Islamic Banking PBZ

Islamic Banking PBZ Islamic Banking PBZ

Islamic Banking PBZ (IB) is a full fledged Sharia Compliant Bank and is Independent with its own Sharia Board and experience Islamic Bankers. The unit is set-up by The People's Bank Of Zanzibar with the main aim to cater for the needs of Islamic Banking and Finances by the Muslim of Zanzibarian in particular and Tanzanian in genaral.

23/01/2012

Dar es Salaam

Encyclopedia
Dar es Salaam , formerly Mzizima, is the largest city in Tanzania. It is also the country's richest city and a regionally important economic centre. Dar es Salaam is actually an administrative province within Tanzania, and consists of three local government areas or administrative districts: Kinondoni
to the north, Ilala
in the center of the region, and Temeke
to the south. The Dar es Salaam Region had a population of 2,497,940 as of the official 2002 census. Though Dar es Salaam lost its official status as capital city to Dodoma in 1974 (a move which was not complete until 1996), it remains the centre of the permanent central government bureaucracy and continues to serve as the capital for the surrounding Dar es Salaam Region.

History

In the 19th century Mzizima (Swahili
for "healthy town") was a coastal fishing village on the periphery of Indian Ocean trade routes. In 1865 or 1866 Sultan Majid bin Said of Zanzibar
began building a new city very close to Mzizima. He named it from an Arabic
phrase bandar as-salām meaning harbour of Peace. A popular but erroneous translation is "haven of peace" resulting from a mixup of the Arabic words "dar" (house) and "bandar" (harbour). Dar es Salaam fell into decline after Majid's death in 1870, but was revived in 1887, when the German East Africa Company
established a station there. The town's growth was facilitated by its role as the administrative and commercial centre of German East Africa and industrial expansion resulting from the construction of the Central Railway Line in the early 1900s.

German East Africa was captured by the British during World War I
and from then on was referred to as Tanganyika. Dar es Salaam was retained as the territory's administrative and commercial centre. Under British indirect rule, separate European (e.g. Oyster Bay) and African (e.g. Kariakoo and Ilala) areas developed at a distance from the city centre. The town's population also included a large number of South Asians. After World War II, Dar es Salaam experienced a period of rapid growth.
Political developments, including the formation and growth of the Tanganyika African National Union (TANU), led to Tanganyika attaining independence from colonial rule in December 1961. Dar es Salaam continued to serve as its capital, also when in 1964 Tanganyika and Zanzibar merged to form Tanzania. However, in 1973 provisions were made to relocate the capital to Dodoma
, a more centrally located city in Tanzania's interior. The relocation process has not yet been completed, and Dar es Salaam remains Tanzania's primary city.

One of the deadly 1998 U.S. embassy bombings occurred in Dar es Salaam; the other was in Nairobi, Kenya.

Geography

Dar es Salaam is located at 6°48' South, 39°17' East (−6.8000, 39.2833). The city is situated on a massive natural harbour on the Eastern Indian Ocean
coast of Africa, with sandy beaches in some areas.

Administratively, Dar es Salaam is broken into 3 districts:
Ilala, Kinondoni, and Temeke.

Climate

Being situated so close to the equator and the warm Indian ocean, the city experiences generally tropical climatic conditions, typified by hot and humid weather throughout much of the year. Dar es Salaam features a tropical wet and dry climate, with two different rainy seasons. Annual rainfall is approximately 1100 mm (43.3 in) and in a normal year there are two distinct rainy seasons: "the long rains", which fall during April and May, and "the short rains", which fall during October and November.


Population

Dar es Salaam is the largest city in Tanzania with 2.8 million people. With a population rate increase of 4.39% annually the city has become the 3rd fastest growing in Africa (9th fastest in the world) after Bamako and Lagos, respectively. The metro population is expected to reach 5.12 million by 2020.
• 1925: 30,000
• 1948: 69,000
• 1957: 129,000
• 1972: 396,000
• 2005: 2,456,100
• 2010: 3,000,000 (rounded estimate)

