Ijara means "leasing" in Islamic finance. The bank purchases an asset (car, equipment, property) and leases it to the customer for a fixed period at an agreed rental rate. The bank retains ownership while the customer enjoys the use of the asset.
It works just like renting an apartment. You pay monthly rent, use the space, but the landlord owns it. In Islamic banking, the bank is the landlord. The key difference from conventional loans: the bank must bear ownership risks — maintenance, insurance, and depreciation stay with the bank.
Ijara is one of the most widely used Islamic financing structures globally. It is used for home financing, vehicle financing, equipment leasing, and even aircraft and ship financing. At the end of the lease, the asset may be returned, purchased, or gifted to the lessee.