What is ijara (Islamic leasing)?

Ijara is a lease contract in which one party (the lessor) allows another (the lessee) to use an asset — property, equipment, or even labor — for an agreed period in exchange for rent. The lessor retains ownership of the asset and remains responsible for major maintenance and risks related to ownership, while the lessee is responsible for use-related upkeep, distinguishing it from a disguised sale. The Quran describes hiring for wages favorably, as in the story of Musa being employed by Shu'ayb, and speaks of paying wet-nurses their due payment for a service rendered — both examples of lawful compensation for use of labor or benefit. Ijara is widely used today in Islamic banking for financing vehicles, machinery, and property, and in a variant called ijara wa iqtina (lease-to-own), the lessee gradually acquires ownership through a separate purchase contract running alongside the lease. Because rent is charged for genuine use of an asset the lessor owns and bears risk on, rather than for the mere passage of time on borrowed money, ijara is considered a permissible alternative to interest-based equipment and property financing.

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