Economy and infrastructure

Dar es Salaam is Tanzania's most important city for both business and government. The city contains unusually high concentrations of trade and other services and manufacturing compared to other parts of Tanzania, which has about 80 percent of its population in rural areas. For example, about one half of Tanzania's manufacturing employment is located in the city despite the fact that Dar holds only ten percent of Tanzania's population. Located on a natural harbour on the Indian Ocean, it is the hub of the Tanzanian transportation system as all of the country's main railways and several highways originate in or near the city. Its status as an administrative and trade centre has put Dar es Salaam in position to benefit disproportionately from Tanzania's high growth rate since the year 2000 so that by now its poverty rates are much lower than the rest of the country. The Benjamin William Mkapa Pension Tower with more than 21 stories is the tallest building in the city and the country. One important thing to keep in mind about Dar es Salaam and other Tanzanian cities is that in the past few years there has been a major construction boom, despite the fact that there is a much higher demand for electricity, which is rationed around the country. In the past 10 years, Dar es Salaam has literally had a face-lift, however the major infrastructural problems still remain. Among those problems are an outdated transport infrastructure and power rationing, which continues to badly affect the Tanzanian economy.

Air Tanzania, the national airline, has its head office in Dar es Salaam.

Transportation

The Julius Nyerere International Airport is the principal airport serving the city, named after the country's first President. There is also a railway infrastructure (TAZARA) connecting the coastal town of Dar es Salaam to the neighbouring country of Zambia on its western border.

Culture

Downtown Dar es Salaam includes many small businesses, many of which are run by traders and proprietors whose families originated from the Middle East and Indian sub-continent — areas of the world with which the settlements of the Tanzanian coast have had long-standing trading relations. During the daytime the heavy weight of traffic, office workers, busy merchants, street vendors and restaurateurs of the area lend it a frenetic and slightly claustrophobic air. However, after nightfall the area is relatively quiet as much of the city's nightlife is located in more residential districts away from the city's mainly commercial centre.

The sprawling suburbs furthest from the city centre are generally populated by Tanzanians of African descent, with the exception of Oyster Bay
, where there is a large population of foreign expatriates. Although there is no racial hostility, the various ethnic communities of Dar es Salaam do not tend to mix heavily. The edges of Dar es Salaam are spreading rapidly, severely taxing the transportation network (which aside from ferries, lacks any kind of mass transit facilities) and raising the prospect of future urban overcrowding.

Food

Due in part to the growth of the expatriate community and the increasing importance of tourism, the number of international restaurants has risen very rapidly over recent years. The city now offers a rich and internationalized diversity of cuisine, ranging from traditional Tanzanian Barbecue style options such as Nyama Choma (Roasted Meat - served with Rice or Ugali) and Mishkaki (Shish Kebab - usually barbecued and served with Salt, Hot Peppers, Chapati, Fries, and Rice on the side), and the long-established traditional Indian
and Zanzibari cuisine, to options from all corners of the globe including Chinese, Thai, Turkish, Italian, and Japanese food. Restaurants like City Garden, Addis in Dar, and Best Bite are only a few of the most popular restaurants located in Dar es Salaam. Even fast food restaurants like Steers and Subway
now have prominent place in the restaurant sector of Dar es Salaam. People who prefer neither fast food or traditional restaurants buy their food from street vendors, who usually sell good food for very affordable prices. Primary and Secondary school students are usually more likely to buy food from street vendors other age demographics.

Entertainment

There is also a lively music scene in Dar es Salaam which is divided between several styles. The longest standing segment is live dance bands such as Kilimanjaro, Twanga Pepeta and FM Academia. Taarab which was traditionally strong in Zanzibar has also found a niche but remains small compared both to dance music and "Bongo Flava", a broad category that represents the Tanzanian take on Hip Hop and R&B, which has quickly become the most popular locally produced music. This type of music is especially strong among the youth and it seems that its pull is reducing the interest in performing and hearing dance music. Songs by artists such as Ferooz name check Dar districts such as Sinza. Traditional music, which locally is used to refer to tribal music is still performed but typically only on family oriented occasions such as weddings.

Much like the popular music of other major cities Dar es Salaam's hip music of the day Bongo Flava is a cultural escape for youths that speaks to topics of everyday life such as "HIV/AIDS, scraping a life together, the difficulty of meeting basic needs, class and wealth barriers, holding your head high despite everything."

This Rap scene has been present and growing for the past ten years as City life has drawn much of the youth in surrounding areas have made the trek into a more urban lifestyle in search of a new better beginning.

