Ijārah ending with ownership and its legitimacy: a fiqh perspective

Abstract

Ijārah ending with ownership is one of the Islamic financial instruments which can be utilized by Islamic financial institutions to finance various types of assets such as consumer goods, industrial assets, houses, and motor vehicles. Today, it is predominantly used for vehicle financing. It has been designed by the contemporary Sharīʼah scholars to offer Sharīah compliant alternative solution for conventional hire purchase. Since the demand for ijaīrah ending with ownership was high by individual and corporate customers of Islamic financial institutions, it has grown in popularity in the Islamic financial industry. Notwithstanding its popularity among the customers, there are still ongoing deliberations on the legitimacy of this product due to its compositions. Skeptics argue that this contract consists of multiple contractual agreements in a single contract which is prohibited in Islamic commercial law. Therefore, this study aims to discuss the legitimacy of Ijārah ending with ownership and its compositions from Fiqh perspective. Since this paper is exploratory in nature; the qualitative method of study is used. The primary and secondary data were gathered through the library from the classical literature as well as from the recent publications. The basic principles on ijārah and its compositions are discussed from a classical fiqh point of view particularly on multiple contracts in one contract. The study reveals that though there are certain unavoidable issues that are found, the Ijārah ending with ownership is a sharīah compliant contract that replaces the leasing facility in the industry and fulfills the requirements of customers.