The Parameters of Forward Ijarah
The Parameters of Forward Ijarah
The Parameters of Forward Ijarah
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All praise is for Allah; may peace and blessings be upon the Messenger of Allah.
To proceed: Since the last thirty years the Islamic finance industry has made one of its
strategic goals research in the classical Islamic fiqh heritage, the aim being to extract
financial formats and become conversant with their parameters and financing particularities
and put them to use in developing contemporary financial products that comply with Islam‟s
worldview and objectives. This task is difficult in and of itself, as it requires knowledge of
fiqh and finance, as well as awareness of the way financial products are used in the real
world. This research paper strives to examine, from fiqh and financial perspectives, an
important contract format which jurists of the past have discussed and which Islamic banks
have greatly benefited from in many of their applications. I‟m referring to a rental contract
based upon a description of attributes which becomes a binding debt. It has become the object
of a great deal of study with regard to the fiqh issues associated with it, in order to formulate
a sound structure for it and to develop a comprehensive conceptualization of the format in
order to put it to good use in banking applications. In the opinion of the researcher, it is a
necessary preliminary effort, and all research efforts must be expended to further develop it
in the Islamic banking industry.
This paper concentrates on the applications of this contract format in financing the rental of
services. I ask Allah to enable me in the task before me. What is correct in it is from Allah,
and what is mistaken in it is from me and from Satan. I seek Allah‟s pardon for every slip.
And all praise is for Allah, Lord of the Universe.
Topic One
The majority of jurists classified leases, with regard to the locus of the right to the
benefit that is the subject of the contract, into two categories: leases of [particular]
objects and leases that entail an undertaking of responsibility.
1. lease of a [particular] object: The right to the benefit that is the subject of
the contract is related to a specific object; for example, a person leases a
specific house or piece of land or car; or he hires a specific person to sew a
garment or build a wall, etc. Regarding this type of ijÉrah, there is no
difference of opinion among jurists that it is not necessary for the lessor to
receive payment on the spot for the contract to be valid or binding or for
the usufruct to pass to the renter. That is because leasing an object is like
selling it, since a lease is the sale of a benefit in return for a specified
compensation, and the sale of an object is valid whether the payment is
immediate or delayed, so likewise is the lease [of an object].
2. a lease that applies to an undertaking of responsibility: The right to the
benefit that is the subject of the contract is linked to the lessor‟s
undertaking of responsibility; for example, if someone rents a horse of
stipulated qualities for riding or for carrying goods, saying, “I rent from
you a horse with such-and-such characteristics to carry me to such-and-
such a place,” or if someone says, “I will make you responsible for getting
this garment sewn or for getting this wall of the following characteristics
built,” and the lessor accepts that.
1
Translator‟s note: Salam is a sale with advance payment and delayed delivery of the commodity. It is lawful
when the attributes and amount of the commodity and its delivery date have all been specified in the contract.
The Legality of al-IjÉrah al-MawÎËfah fÊ al-Dhimmah
Scholars differ about the legality of al-ijÉrah al-mawÎËfah fÊ al-dhimmah. The ×anafÊs
prohibited lease of the benefits of generic objects determined by specifications and for which
the lessor undertakes responsibility. They stipulated that the object being leased be a
particular object.
The majority of jurists, comprising the MÉlikÊs, ShÉfiÑÊs and ×anbalÊs, considered it
permissible to lease objects that are merely described and for which the lessor undertakes
Therefore, the legality of forward ijÉrah is derived from the legality of leasing contracts and
salam contracts.
1. A lease in which the price is something described for which there is an undertaking of
responsibility
The rental payment due upon the renter/hirer will either be specific, delimited and
its traits. In the latter case it is not rendered void by the destruction of an object that
fulfils the stipulations the lessor/hiree designated for the payment due from the renter;
difference between the two is that the destruction of the object or the appearance of a
parties had agreed to payment in the form of a specific object. However, if they had
they agreed upon, since in this case the condition is not linked to a specific object that
the buyer or hirer stipulated as discharging the responsibility of the seller or hiree; it is
only linked to the type of object that is established as being the financial responsibility
A lease in which the subject of the contract is an action is subdivided into two cases;
the first is when the contract pertains to the person himself; for instance, the other
party says, “I hereby hire you to do such-and-such an act.” The second case is when
the contract pertains to the liability of the person being hired; for instance, the other
party says, “I hereby commission you,” or says, “I‟m giving you these dirhams for the
tailoring of this garment.”3 Here the lease contract does not pertain to the person of
the lessor/hiree, and the performance of the desired action is not restricted to his
person; he is merely responsible for making sure the action is completed. He may
provide:
Many scholars use the term kirÉ’5 for a rental contract of something like a riding
animal, a car or a boat. The subject of such a rental may be a particular object which
is seen and specified at the time of rental, or it may pertain to a type of object
instance, “I assign you the use of it (i.e., the described object) for a year for such-and-
such amount.” If it is a riding animal, for instance, the type would have to be specified
2
MuÍammad SaÑÊd al-BËÏÊ, “Forward IjÉrah”, a paper presented at the 2007 Conference on the Practice of
Islamic Finance and Banking, held in Bahrain, p. 3.