In the 1970s, the Ministry of National Youth Culture aimed to create a national culture, which stressed the importance of music.Dar es Salaam became the new music center in Tanzania, with the local radio exposing new bands and dominating the music and cultural scene. With this ujamaa, or family, mentality governing culture and music a unified people’s culture was created. Dar es Salaam became a center of city crime, gangs, and violence, which lead to the rise of hip hop music. Throughout the years, the radio in Dar es Salaam has played a major role in the dissemination of music because many people don’t have televisions and cassettes are used over CDs. In addition, creating music in Dar es Salaam involves significant dedication because artists receive little pay due to inadequate copyright laws.

Tourism

A variety of museums, including the National Museum, the Village Museum and the Botanical Garden are all very close by.Within an hour's drive north is Bagamoyo, which is home to the Kaole ruins. There are beaches on the Msasani peninsula north of Dar es Salaam and in Kigamboni to the south where residents and tourists alike frequently visit. Trips to the nearby islands of the Dar es Salaam Marine Reserve are a popular daytrip from the city and a favourite spot for snorkeling, swimming and sunbathing. In addition to that, Bongoyo Island is just a boat ride away from Msasani Slipway. Although the variety and population of coral and fish species are not as numerous as other sites on Zanzibar, Pemba, and Mafia Island, the Bongoyo Island Marine Reserve is well worth a visit and is a great way to spend a day out and see the coast. The National Stadium hosts Dar es Salaam's Young Africans Football Club, Simba Football Club, other Tanzanian football clubs, and many other international matches.

Globalization

Globalization has affected many of the cultural expressions in Dar es Salaam, in particular, hip hop music and culture. The hip hop scene in Dar es Salaam articulates a blending of local cultural struggles and the indigenization of global influences. Hip hop music and culture arrived in Tanzania, taking its cues from various African American styling. Birgit Quade highlights Tanzanian hip hop's connection to US culture when she writes: "What makes hip-hop a global phenomenon is that it draws upon style, music, and look that is not restricted to any local region or language... In the mid-1980s, young people who saw the first hip-hop films and videos coming from America and started break-dancing and rapping." The adaptations of language, fashion, style, and content within Tanzanian hip hop culture have evolved gradually. The result of this evolution has created a localized form of hip hop, often showcasing native dialectic lyrical performances and traditional garbs. While hip hop in Dar es Salaam is a clear reflection of Tanzanian localized struggle and culture, it also engages in and compromises with aspects of Western culture.

According to Eric Achakeng of the University of Adelaide, Globalization has raised some troubling concerns for the developing world, including Africa. One such concern is its impact on urbanization and the ramifications that go with it. Cities are traditionally engines of social modernization and economic growth and at the same time the theatres in which globalization stages its actions. For Africa this has meant fueling the already unprecedented urban growth phenomenon and increasing the challenges that go with it. One key challenge is the management of municipal solid waste. Dar es Salaam, a city which is projected to have over 5 million inhabitants within the next decade, continues to be the one city in Tanzania which villagers flock to for better opportunities, while on the other hand more Westerners and Asians are settling in Dar es Salaam. This surge of foreigners from the West has put more pressure on Dar es Salaam officials to implement laws which would better accommodate the growing diverse population of Dar es Salaam and its suburbs.

Education

Dar es Salaam is also the educational centre of Tanzania. The city is home to many Educational Institutions.

Universities
• The University of Dar es Salaam is the oldest and biggest public university in Tanzania. It is situated on the western side of the city of Dar es salaam, occupying 1,625 acres on the observation hill, 13 kilometers from the city centre. The university is home to approximately 16,400 undergraduates and approximately 2,700 postgraduates.

• Ardhi University has some 2613 registered students (2457 Undergraduates and 156 Postgraduates) as of year 2010/2011. The Institute offers two-year diploma programmes in the fields of Land Surveying and Land Management and Valuation. Moreover, a three-year Diploma program in Urban and Rural Planning was introduced.

• Muhimbili University of Health and Allied Sciences (MUHAS) has two campuses; Muhimbili Campus and Mloganzila Campus. Muhimbili Campus is situated in Ilala Municipality, in Upanga along United Nations Road. Mloganzila Campus is still new and in the process of development and it occupies 3,800 acres and is located 3 km off Dar es Salaam-Morogoro highway, 25 km from Dar es Salaam.

