Ijarah

Ijarah Ijarah toy withs lease, lock or wage. Generally, Ijarah concept means change benefit or use or service for a fixed set or wage. Under this concept, the Bank makes ready(prenominal) to the customer the use of service of assets / equipments such(prenominal) as plant, office automation, motor fomite for a fixed period and price. Advantages Of Ijarah The sp atomic number 18-time activity are the advantages of Ijarah to lessee 1)Ijarah conserves capital as it may provide 100% financing. 2)Ijarah enables the Lessee to entertain the use of the equipment on wages of the head start rental.This is important since it is the use (and non ownership)of the equipment that generates income. 3)Ijarah arrangements are flexible because the terms and rental readiness may be tailored to reconcile the needs of the Lessee. Therefore, it aids corporate formulation and budgeting. 4)Ijarah is not borrowing and is and so not required to be disclosed as a liability in the sense of equilib rium Sheet of the Lessee. Being an off balance sheet financing, it is not included in the computation of gearing ratios imposed by bankers.The borrowing capacity of the Lessee is therefore not impaired when leasing is resorted to as a mean of financing. 5)All payments of rentals are treated as payment of operating expenses and are therefore, fully tax-deductible. Leasing therefore offers tax-advantages to profit making concerns. 6)There are numerous types of equipment, which becomes obsolete before the end of its positive economic life. This is particularly true in high technology equipment like computers.Thus the bump is passed onto the Lessor who will undoubtedly charge a premium into the lease rate to reanimate for the risk. A Lessee may be will to pay the said premium as an insurance against obsolescence. 7)If the equipment apply is for a comparatively short period of time, it may be more profitable to lease than to buy. 8)If the equipment is used for a short duration and t he equipment has a very poor second collapse value (resale value), leasing would be the best system for acquisition