3
TuÍfat al-MuÍtÉj fÊ SharÍ al-MinhÉj, 42:952; See also MuÍammad SaÑÊd al-BËÏÊ, op. cit., p. 4.
4
MuÍammad SaÑÊd al-BËÏÊ, op. cit., p. 6.
5
Translator‟s note: „Charter‟ may be the closest English equivalent.
6
MuÍammad SaÑÊd al-BËÏÊ, op. cit., p. 11.
because animals differ in their usefulness for differing purposes, based on variations
The comprehensive criterion that provides the parameters and rules that govern forward
ijÉrah is thorough specification of the attributes of what it is that will be provided in the
leasing contract, i.e., total commitment to the conditions and parameters of salam contracts.
That is because forward ijÉrah is a salam contract that pertains to benefits, as was already
The following are the most important rules associated with forward ijÉrah:
1. It is not permitted to delay the payment, or make a substitution for the form of
payment agreed upon, or shift responsibility for payment to a third party or to a source
In fact, it is obligatory to make payment on the spot at the time the contract is enacted,
just as for the payment in a salam contract, because this is a salam contract for
usufruct. If the payment is present and observable but its value or extent is not known,
there are two opinions about that, just as for the advanced capital (payment) in a
7
AsnÉ al-MaÏÉlib, 12:161.
8
SharÍ MuntahÉ al-IrÉdÉt, Section: IjÉrah Is of Two Types; 2:252.
salam contract.9 Ibn Rushd said, “One of the conditions of forward ijÉrah, according
to MÉlik, is that payment be immediate, in order to avoid the sale of a debt for a
debt.”10 However the ShÉfiÑÊ and ×anbalÊ schools make a distinction in that regard.
The first case involves forward ijÉrah contracts that are formulated using the term
salam; for instance: “I make over to you (aslamtuka) this amount for the use of a
such-and-such qualifications to build a wall.” If the lessor accepts, the payment must
be received on the spot so as not to turn the situation into the exchange of a debt for a
debt. However, in case the terms salam and salaf (debt) and their related verbs are not
Those who permit forward ijÉrah differ whether immediate payment at the time the
contract is enacted is a condition for the validity of the contract. There are three
a. The ShÉfiÑÊ School requires, for the validity of a forward ijÉrah contract, that the
lessor/hiree receive payment at the time the contract is enacted, just as they
require that the supplier in a salam contract receive payment at the time the
contract is enacted.
9
AsnÉ al-MaÏÉlib, Section: IjÉrah Entailing an Undertaking of Responsibility, in vol. 2.
10
BidÉyat al-Mujtahid, 2:182.
11
SharÍ MuntahÉ al-IrÉdÉt, 2:36.
12
NazÊh ×ammÉd, 28th al-Barakah Symposium on Islamic Economics, Jeddah, 2007, p. 33.
If the two parties separate without receipt of payment, the ijÉrah contract becomes
null and void because a forward ijÉrah contract is a salam contract for usufruct
and, therefore, the same rule applies to it as applies to salam contracts for physical
salam and its derivatives or the term ijÉrah or any other term. In TuÍfat al-MuÍtÉj
it says:
Al-ZarkashÊ said:
13
TuÍfat al-MuÍtÉj fÊ SharÍ al-MinhÉj, the Book of IjÉrah, vol. 6.