• The Open University of Tanzania is a fully fledged and accredited public Institution of Higher learning, mandated to conduct academic programmes leading to Certificates, Diplomas, Undergraduate and Postgraduate qualifications. In the 15 years of existence, the OUT has enrolled students from Malawi, Uganda, Kenya, Namibia, Hungary, Burundi, Libya, Ethiopia, Rwanda, Saudi Arabia, Lesotho, Botswana and most of the United Republic of Tanzania. As of 2008, the total enrollment at OUT was at 44,099, the majority of which Tanzanian.

• The Hubert Kairuki Memorial University (HKMU) is a private institution located on plot No. 322 Regent Estate in the Mikocheni area, some 7-km from the Dar es Salaam City centre, off Ali Hassan Mwinyi and Old Bagamoyo roads.

• The International Medical and Technological University (IMTU) is a privately owned institute of higher education institution operating in Dar es Salaam.

• Kampala International University- began operations in January 2009 operating from Quality Plaza along Pugu road.Currently, the University Centre is situated on a 60 acres of land, at Gongo la Mboto area in Ilala District, 7 km from Mwalimu Julius Nyerere International Airport along Pugu road.


Other institutes of higher education include:
• The Institute of Financial Management (IFM)
• Dar es Salaam Institute of Technology (DIT)
College of Business Education (CBE)
• The Institute of Social Works
• College of Public Service
• The Mwalimu Nyerere Memorial Academy
• The National College of Tourism
• Dar es Salaam Maritime Institute
• Saint Joseph College of Engineering and Technology

Schools

Dar es Salaam also boasts some of the finest schools in Tanzania, most of which are private. The following are schools that provide secondary education, O Levels and A Levels in Tanzania, according to the National Examination Council Of Tanzania (NECTA) syllabus.

Private secondary education schools include
• St. Anthony's Secondary School-Mbagala
• Loyola High School
• Al Muntazir Islamic Seminary

• The Ali Hassan Mwinyi Elite School
• Agakhan Mzizima Secondary School
• Shaaban Robert Secondary School
• Hindu Mandal Schools
• Kenton High Schools
• Saint Mary's Schools
• Alpha High School


Some of the International Schools in Dar es Salaam are the
• International School of Tanganyika (IST)
• Haven of Peace Academy (HOPAC)
• Dar es Salaam International Academy (DIA)
• Dar es Salaam International School (DIS)
• Laureate International School
• Esacs International Academy
• Indian School Dar es Salaam (India's CBSE Affiliated School) (http://www.isdtz.org/about_us.htm)
• Academic International School


Some of the Leading Government Schools, which are also the largest in the city include
• Jangwani Girls Secondary School
• Azania Boys Secondary School
• Tambaza High School
• Forodhani Secondary School
• Kibasila High School
• Zanaki Girls High School
• Kisutu Girls Secondary School (which offers only O' level)
• Benjamin William Mkapa High School (former City High School)
• Pugu High School (Boys Boarding School outside the city)

Suburbs


Dar es Salaam is divided into three districts: Ilala, Kinondoni and Temeke. All three are governed as municipal councils, and so all of the city's suburbs or wards are affiliated with them.
Kinondoni

Kinondoni is the most populated amongst the districts, with half of the city's population residing within it. It is also home to many of the high-income suburbs. These include:
• Masaki, Oysterbay and Ada Estate
are the posh suburbs located along the central beach. During the Colonial Era, they were the major European suburbs of the city. Now, similarly, many diplomats and expatriots reside in these areas. Oysterbay Beach, also known as Coco Beach, is the only white sandy beach in Kinondoni and is the most famous in the area. Many newly built luxury apartments line the waterfront, accommodating the rapid growth of foreigners, mostly Europeans and Asians.

• Mikocheni and Regent Estate are also suburbs within the district. According to the 2002 census, the wards have a total population of 27,283. Mikocheni is the home of some major political figures including the first president of Tanzania, Julius K. Nyerere.

• Msasani is a peninsula to the northeast of the city center. It's home to many of the expatriates from Britain and other western countries that live in Dar es Salaam. Msasani contains a mixture of traditional shops and western-oriented resorts and stores.

• Mbezi Beach is the beachfront suburb located along the northern Dar es Salaam Beach. It is noted for its beautiful beaches with several tourist hotels, and also as the place of residence of many people of high social status and some politicians.

