Under the terms of an Ijara transaction, a financial institution (bank) buys an asset from a manufacturer and then leases it to the customer (or lessee) for an agreed period of time, in return for pre-agreed rental payments.

During this pre-determined period, the title to the underlying assets remains with the bank, while the actual possession of the asset is with the lessee. During the life of the asset, the risk of ownership remains with the bank, while the lessee is liable for any misuse of the asset.

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