the two considerations are equally strong then there are two views within
the madhhab, the most correct being that precedence is given to the wording
because it is the basis from which meaning is derived, which makes
meaning subordinate to it. If the term salam is used in an ijÉrah contract
then the requirement that payment must be delivered on the spot is
indisputable. If the contract is enacted using the term ijÉrah, there are two
opinions, the strongest being that precedence of consideration is given to the
meaning, as in the use of the term hibbah (gift). If he says, “I hereby
purchase from you a garment of the following attributes with these
dirhams,” it takes effect (as a sale, according to the most authentic view)
due to the equal weight of the meaning and the wording, in which case the
most authentic opinion is that the wording is given consideration; thus a sale
takes effect.14
the contract; for a delay of payment means that the transaction turns into the sale
of a debt for a debt and the activation of lingering obligations on each party vis-a-
vis the other, which is prohibited. There is an exception, however: if the renter has
begun to make use of the property―for instance, if the renter has begun driving a
car that has been rented on the basis of stipulated attributes to the place he has
stipulated it transport him to―in that case, delay of payment is allowed since it is
no longer a delayed transfer by both parties. That is because the receipt of the
which means the factor that prevents delay of payment is no longer operative...and
there is no difference in that between a contract enacted using the term ijÉrah and
one enacted using the term salam. The author of ×Éshiyat al-DasËqÊ says:
14
Al-ManthËr fÊ al-QawÉÑid, 2:442.
precludes the hazard of [a delayed payment for] a guaranteed future benefit,
which is not lawful. An example of that would be for the one offering
service to say to the one offering payment: “I will carry you to Makkah for a
specific amount of wheat, which will be a pending obligation upon you to
be paid at such-and-such a date.”15
The MÉlikÊs consider payment within two to three days of contract enactment to
c. The ×anbalÊ School requires payment on the spot for forward ijÉrah contracts
formulated using the terms salam or salaf [and their derivatives]; for instance: “I
hereby make over to you (aslamtuka) this dÊnÉr for the use of a car of such-and-
specifications.” If the service provider accepts the offer, in order for the forward
ijÉrah contract to be valid, payment must be made when and where the contract is
enacted, for this is a salam contract for usufruct. If payment is not received before
the two contracting parties separate, then it becomes the sale of a debt for a debt
(i.e., delayed payment for delayed service), which is prohibited. If, however, the
forward ijÉrah contract is formulated without using the terms salam or salaf,
immediate payment is not a condition for the validity of the contract because it
will not be salam in that case; therefore the conditions associated with it are not
applicable or binding.
If the hiring is for work to be done later, payment is due as soon as the
work is completed, based upon the statement of the Prophet (peace be
upon him): “Give a worker his wages before his sweat dries,” and
because it is one of the two items being exchanged, so when one of
them is made over it is incumbent for the other to be made over as
well, just as in a sale. If they agree to a condition of delayed payment,
15
×Éshiyat al-DasËqÊ ÑalÉ al-SharÍ al-KabÊr, 12:336.
it is permissible, unless the contract is for an undertaking to provide
usufruct. There are two opinions about that in the madhhab:
The first is that it is lawful, because it is compensation for
leasing/hiring,16 so delaying it is allowed, just as in delayed payment
for an object.
The second is that it is not allowed because it is a contract for an
undertaking of obligation, so it is not allowed to delay payment for it,
just as in salam sales.17
The view Dr. BËÏÊ espoused in the paper he presented to the 2007 Conference on
the Practice of Islamic Finance and Banking was “It is obligatory to deliver
payment when and where the contract is enacted because this contract is a salam
contract for usufruct, and it is well known that it is obligatory to hand over
payment on the spot for salam contracts in order to avoid selling a debt for a debt.
Dr. ÑAbd al-SattÉr AbË Ghuddah mentioned a dissenting view about delayed
Services and the Applications of Forward IjÉrah Contracts” presented at the 28th
SharÊÑah Standards favoured the view that it is permissible to delay payment even
when the contract is formulated using the term salam. Dr. AbË Ghuddah did not
16
Translator‟s note: There is a mistake in the Arabic original; ijÉzah was written instead of ijÉrah.
17
Ibn QudÉmah, al-KÉfÊ fÊ Fiqh Ibn ×anbal, 2:169.
18
MuÍammad SaÑÊd al-BËÏÊ, “Forward IjÉrah”, a paper presented at the 2007 Conference on the Practice of
Islamic Finance and Banking sponsored by the Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI) and the World Bank in Bahrain, p. 8.
