Tuesday, December 4, 2007

Shariah-compliant auto leasing getting popular

by Hina Mahgul Rind from The News (Pakistan)

Various banks are offering auto Ijarah (leasing) to more and more people who prefer Islamic financing for home and car financing to conventional banking system. Sohail Akram, manager at the Car Ijarah Department at Bank Al-Falah, explained that under Ijarah, the lessor (Muaj’ir) is the owner of the financed asset, and the lessee (Mustaj’ir) is given only usage rights. Akram explained that Ijarah is a form of borrowing intended to finance specific assets (plant & machinery, vehicles, or office equipment), the ownership of which remains with the lessor. Ijarah finance is intended for the financing of mainly long-term borrowing requirements between three and seven years. The News has learnt that now many banks have stopped giving auto loans due to the poor recovery rate.

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