Tou difference asal mein Islamic Vs Non Islamic ka tou naa hovaa naaa ?
The difference is Finance Lease vs an Operating Lease - Both of whom are present in Conventional Financing !
Yaap you are very much on the point Ijarah is the alternative of Operating lease .....
here is the question ...... Now why one is Islamic and other is not ..... ??
Under Operating Lease conventional organization could finance any thing suited to them ..... they can lease gambling machine or alcohol manufacturing plant, or building for brothel ..... but can we do the same no .... for Ijarah asset must have a valuable use ..... secondly Ijarah contract can not be extended for the consumable, eatable items like fuel, ammunition etc....
Besides in addition to this the Ijara wa iqtina that I'm talking about is a Finance Lease so in a way both the Islamic & the Conventional Banks are doing the same thing where their default categories are different !
One says our standard lease is a Finance Lease whilst the other says that ours is an Operating Lease (an Ijara) but we also have the option of a Finance Lease (Ijara-wa-iqtina) - Kaaam tou eik hiii haiii naaa sirf Arabic Names ka difference haiii !
Now Ijara wal iqtina and Financial lease .....
Dear as you know financia lease transfer the ownership of the asset to the lessee but Ijarah does not transfer the ownership to the lessee ..... in fact ownership can not be transferred to the lessee under Ijarah
than what is Ijara wal iqtina ...... ???
It's '
product' of '
two separate contracts' .... First Ijarah which have to fulfil all the Sharia imposed term & conditions of Ijarah as usual, and there is no relaxation in it .... after the completion of Ijarah term, lessee will not have the ownership, which in the case of Financial lease, lessee will get....
now a separate contract of sales will be made this is the second step and
separate from Ijarah ....
which has expired & asset is free for further business which may be a sales or lease at the discretion of the Owner of the asset .....
so my dear in its basic there is nothing like 'Ijarah wal Iqtana', nor it is any form of Ijarah .... it is product used as alternative for the market of 'financial lease' and
'Ijarah wal Iqtana' is just a name of that product ..... abb tum koi acha name chaoo to woo dey dooo ....
Besides when it comes to Ijara-wa-iqtina - You're calculating your Rental Payment with reference to the KIBOR which is the inflation adjusted interest rate !
Similarly even when it comes to Ijara (Operating Lease) - the Rental is again calculated with reference to the KIBOR which is again the Inflation Adjusted Interest Rate !
How is then Islamic Banking any different when the element of Interest is there ?
I think their approach is wrong !
First Why Islamic banks use KIBOR ....
Dear Islamic banking was in early stages when it was decided to use KIBOR which was the
benchmark of banking Industry with the passage of time many Islamic Banks emerge even the emergence of Islamic windows in Conventional banking sector increase the size of Islamic Banking Industry ..... in 2009 Islamic banks decided to use the alternative of KIBOR and they have already developed the mechanism which is delayed at the SBP
having said that now try to understand that using a '
benchmark' to determine the profit rate does not effect the permissibility of transaction as Haram if it was in compliance with sharia ...... the permissibility or impermissibility depends upon the nature, procedures/mechanism of the transactions.
The element of Interest will be there no matter what unless we change our Economic System at a fundamental level !
Agreed dear it is the same thing which i said earlier many times ..... Interest is an economical problem not a banking problem ..... but reforms in banking sector would eventually lead towards the reforms of sharia compliant economic system ..... it will take time, resources, but it is the ultimate goal.