19
Dr. ÑAbd al-SattÉr AbË Ghuddah, “Parameters for Leasing Services and the Applications of Forward IjÉrah
Contracts” presented at the 28th al-Barakah Symposium on Islamic Economics, Jeddah, 2007, p. 98.
c. The opinion of Dr. NazÊh ×ammÉd
In a paper that he wrote on forward ijÉrah, Dr. NazÊh ×ammÉd stated: “I favour
the ×anbalÊ view that forward ijÉrah contracts are permissible without the
requirement that payment be submitted on the spot, when the contract is enacted
using the term ijÉrah and the like and the terms salam and salaf are avoided. This
makes life easier for people, lightens their burdens and removes hardship from
them regarding the types of financial transactions they need. This is in line with
the statement of AbË YËsuf: “That which is kinder to the people is more fitting
Dr. Ali al-QuradÉdghÊ, in a paper he presented to the European Council for FatwÉ
and Research, advocated the permissibility of delayed payment when the contract
is formulated using the term ijÉrah. He mentioned that while discussing the
Payment must be made on the spot if the contract is enacted using the
term salam. However, if it is enacted using a term like ijÉrah, this is
not a condition of validity, according to one opinion in the ShÉfiÑÊ
madhhab and according to the favoured opinion in the ×anbalÊ
madhhab.21
e. The opinion of the Accounting and Auditing Organization for Islamic Financial
payment for them in its SharÊÑah standard no. 9 specifically for ijÉrah and ijÉrah
20
Dr. NazÊh ×ammÉd, op cite.
21
Dr. Ali al-QuradÉdghÊ, “IjÉrah for Human Services,” Paris: European Council for FatwÉ and Research, 2008.
specifications stipulated in the contract, the renter may refuse to
accept it and demand that which does meet the specifications.22
From what has been presented it is clear that the issue requires further research and
deep ijtihÉd due to its importance in the applications of leasing human services by
Islamic financial institutions. The sound foundation for that will be research into
the objectives of the SharÊÑah that relate to this contractual form in particular.
Guidance can be taken from that in real-world practice by considering the financial
and economic effects. The only manifest rule that we can rely upon for the time
being is that in AAOIFI’s SharÊÑah Standards, since the Islamic Fiqh Academy has
However, there are a number of observations that may serve as a basis that would
contract wording, which rules will we apply? Are they the rules for the lease of
a particular object or the rules for forward ijÉrah? That makes a difference,
c. The apparent meaning of the juristic texts that mention taking into consideration
the contract wording is that they rely upon the wording to indicate the intent of
particularly in the case of modern societies, which rely upon documentation and
22
The Accounting and Auditing Organization for Islamic Financial Institutions: AAOIFI’s SharÊÑah Standards,
Bahrain, 2007, p. 135.
Therefore, this issue will have to be settled by means of the various fiqh
councils after copious and painstaking research of the topic. And Allah knows
best.
This means that the contract requires him to commit himself to making sure that an
act desired by the hirer is executed in a sound and acceptable manner, no matter who
does it and no matter what means are used. Based on that, the lessor can hire
whomever he chooses to execute the act requested of him, and he has the right to
It (i.e., ijÉrah) is of two types: that whose subject is a particular object, like
rental of a particular piece of real estate or animal or person. Or it could be
the undertaking of responsibility, such as rental of a riding animal that
matches certain specifications which the lessor undertakes to provide, or
giving [the lessor] the responsibility of getting a garment sewn or a building
built.23
That is, renting an animal by assigning a person the responsibility of providing a type
of animal requires that the animal meet the stipulated specifications. This is different
from hiring someone to personally do a certain job. ImÉm al-NawawÊ called attention
to that when he said: “If the hirer says, „I hereby charge you with the responsibility of
that you weave it yourself,‟ the contract is not valid due to the imposition of hazard
(gharar).”24
3. If the lessor fails to provide the renter with the rented item at the specified
time―some of them use the expression “flees from [the responsibility]”―the renter
has the option of keeping the contract in effect and accepting the delay, or he may
cancel it.
23
Al-NawawÊ, al-MinhÉj, with al-ShirbÊnÊ‟s commentary, 2:333.
24
Al-NawawÊ, RawÌat al-ÙÉlibÊn, 5:256.
4. The lessor is allowed to use the lease payment for his personal purposes.
An analogy is drawn here with the permissibility of doing so in a regular salam sale.
