Islamic finance transaction structures

Ijarah

Ijarah can be seen as the Islamic financing equivalent of leasing and is often considered a hybrid between conventional operational and finance leases. The financier purchases an asset at the customer's request. This asset is then leased by the financier to the customer in return for rent paid to the financier. Title to the asset itself remains with the financier—it is simply the usufruct (the right to use or enjoy the asset) that is transferred to the customer for the term of the lease.

For further details, see Practice Note: Structure and key features of an Ijarah transaction.

Istisna'a

Istisna'a is a contract for manufacture or development and is commonly used in project finance to fund large-scale industrial projects or major assets which are not yet in existence. The financier will instruct a supplier to procure the manufacture,