• Sinza, Kijitonyama, Magomeni, Kinondoni and Mwenge
are more ethnically mixed than the areas mentioned above. These were perhaps the earliest African suburbs to be occupied. The wards also have the most prosperous business climate outside of the central business district, with many shops, bars, restaurants and inexpensive hotels located here.

• Kimara and Mbezi Louis are hilly , mostly middle and upper class, suburbs far from the city. Due to the distance from the city center, it is quieter, with cooler weather.

• Manzese, Tandale, Mwananyamala-Kisiwani and Kigogo are considered low-income neighborhoods characterized by poor settlement planning, low quality housing and social services.

Ilala

Ilala is the administrative district of the city where almost all government offices and ministries are housed. The Central Business District (locally called "Posta") is also located in this district. Furthermore, it is the transportation hub of the city, as the Julius Nyerere International Airport, Central Railway Station and Tazara Railway Station are all within the district boundaries. The residential areas are mainly middle to high-income, and some of these are:
• Upanga & Kisutu have the highest concentration of Asian communities within Dar es Salaam, with many residents of Indian and Arabian descent. These areas are also famous for the many colonial houses and mansions built in Indian, Arabic and European styles.

• Kariakoo is the shopping district of the city, perhaps the busiest and largest in East Africa. Many shops, bazaars and merchants dot the streets, selling a variety of products, from foodstuffs to hardware materials. The Kariakoo Market, which is the largest, contains the only underground section of the city. It is the major supply point of the food consumed by all the residents of Dar es Salaam.

• Tabata, Segerea and Ukonga located a bit far from the city center, these suburbs are growing to become among the busiest in terms of business and entertainment. This has caused serious traffic congestion, which is said to be the worst in all of Dar es Salaam.

• Ilala this is also among the middle income suburbs, very near to the city center, marked by the Askari Monument.

Temeke

Temeke is the industrial district of the city, where the main manufacturing centers (with both heavy and light industries) are located. The Dar es Salaam Port, which is the largest in the country, is also found here. Temeke is believed to have the largest concentration of low-income residents due to industry. Also, many port officials, military and police officers live here.
• Kurasini located right on the Dar es Salaam Harbour, is the home of the Dar es Salaam Port, The Police College, Mgulani Police Barracks and the Dar es Salaam International Trade Fair Grounds. Thus, the main residents are police officers and port officials.

• Chang'ombe, this suburb is one of the only higher income areas in Temeke. It has maintained this status due to occupation by African high colonial officers and some industry owners from the colonial era. Chang'ombe is also the home of the Dar es Salaam University College of Education, The National Stadium and Uhuru Stadium.

• Temeke, Mtoni and Tandika are middle to low-income suburbs.

• Mbagala and Kijichi also are middle to low-income suburbs where Mbagala is the Largest suburb in the whole district, and is also considered a slum.

• Kigamboni (South Beach) is a beach front suburb with very beautiful, sandy beaches. Few people live here due to recent gentrification, where real-estate developers have bought out many of the properties and are trying to transform the area with high-quality, luxury residences. Some of the most famous beach parks and resorts are also in Kigamboni.

Sports

Dar es Salaam is the sports center of Tanzania. Dar es Salaam hosts the largest stadium in East
and Central Africa
(National Stadium
) which can accommodate up to 60,000 people. The city is the home of the most famous and rival Soccer clubs, The Simba Sports Club (Simba) and Young Africans Sports Club (Yanga).
Apart from the National Stadium, Dar es salaam is home to the Uhuru Stadium (used mainly for local tournaments and political gatherings), Karume Memorial Stadium (the home of Tanzania Football Federation /TFF/), the Gymkhana Golf Courses (between the city center and the shores of the Indian Ocean
) and also has Tennis courts, Squash courts and a Fitness club. Outside the metropolitan districts there is the Lugalo Military Golf Course (located in the Lugalo Military Barracks).
Notable people
• Hasheem Thabeet
– Houston Rockets
basketball center
• Marin Hinkle
- actress, Two and a Half Men
TV Show
• Nairn McEwan
, rugby union
player and second national coach was born in Dar es Salaam.
• Roald Dahl
- famous writer, lived and fought in Dar es Salaam (World War II
) for five years
• David Adjaye
- Architect, London-based was born in Dar es Salaam in 1966
The source of this article is wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.

