Lease-Equity Financing

Definition of "Lease-Equity Financing"

It is a technique followed by some Islamic banks for financing large industrial projects. According to this technique the client gets long-term finance initially in the form of leased assets such as land, building, machinery, equipment, etc. During this period, the client pays rent of these assets to the Islamic banks. After construction, the bank’s investment in these assets is converted into equity capital of the company.