Examining the current practice of Ijarah in Islamic Financial Institutions in Sri Lanka

Abstract

Most of the customer's concern that there are no differences between the Ijarah financing and leasing practice, both follow the same procedures. Therefore, the major objective of this study is to explore how Ijarah financing within the Sri Lankan context to remove the misconceptions mentioned above. For this purpose, a representative sample of two Islamic Financial Institutions were selected, namely LOLC AL-Falah and Amana Bank PLC, in a selected area of Akkaraipattu. The data were collected for this study, from both primary and secondary sources. The primary data were collected by conducting semi-structured interviews with the ‘ten’ practitioners, as well as ‘three’ Shari’ah experts of Sri Lanka are randomly selected. The secondary data were collected from records of selected IFIs, Magazines, Articles, Books, Websites, and recent news publications. The current practice of ijarah was compared with both selected IFIs based shari’ah Framework, for that purpose, content analysis method/documentary was used for analyzing the compared aspects of both. The researchers identified the fact that, while practicing ijarah financing in selected institutions there are few differences the only mismatch with shari’ah standard while most of the procedures are comply with shari’ah within 2 selected financial institutions. Also, this study tries to compare the system of leasing within conventional and Islamic financial institutions. The researchers can feel that both systems are completely different from each one in the ways of Interest +, Shari’ah compliance, and etc. Finally, the researchers point out that there are so many differences between Islamic and conventional side while practicing Ijarah where both they follow different procedures.