Date 22/1/2012Attendence - 130
23/01/2012

Date 22/1/2012
Attendence - 130

21/01/2012

Ijarah
Leasing is an agreement that permits one party (the lessee) to use an asset or property owned by another party (the lessor) for an agreed-upon price over a fixed period of time. It is a form of asset finance which has the benefit of using assets without the requirements of ownership. The lessee acquires the asset he needs without borrowing on interest and receives the benefits of use while the lessor receives the value of regular rental payments for a specified period plus the residual value of the asset. The lease may be written either for a short-term or for a long-term and its rules are similar to those governing sale because in both cases there is a transfer of one thing between two parties for valuable consideration. However, leasing differs from sale as its mechanism allows the separation between ownership and use; in fact, it does not involve transferring the corpus or ownership of an asset which remains with the lessor.

There are generally two types of leases: a finance lease and an operating lease. A finance lease is mainly a method of raising long-term finance to pay for assets. It provides the lessor with full recovery of its investment and a reasonable profit over the initial non-cancelable lease term. This mode enables enterprises, especially SMEs, to acquire assets, such as capital goods and high cost equipment, for which they do not have the funds to make a large up-front payment that would otherwise be involved in a direct purchase. In this type of lease, the lessor retains ownership of the equipment but transfers to the lessee substantially all of the risks and rewards of ownership of the asset. The lessee is responsible for the insurance, registration and maintenance of the equipment.

Financial leases have some similar feature to secured loans. Both allow a business to use an asset, such as equipment, over a fixed period, in return for regular payments. The business client chooses the equipment it requires and the bank buys it on behalf of the business. After all the payments have been made, the business client becomes the owner of the equipment. The lessor's rate of return is fixed and is not dependent upon the asset-value, performance, or any other extraneous costs. The fixed lease rentals give rise to an ascertainable rate of return on investment. Therefore, by spreading payments out over the lifecycle of the asset, the business is able to align the cost with the benefit derived from the use of the leased asset. The lessor generally would not provide any services relating to operation of the asset. In addition, financial leases are non-cancellable; in fact, the lessee cannot return the asset and not pay the whole of the lessor's investment.

On the other hand, when a risk is involving other than a plain financial risk in a lease, it is an operating lease. In fact, an operating lease is similar to a rental agreement, and is not a finance lease for the purpose of acquiring assets; operating leases take innumerable forms based on the risks the lessor takes or avoids, and the involvement of the lessor in operation of the asset. Operating leases are also referred to as a “non-full payout” leases, because the amount of the rental does not cover the lessor’s full capital outlay for the expected economic life of an asset, the minimum lease payments over the lease term are such as to secure for the lessor the recovery of his capital outlay plus a market return on funds invested and the lease period is always less than the working life of the asset.

The basic features that differentiate an operating lease from a financial lease are related to whether the lessor or the lessee takes on the risks of ownership of the leased assets. In fact operating leases do not put the lessee in the position of a virtual owner; the lessee is simply using the asset for an agreed period. Also, there is always a dependence on the lessee's commitment to pay, as a result, the lessor also takes is asset-based. Its rate of return in an operating lease is dependent upon the asset value, performance, or costs relating to the asset; and is always a matter of probabilities and uncertainty.

Therefore, in an operating lease, the lessor normally holds a stock of assets with high degree of marketability to provide to other entities. He may also provide any services relating to these assets, such as maintenance or operations. The assets remain property of the lessor who has the option to re-lease them every time the lease period terminates. Accordingly, the lessor bears the risk of obsolescence, recession or diminishing demand. In contrast, a financial lease provider operates like a lender except that the lessor has the additional collateral of legal ownership of the assets without any of the risks associated with ownership.

Valid lease
Since leasing is a variety of sale, it is lawful in everything that can lawfully be bought and sold, and the rules of Shari´ah pertaining to sale are also generally applicable to leasing. In fact, any Islamic financing mode should be asset-based there has to be an element of risk taking. In fact, the profit is generated when an asset having intrinsic utility is sold or offered for use; and one cannot claim a profit without bearing the risk connected to the transaction. Therefore, most of the rules relating to the contract of sale come into existence also apply to Ijarah or Islamic leasing. Muslim jurists have, however, singled out some conditions the validity of an Ijarah contract with respect to the asset or service hired and the rental.

