Ijarah

Ijarah Ijarah opines lease, postulate or wage. Generally, Ijarah concept means change benefit or use or service for a fixed equipment casualty or wage. Under this concept, the Bank makes procurable to the customer the use of service of assets / equipments much(prenominal) as plant, office automation, motor fomite for a fixed period and price. Advantages Of Ijarah The adjacent are the advantages of Ijarah to lessee 1)Ijarah conserves capital as it may provide 100% financing. 2)Ijarah enables the Lessee to pass the use of the equipment on allowance of the original rental.This is important since it is the use (and non ownership)of the equipment that generates income. 3)Ijarah arrangements are flexible because the terms and rental cookery may be tailored to subject the needs of the Lessee. Therefore, it aids corporate readying and budgeting. 4)Ijarah is not borrowing and is because not required to be disclosed as a liability in the correspondence Sheet of the Lessee. Bei ng an off sense of equilibrium sheet financing, it is not included in the computation of gearing ratios imposed by bankers.The borrowing capacity of the Lessee is therefore not impaired when leasing is resorted to as a mean of financing. 5)All payments of rentals are treated as payment of operating expenses and are therefore, fully tax-deductible. Leasing therefore offers tax-advantages to profit making concerns. 6)There are many types of equipment, which becomes obsolete before the end of its authentic economic life. This is particularly true in high technology equipment like computers.Thus the danger is passed onto the Lessor who will undoubtedly charge a premium into the lease rate to cross for the risk. A Lessee may be impulsive to pay the said premium as an insurance against obsolescence. 7)If the equipment utilize is for a relatively short period of time, it may be more profitable to lease than to buy. 8)If the equipment is used for a short duration and the equipment ha s a very poor second croak value (resale value), leasing would be the best method acting for acquisition