Ijara

Finance ijara (ijara ending in ownership) is a financing structure in which the financier owns the property and leases it to the customer for a set period at periodic rent, with ownership passing to the customer at the end by gift or sale as the contract provides. In Saudi Arabia this structure is governed by the Finance Lease Law issued by Royal Decree No. M/48 dated 13/8/1433H, which requires the lessor to be a joint-stock company licensed to offer finance leasing and the contract to be concluded in writing or electronically and registered in the finance lease contract register. The law lists the ways ownership can transfer: on payment of the dues, on payment of the dues plus a set amount, by a promise to sell at a nominal price, at the agreed price, at the asset's value at the time of sale, or by gift. It differs from informal rent-to-own arrangements between individuals in that the lessor is a licensed entity supervised by the Saudi Central Bank. Its main practical effects: the property remains the financier's throughout the term, so the lessor must obtain cooperative insurance on the asset and may not require it from the lessee, and bears basic maintenance unless agreed otherwise, while the lessee bears operational maintenance. The lessee is liable for loss of the property only through deliberate act or negligence. Ijara also allows variable rent reset for future periods against an agreed index, unlike murabaha's fixed price.