The Islamic Leasing System

This comprehensive study examines the Islamic leasing system (Ijarah) as a distinctive financial instrument within Islamic finance, exploring its theological foundations, operational frameworks, and contemporary applications. Through extensive analysis of scriptural sources from the Quran and Sunnah, along with investigation of classical and contemporary scholarly interpretations, this research establishes the legitimacy and parameters of Ijarah contracts in Islamic jurisprudence. The study systematically delineates the essential principles governing valid Ijarah arrangements, including asset ownership requirements, risk distribution, and usufruct transfer, while developing a detailed typology of Ijarah contracts emerging in modern Islamic finance. Comparative analysis between Islamic Ijarah and conventional leasing reveals fundamental distinctions in ownership responsibilities, interest treatment, and ethical restrictions that reflect the unique paradigm of Islamic economics. The research further examines real-world applications across consumer, corporate, and capital market sectors, alongside the governance frameworks ensuring Shariah compliance in implementation. Despite identifying significant challenges in legal harmonization, operational complexity, and market competitiveness, the study concludes that Ijarah represents more than merely an interest-free alternative to conventional leasing—it constitutes a distinctive financial framework successfully bridging religious requirements with economic functionality, demonstrating the enduring relevance of faith-based financial principles in contemporary markets.