There are some useful legal and economic characteristics of ijarah contract

1. There are some useful legal and economic characteristics of ijarah contract that distil into its securitization in the form of Asset Ijarah Bonds. It provides flexibility of sale and ownership of the underlying asset without affecting its ijarah contract, independence from synchronization of usufruct and payment flows, flexibility in setting the rent, its term, combination with other contracts, and initiation of the contract without the asset in place. Legal and Economic Features of Ijarah contract and Asset Ijarah Bonds14 Asset Ijarah Bonds (AIB) Definition: ―The AIBs are securities of equal denomination for each issue, representing physical durable assets that are tied to an ijarah contract as defined in the shari‘ah‖. Economic features of shari[ah nominate Ijarah contaract: 1. Flexibility of sale: Ijarah contract in shari‘ah does not restrict the right of lessor to sell the leased asset. 2. Independence of ownership: Persons who share the ownership of a leased asset can dispose of their property by, say, selling it to new owners individually or collectively as they may desire. 3. Flexibility in timing of inflows and outflows: It is not necessary that the flow of usufruct benefits should coincide with the timing of rent payments. 4. Flexibility in initiation: Shari‘ah does not require that the asset- subject of ijarah contract, should be in existence at the time of the contract. 5. Flexibility in length of term: The ijarah contract can be of any length as long as the asset which is the subject of the ijarah contract remains in existence and renders its usufruct. 6. Flexibility in determination of rent: In an ijarah contract, it is necessary that rent must be known. But it can be determined by a variety of flexible ways. 7. Possibility of hybrid with wakalah: An ijarah contract is open for combination with the wakalah contract. 8. Restriction on liability for maintenance: Maintenance expenditures related to the basic characteristics of the asset are the responsibility of the owner, while maintenance expenses related to its operation are to be taken care of by the lessee. 9. Ijarah contract is amiable to securitization in the form of a bond. The 14 Summarized from Kahaf (1997). 29