This is supported by a ÍadÊth collected in Sunan AbË DÉwËd on the authority of ÑAbd
AllÉh ibn AbÊ AwfÉ al-AslamÊ, who related, “We went on an expedition to Palestine
with Allah‟s Messenger (peace be upon him). The Palestinian peasants would come to
us, and we would pay them in advance for wheat and oil at a specified price and for a
specified date of delivery.” He was asked, “From whom would they get it?” He
replied, “We wouldn‟t ask them.”25 The lessor is allowed to use the payment for
It is permitted to take a security deposit from the lessor in a forward ijÉrah contract;
for instance, to take a pledge of corresponding value to the job from a builder who has
contracted to build a house; in case he doesn‟t build the house, the deposit holder has
the right to sell it and use the proceeds to pay someone else to build it. “This is similar
to the sureties government agencies take from those who do work for them to make
o Detailed Rules for Forward IjÉrah Contracts, with Respect to Each Type
25
Sunan AbË DÉwËd, 3:273.
26
ÑAbd al-RaÍmÉn al-JazÊrÊ, al-Fiqh ÑalÉ al-MadhÉhib al-ArbaÑah, 2:220.
says, “Do this, and I will make sure you‟re satisfied,” or “...I‟ll give
you something,” etc., the contact is invalid. If the hiree goes ahead and
performs the task, he is entitled to the going market rate for a job of
that sort. If the terms of his hire are that he gets his living expenses or
Dhimmah).
[It is] a condition (that the specifications of the task and the
time devoted to it should not both be determined); for
instance, someone says, “I contract you (to sew it) i.e., this
27
Al-GhamrÉwÊ, al-SirÉj al-WahhÉj ÑalÉ Matan al-MinhÉj, 1:294.
28
SharÍ al-Bahjah al-Wirdiyyah, 2:206.
garment (in one day),” because he may finish it before the
day is done. If [the hirer] uses his labour for the rest of the
day, he has exceeded what he contracted him for. And if [the
labourer] doesn‟t work, he has left doing so in part of the
time allotted for it, which makes it avoidable deception, and
there is no equivalent to it [in the format that scholars agree
upon].29
29
SharÍ MuntahÉ al-IrÉdÉt, 2:258.
30
FatÉwÉ al-SubkÊ, 2:372.
31
Translator‟s note: JuÑÉlah is a contract to perform a particular action for a particular compensation. In that, it
is a type of ijÉrah, but it is non-binding, so there are fewer conditions for its validity. For instance, someone can
announce, “Whoever finds my lost camel will get such-and-such a prize.” This task could take an hour or a
month, so its indeterminate nature would make it invalid as a binding contract. Also―and this is why it was
cited here―in juÑÉlah the hirer can stipulate, “Whoever sews me a garment like this in one day will get such-
and-such.” If the worker completes it in one day, he is entitled to the compensation, but if he takes longer he is
not. Both parties in juÑÉlah have the option to cancel before the work starts, but once the work starts the
requestor of the work loses that option. See http://www.islam-qa.com/ar/ref/21239.
contract. If he decides to continue it, the service provider has
no option [to refuse].32
1. A forward ijÉrah contract does not become void if the object being
leased should be destroyed. That is not the case if the ijÉrah contract is
defect.
That is because the lessor has the obligation to replace the defective
32
Al-MubdiÑ SharÍ al-MuqniÑ, 6:840.
33
Ibid.
34
JawÉhir al-ÑUqËd, 1:264.
35
Ibid.
3. The lessor must provide services that are subordinate to the
usufruct.
This is different from the lease of a particular object, for which such
al-ÑUqËd:
stipulating the particular person who will actually perform the service,
dissolved, whether the other party has received part of the stipulated
actual service provider dies, the contract is not dissolved; rather the
person.
36
Ibid.
3. If the actual service provider is found to have a defect, the hirer
provided in a manner that enables the hirer to benefit from it. This
provision in the future―in fact, that is how such contracts are normally
the other hand, for a particularized ijÉrah contract the person who will
confirmed.37
Contracts
task and the payment are both specified. IstiÎnÉÑ is similar to ijÉrah
either party to the contract. IstiÎnÉÑ differs from ijÉrah in that the
the task requires that the worker, for instance, dye the material, he
the materials―for that is pursuant to the task, and the job orderer
garment would come to the dyer with his own garment to be dyed,
following points:
37
See Dr. Ali al-QuradÉdghÊ, op. cit.
38
Translator‟s note: IstiÎnÉÑ is a contract of exchange with deferred delivery, applied to specified made-to-order
items. See; http://www.islamic-finance.com/item_istisna_f.htm
forward ijÉrah, since it is salam of usufruct, according to the
usufruct.
39
Ibn Rushd, al-MuqaddimÉt, 5:630.
