Ijara
Ijara is a lease in which the provider acquires or owns an asset and grants another party the right to use it for an agreed period and rental. Ownership and certain associated responsibilities remain with the lessor, subject to the contract and applicable requirements. Some arrangements include a separate mechanism for transfer of ownership at the end; it must not be assumed in every lease. Identify the asset, lease payments, maintenance terms and risks when comparing financing choices.
Worked example
A finance provider buys a machine and leases its use to a manufacturer for three years. The manufacturer pays agreed rent; whether the machine is transferred at the end depends on the separately agreed terms.
Common mistake
Assuming the customer automatically owns the asset at the start or that every ijara is a loan of cash rather than a lease.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Supporting | September 2026–June 2027 |
| ACCA | FM | Direct | September 2026–June 2027 |