Difference Between Murabaha and Ijara Contracts

– Property Ownership: In a Murabaha Contract, the bank purchases the property and sells it to the client at a markup, with ownership remaining with the bank until all installment payments are completed; once fully paid, ownership is transferred to the client. In an Ijara Contract, the bank or financing entity leases the property to the client for a specified period, during which the client makes periodic lease payments and, at the end of the lease term, has the option to purchase the property at a predetermined price.
– Property guarantee: In the Murabaha contract, the client bears the guarantee and maintenance of the property after purchasing and receiving the property. As for the Ijara contract, the bank bears the guarantee of the property throughout the lease period until the client owns the property.
– Financing Return Variability: In a Murabaha Contract, the markup and installment payments are fixed and not subject to change. In an Ijara Contract, lease payments may be variable under specific conditions.
– Adjusting Financing Return: In a Murabaha Contract, the price cannot be increased after the contract is signed, as it represents a fixed debt owed by the client. In an Ijara Contract, lease payments may be adjusted during the lease period under certain conditions, as they do not constitute a fixed debt.
– Exemption in Case of Disability or Death: In both contracts, if the client becomes permanently disabled or passes away (God forbid), their heirs are exempted from further payments, and ownership of the property is transferred to them.