40
Ibid.
a. In forward ijÉrah the compensation is paid up front, whereas in
for.
41
ShawqÊ DunyÉ, al-JuÑÉlah wa al-IstiÎnÉÑ: TaÍlÊl FiqhÊ wa IqtiÎÉdÊ, p. 61.
42
For instance, to arrange with a person to make ×ajj on behalf of an elderly or sick person who can afford to
go but cannot handle the physical demands of the journey and the rites.
43
Ibn SaÑdÊ, Minhaj al-SÉlikÊn fÊ al-Fiqh.
Topic Two
For instance, hiring to transport a person entails helping them to get in and out of the
vehicle.44
This is based upon the permissibility of using the capital advanced in a salam contract for the
seller‟s personal needs; it need not be related to the production of the contracted commodity,
as was previously mentioned in the rules for forward ijÉrah. Therefore, the lessor/contractor
in forward ijÉrah can use the advance payment, just as in a salam contract, for personal
purposes or for his personal expenses, since this is a salam contract for usufruct. He is not
obligated to spend it specifically on acts related to the provision of the service.45 This
provides flexibility for using this contract format to provide funding for a variety of cash
needs.
3. It is possible to provide the benefit by means of more than one object or entity,
which is the opposite of the rule for particularized ijÉrah, in which only the specific
subject matter of the contract can be supplied for usufruct; whereas in forward ijÉrah
44
ÑAbd al-SattÉr AbË Ghuddah, op. cit., p. 100.
45
Al-TÊjÉnÊ ÑAbd al-QÉdir AÍmad, “Salam is a SharÊÑah-Compliant Alternative for Contemporary Bank
Financing: A Finance and Investment Perspective,” The Sudani Ministry of Finance and National Economy,
The Higher Advisory Committee on Government SukËk, Sudan, 2006, p. 11.
46
ÑAbd al-RaÍÊm al-HÉshim, “Specification and its Impact on Financial Contracts,” University Thesis Series no.
67, ImÉm MuÍammad Ibn SaÑËd University, Riyadh, 2006, p. 55.
Areas for Application of Forward IjÉrah Contracts in the Islamic Finance Industry
Forward ijÉrah contracts are applied in the following areas of the Islamic finance industry:
1. Financing services
2. Investment ÎukËk
The steps for using a forward ijÉrah contract to finance a service can be detailed as follows:
1. The lessor (the financial institution) enters into a forward ijÉrah contract to provide
2. Then the financial institution enters into a forward ijÉrah contract with an entity that
assumes the responsibility of providing the desired service. The following guidelines
must be observed:
a. The financial institution must stipulate that the service provider provide it or a
b. There must be no linkage between the two contracts; i.e., the contract between the
financial institution and the service provider must not be linked to the contract
between the financial institution and the beneficiary of the service. That is because
one does not have the right to act freely [with regard to the benefit] for which
someone else has undertaken specified responsibility before one has taken
possession of the object, i.e., before the particular source of the benefit has been
identified.47
47
ÑAbd al-SattÉr AbË Ghuddah, op. cit., p. 102.
Second: Areas of Application
1. Financing education, training sessions, health services, trips, including ×ajj and
This can occur, for example, when a real estate developer comes up with a plan to
build housing units described with detailed specifications. Then it prepares ÎukËk of
identical value that bestow rights to the benefits of these housing units of detailed
specifications and opens them for public subscription. The ÎukËk should stipulate the
beginning and ending dates of the usufruct rights and other important specifications of
The ÎukËk subscribers will be the renters of the benefits of the specified
The ÎukËk holders will jointly possess the benefits of the specified objects that
the lessor has undertaken the responsibility to provide. They will reap their
When issuing this type of ÎukËk the following SharÊÑah rules must be observed:
providing to the renter, which contains the benefit described in the contract
and which has become a debt obligation of the lessor. That is because the
48
×Émid ibn ×asan MÊrah, “IjÉrah ØukËk: A Jurisprudential Study of Their Foundational Principles and
Application,” The SharÊÑah Group Publication Series No. 1, al-BilÉd Bank, DÉr al-MaymÉn, 2008, pp. 330-331.
objects in which the specified benefits reside vary greatly in nature and price.
