Al-jarah wa al-Iqtina'

Definition of "Al-jarah wa al-Iqtina'"

A mode of financing adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, building or other facility for the client against an agreed rental together with an undertaking from the client to make additional payments in an account which will eventually permit the client to purchase the equipment or the facility. The rental as well as the purchase price is fixed in such a manner that the bank gets back its principal sum along with some profit which is usually determined in advance