profits in respect of any funding transaction, provided that, the Bank shall inform the customer with the new profit margins.
  • The customer shall disclose to the Bank all parties which are considered legally or financially related to the customer pursuant to the definition specified in the Central Bank’s directives in respect of maximum limits of credit.
Q & A:
  • Q: What are the assets that can be facilitated through Ijarah Sale Leaseback?
  • A: Assets include but not limited to cars, Machines, etc. as long as it is acceptable by Shariaa’ view.
  • Q: Can the lessee (customer) request to terminate the Ijarah contract prior the maturity date and purchase the rented property or asset?
  • A: Yes, subject to the Bank approvals.