The disparity is so great that it is impossible to specify the particular object for
being valid.49
b. It is permitted to securitize the benefits that are the subject matter of the
forward ijÉrah contract, and which have become a debt obligation upon the
lessor. It is then permissible to buy and sell them. That is because a stipulated
contract; so, likewise, it can be traded by the original renter, who gains the
right to it by the ijÉrah contract. He can rent it to a third party, who can rent it
to a fourth party, who can rent it to a fifth. The price can be the same as the
doesn‟t matter if the benefit that the ijÉrah contract bestows right to is
transaction.50
49
NazÊh ×ammÉd, op. cit., p. 344.
50
Ibid., p. 345.
Contemporary Rules and FatwÉs for Forward IjÉrah
1. The rental of services such as teaching, medical treatment, transport, etc. are all
This personality is legally responsible for providing the service, rather than the doctor,
teacher, or means of conveyance. The key issue involved in transforming this type of
ijÉrah from a forward ijÉrah format to particularized ijÉrah is the specification of the
party who will actually provide the service. If the party is specified it becomes a
particularized ijÉrah, and if the party is left unspecified it remains a forward ijÉrah
format. To leave the direct service provider unspecified is the standard banking
practice.51
2. The lessor in forward ijÉrah does not have the right to deliver the rented item before
unless both parties agree at that time; otherwise, the additional period [of the renter‟s
possession] is not to assessed as part of the rental period, which means that the
3. If the lessor delays providing the renter access to the benefit beyond the agreed-upon
starting date, the renter has the right to a refund proportional to the extent of the delay.
4. It is not permitted to structure a forward ijÉrah contract to end with the purchase of
That is because the benefit that is the subject matter of a forward ijÉrah contract is a
debt obligation on the part of the lessor. It does not pertain to a particular item, but
rather to the legal liability of the lessor. That means that he is in compliance with the
terms of the contract as long as he provides any item that contains the benefit he has
51
Decision no. 8/3/2006_1 of the FatwÉ and SharÊÑah Advisory Board of AbË Dhabi Islamic Bank.
contracted to provide the renter/hirer, who has no right to reject that particular item or
demand a replacement as long as the item provided does contain the benefit in accord
with the specifications stipulated in the contract. This logically necessitates the
anonymity of the item by which the lessor can fulfil his obligation of providing to the
renter. The level of indeterminacy is too high for a contract that includes a purchase at
the end of the lease period. That will almost certainly lead to disputes and arguments
between the two parties, and there is no contract provision that will fend off this
eventuality, which means that a forward ijÉrah contract that ends in purchase is
irrevocably invalid.52
Suggestions
1. The controversies surrounding forward ijÉrah, such as the basic issue of its legality
and the permissibility of delaying the payment, should be settled by means of the
ijÉrah. The results should be used as a guide to develop new financial products
4. Research should be done on the risks involved in forward ijÉrah and suggestions
much as possible.
52
NazÊh ×ammÉd, FÊ Fiqh al-MuÑÉmalÉt al-MÉliyyah wa al-MaÎrafiyyah al-MuÑÉÎarah: QirÉ’ah JadÊdah.
(Regarding Jurisprudence of Modern Financial and Banking Transactions: A New Reading), DÉr al-BashÊr,
2007, p. 344.
5. A study should be conducted of financing real estate projects using forward ijÉrah.
APPENDIX: A Financing Contract by Means of Forward IjÉrah
Mustanadiyyah)53
Preface
Whereby the second party (the renter) wishes to lease the services specified in the appendix
attached to this contract, and whereby the first party (the lessor) agrees to guarantee the
provision of those services to the second party in accord with the requirements of a forward
ijÉrah contract and the particular conditions and regulations stipulated below, the two parties,
who are fully legally competent as per the requirements of the Islamic SharÊÑah and the law of
Article One:
The preface above and the attached chart shall be considered integral and inseparable parts of
this contract; and the contract shall be read, completed and interpreted in light of this preface.
The second party acknowledges that he agrees to the descriptions, explanations, constituents,
and specifications of the useful service that is the subject of the contract, that he has accepted
it with those specifications, and acknowledges that it is suitable for fulfilment of the benefit
intended by confirmation of this contract with due consideration to the regulations contained
53
These templates are from Bayt al-TamwÊl al-ÑArabÊ (an Islamic bank) in Lebanon. References to the two
contracting parties, the date, the currency, addresses and signatures have all been removed.