The first conditions required in a valid Ijarah are that the two sides of the exchange must both be known and specified in such a way that eliminates the possibility of disagreement and dispute; that the usufruct in question has a financial or market value; The assets from which it is almost impossible to derive any benefit from its use, cannot become the subject of Ijarah; and also the agreement does not involve unlawful activities and substances. The contracted usufruct and the rent should be ascertained clearly and agreed in advance, either for the full period of the lease or for a specified period in absolute terms.

Since leasing transfers the ownership of usufruct from the lessor to the lessee, the former must not only own the assets involved but also be able to transfer the ownership of its benefits to the lessee. If a particular asset is specified for Ijarah, the lease contract cannot be executed before getting of the asset or its usufruct. It is also a requirement of a valid Ijarah that the lease period must be specified and that the lessor retains ownership of the leased asset during the entire period of the lease. Liabilities arising from ownership will be borne by the lessor, while the liabilities relating to the use of the property leased asset will be borne by the lessee. The lessee is liable for any loss to the leased asset due to negligence, but he cannot be made liable for loss caused by factors beyond its control.

The rental can be determined, with the mutual consent of the contracting parties, on the basis of aggregate of the cost incurred by the lessor for the acquisition of the assets to be leased and based on a reasonable rate of return by reference to an agreed benchmark. If the lease is based on a floating rental rate, it is recommended to use a well known benchmark or index to determine rentals of subsequent periods in a long-term lease to avoid any dispute or injustice due to possible fluctuations in the market rate structure and binding nature of the lease contract. The floating rate, however, should be subjected to an upper limit in order to avoid the element of Gharar.

Furthermore, a stipulation may be inserted in the Ijarah contract making late payment by the lessee over a period of time liable to a certain amount of charity. This may provide prevention from late payment even though it does not compensate the lessor for his opportunity cost over the period of default. The lessor may also approach a competent court to award damages for any shortfall. The lessor can also demand payment of an earnest money amount as advance payment of rentals to ensure that the prospective lessee fulfils the commitment to take possession of the asset on lease when purchased by the lessor. If the Ijarah contract is not executed for any reason attributable to the lessee, the lessor can recover from the earnest money the amount of the actual losses suffered loss incurred in this agreement. And unlike normal sale which cannot be effected for a future date, Ijarah for a future date is permissible. The lease period and the lessor’s entitlement to rent, however, begin form the date on which the leased asset has been delivered to the lessee. The rent thereof may be payable in advance before delivery of the asset to the lessee. Any advance rentals must be adjusted against future rentals.

Finally, either the lessor or the lessee can make a unilateral promise to buy or sell the leased asset at the end of the lease period, or earlier, at an agreed price, provided that the lease agreement shall not be conditional upon such sale. On the other hand, the lessor may make a promise to gift the asset to the lessee upon termination of the lease, provided the lessee has fulfilled all the obligations under the contract. There must also not be any stipulation in the contract purporting to transfer of ownership of the leased assets at a future date.

Ijarah Muntahia-bi-tamleek
In the Islamic jurisprudence, one transaction cannot be conditioned by another transaction. Ijarah and sale/purchase transactions are two different contracts and the transfer of ownership in the leased property cannot be made by a sale contract on a future date along with the Ijarah contract. Therefore a ‘Hire-Purchase’ agreement which combines both lease and sale at the time of contract, it is not suitable for Islamic banks.

The method acceptable to Shari´ah is that the ownership remains with the lessor along with all liabilities emerging from ownership. As a result, Islamic banks take the asset risk, bear the ownership related expenses and give or take responsibility for transfer of the asset to the lessee upon termination of the lease. This is done under Ijarah Muntahia-bi-tamleek which includes a promise by the lesser to transfer the ownership of the leased property to the lessee. The transaction basically remains that of Ijarah and the transfer of ownership is kept separate from the main Ijarah contract. Under this arrangement, the bank purchases the asset for the client who then leases the asset from the bank; at the end of the lease term, the transfer of the asset ownership to the lessee is kept separate.

