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I think there are key underlying differences. The first as always being the share of risk and liability between both the leaser and leasee
Another difference I believe is that they’re with Ijara the amount due per instalment e.g. rent, must be fixed and agreed in advance in a non ambiguous manner and cannot be increased later down the line by the leaser
One thing I’m not sure about though is if there can be a late payment fee? I was under the impression that we don’t do late payment fees Islamicly. Can anyone confirm
There are 2 Islamic principals in terms of financing:
I.” It has to be asset-based financing:
The first fundamental principle of Shariah is that as opposed to conventional financial dealing, profit is generated when something having intrinsic utility is sold or offered for use. Money has no intrinsic value. As such dealing in money cannot generate profit unless converted into real assets.”
2nd is that there must be an element of risk involved
This means that one cannot claim a profit or fee for a property/transaction, the risk of which was never borne by him.
Jazakum allahu khairan for the explanation, where is this from if you don’t mind me asking?
What does it mean when you say “money has no intrinsic value”?
Is this not the basis of Ijaarah? so it would be halal right?
To my understanding, if someone lends you money and is basically investing in YOU, so not the asset itself, and if they lose the money, the lender would also lose money too, then I don’t see that as any different to a man buying something for his shop that is in style or trending and hoping he sells a lot and makes a profit, or risks it all. This sounds permissible to me!
It really depends on how the contract is drawn up. Generally a lease and ijarah are synonymous. Some Ijara models are highly problematic.
You can’t rent money, ijara is a rental agreement.
No we can’t have late fees as a fixed part of the contract. However, I do believe it’s possible to claim compensation.
The report might be a bit too technical hence I took out the main 2 points above
I was watching a video where it says late fees are allowed but the money needs to go to charity. So there’s still a penalty in place but the lender doesn’t benefit from it. Is that correct?
I believe it’s referring to the fact that since a few decades ago, currency was de-pegged from gold. Such that now there’s no underlying asset backing pounds or dollars anymore
Could you share the video, to see the reasoning? I don’t see the point in late fees unless it’s for compensation. Late fees for the sake of it are just totlatarian.
Fiat currency has become a store of value in and of itself though. Although in reality it has no intrinsic fixed value.
Hmmm, isn’t that like saying,… if you don’t pay for it, we will charge interest and give the excess to charity? That would be haram, regardless if they benefit or not.