Article Three: The Period of the Contract and the Lease
a. This contract shall commence from the date the second party is enabled to take benefit
from the useful service that is the subject of the contract, and it shall terminate on the
date that the contracted useful service described in the appendix is terminated.
b. This lease shall be executed and the compensation shall be due when the second party
c. The total compensation for this contract shall be __________________ only, nothing
a. The second party hereby pledges to pay the instalments of the lease payment
stipulated in Clause Three of Article Three above to the first party without any
b. The second party has no right to delay payment in the manner clarified in this
contract. In the event that he should delay payment or refuse to pay, the first party
shall, in this circumstance, have the right to claim from the second party due
fulfilment of all its rights proceeding from this contract, as it is also its right to secure
fulfilment of its rights by what may be in its custody of property and deposits
c. The client shall be obliged, should he fail to pay an instalment on time, to give, in
charity to good causes, with the knowledge of the SharÊÑah Board of the Bank, a
percentage of each instalment as determined by the administration; and the client shall
bear all direct procedural expenses incurred by the Bank in seeking restitution for the
a. The second party is obliged to use the service that is the subject of the contract in a
manner that accords with its nature and with the prevailing custom and the
instructions issued by the entity that will be providing the service mentioned in the
attached appendix. Any departure from the regulations applied by this entity shall be
the sole responsibility of the second party, and the first party shall have nothing to do
with that. Therefore, all administrative procedures and relevant laws of that entity
shall be applied to the second party only, and that shall not absolve him of any
b. The second party assumes responsibility for all attendant necessities required for
deriving benefit from the service that is the subject of the contract; that is by
papers and items of similar nature, as may be required for the completion of this
useful service. All such items shall be the responsibility of the second party since they
Article Six: Disposal of the Asset that Is the Subject of this Contract
a. The second party has a right to relinquish the benefit that is the subject of this
contract to ______________, while remaining responsible to the first party for the
b. The second party has no right, without previous written agreement by the first party,
to make any additions, alterations or amendments to the service that is the subject of
the contract, and any unauthorized additions or amendments shall not be considered
subject to this contract, and, as such, they shall be the sole responsibility of the
If the second party should be unable to avail of the service that is the subject of this contract
due to reasons for which he is not responsible and which are not considered unpreventable
and unpredictable―for instance, the entity providing the service entirely stops its operations
―he has the right to request of the first party provision of another entity having qualifications
comparable to the first entity through which he can attain the contracted service.
The first party has the right to dissolve this contract by written notice to the second party if
a. If the second party should renege on any of the obligations imposed upon him by this
contract.
b. If any of the promises advanced or information provided by the second party in this
The second party affirms that he possesses the complete authority and necessary legal
competence to enter into this contract and carry out the obligations contained in it, and that
such execution shall not conflict with any existing law or contract or with any promise or
The second party affirms that he has understood the articles, rules and conditions of this
contract, and that he has not been subject to any type of deception, mistake or any other
Article Eleven: The Law that Must Be Followed, Dispute Resolution and Jurisdiction
a. Everything that is not mentioned in this contract is subject to the laws and prevailing
Islamic SharÊÑah with the proviso that the Arabic text shall be relied upon as the
University of ___________________
(University Address)
Dear Sirs: We wish to inform you that we would like to acquire an academic seat in the
semester / two semesters (Semester _________ and Semester _________) for the academic
We request your confirmation so that we can complete the necessary procedures, after which
the payment due will be delivered; with the knowledge that, should you agree to assign to us
the desired seat(s), we reserve the right to cancel the lease of the aforementioned seat(s)
(Islamic Bank)
TEMPLATE 3B
Ceding Benefit
University of ___________________
(University Address)
Dear Sirs: With reference to your bestowal upon us of an academic seat in the specialization
semesters (Semester _________ and Semester _________) for the academic year
we wish to inform you that we have ceded our right to the benefits of this academic seat to
We are including a check for _______________________ to cover all the tuition and
attendant fees.
Request of a Commitment
University of ___________________
(University Address)
Dear Sirs: With reference to the academic seat awarded by you to the Bank for year
we request you not to give the yearly academic results directly to the student _____________
or his parents/guardian, but, rather, to give them directly to the administration of the Bank as
(Islamic Bank)
TEMPLATE 5B
Request of a Commitment
University of ___________________
(University Address)
Dear Sirs: With reference to the academic seat awarded by you to the Bank in the
specialization of _________________ for the academic year ________, the rights to which
we request you not to give the yearly academic results directly to the student
(Islamic Bank)
TEMPLATE 6A
Contract Cancellation
With reference to the contract signed between the two abovementioned parties for the
both parties have agreed that this contract and all it entails are null and void.
_________________________ ___________________________
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