Ijarah shares many common features with financial lease and hire-purchase arrangements. It involves a lessor purchasing an asset and renting it to a lessee for a specific time period at an agreed rental and at the end of the lease period transferring the ownership of the asset to the lessee. However, Ijarah Muntahia-bi-tamleek is different from the conventional leases where the rentals start accruing as soon as the payment for purchase of the asset being leased is made by the lessor; while in Ijarah Muntahia-bi-tamleek, rentals start at the time when the asset is supplied to the lessee in useable form. Also, if the price of the asset is paid to the lessee instead of the supplier, there must be an agency (Wakalah) agreement between the parties prior to the lease agreement that gives authority to the lessee to purchase the asset on behalf of the bank. If the asset is destroyed before its delivery to the lessee in useable form, the loss will be that of the bank and not of the agent. Therefore, the risk of the asset will be that of the bank as long as the client serves as its agent for purchase of the asset while in conventional lease all risks are borne by the lessee.

In addition, is different from a hire purchase and finance lease in the sense that it is an arrangement that does not comprise two contracts in one bargain; in fact, leasing is the real and the major contract; therefore, it is subject to all Shari´ah rules of an ordinary operating Ijarah contract. The transfer of ownership is processed through a separate sale or gift contract. This other part of the deal is only a unilateral promise not binding on the promissee and as such it is not a transaction until actually entered into by the parties. In addition, Ijarah Muntahia-bi-tamleek is a fair arrangement based on justice for both the parties; the lessor recovers cost of the leased asset and also the profit in the form of rentals while the lessee can get ownership title of the asset at the end of the lease period. The lessee is also protected from the loss by the lessor would bear all responsibility for loss of the leased asset, in case of absence of negligence on the part of the lessee.

Potential of Ijarah
There are many Islamic finance structures where Ijarah can be used. Islamic banks use this mode of financing with the purpose of enabling customers to use durable goods and equipment such as ships, housing, heavy machines and plants in productive enterprises who may be unable to buy them for their production purposes. Ijarah has also huge potential as a financing mode for retail, corporate and the public sectors and can also play a crucial role in promoting Islamic finance industry. It can be used as incentive to economic development as it is usually long term and offers potential for stimulating productive industries.

Leasing is an attractive mode of investment for Islamic banks because assets acquired under these contracts are usually of high quality, marketable and maintain their market value well above book value; therefore, the bank does not have to depend so much on the creditworthiness of the lessee, given that as a recourse, it can sell the asset to dispose for cash in case of default. And since the Islamic bank acquires the desired asset only when a client requests it and commits himself to enter into a lease contract with the bank, the possibility of misuse of funds and assets is minimized and the bank can make a profit by setting the rent at a level that covers, over the lease period, the purchase price as well as a return in line with the current rate of mark-up. In fact, Islamic banks can get variable and floating return on long term investments. And although Ijarah is a longer-term financing instrument, a leasing contract can be reviewed periodically. The financing party thus not tied down to a fixed return that may not be in its investment goals.

Furthermore, Ijarah offers the advantage of not requiring collateral and thus of simpler repossession procedures since ownership of the asset lies with the lessor. It also means that it has greater in-built stability to contain inflationary pressures in the economy. The lessor is only exposed to a low level credit risk from the lessee as the lease transaction is, by definition, asset-backed. Ijarah has also become popular due to a tax advantages as the rental can be offset against corporate tax by the lessee.

Finally, Ijarah can be used indirectly for Sukuk issues by the corporate and the government sectors. Ijarah Sukuk represent leased assets without actually relating the holders to any corporate body or institution. Securitisation on the basis of Ijarah is an alternative tool to interest based borrowing provided it uses durable and useable assets. For example, an aircraft leased to an airline can be represented in bonds and owned by a number of Sukuk holders, each of them individually and independently collecting their periodic rent from the airline company. The Sukuk holders are not owners of a share in a company that owns the leased asset, but simply a sharing owner of a part of the aircraft itself. Islamic banks are also able to offer leasing certificates to their depositor clients as specific investment certificates as a form of declining equity. These mechanisms facilitate the formation of fixed assets and can contribute to long term economically beneficial investment.

Address

Stone Town

Alerts

Be the first to know and let us send you an email when Islamic Banking PBZ posts news and promotions. Your email address will not be used for any other purpose, and you can unsubscribe at any time.

Contact The Business

Send a message to Islamic Banking PBZ:

Share