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Ejarah is a type of financial lease whereby the Bank acquires certain assets or equipment necessary for the work or trade of the client. The Bank then leases the assets or equipment to the client for rental payments over a set lease period. At the end of the lease contract, the ownership of the asset is transferred to the customer upon payment of all dues.
Ejarah contracts are primarily intended to lower operational expenses for clients by eliminating up-front purchase costs. For example, a company owner may prefer to rent heavy machinery for the realization of large-scale projects rather than paying for this equipment up-front, if this expenditure represents a burden on operational capital. The customer would then pay for the equipment in monthly installments. At the end of the project term, the customer would either return the equipment to the Bank, or opt to purchase the equipment by paying all remaining dues.
The possibilities of using ejarah to finance equipment and machinery are broad, so that computer systems, cars, heavy machinery, and any other equipment necessary for the realization of large projects can be leased in this manner.
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