What is Ijarah System?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The Ijarah System is known as a system in which a fixed amount is paid by the farmers to the state. In return, the state offered the revenue farmers considerable freedom in the assessment and collection of taxes. This allowed new social groups such as moneylenders and bankers to influence the management of the state’s revenue system.

Ijarah System

The meaning of Ijarah is Revenue cultivation. This was a well-known practice in the land revenue administration under the Sultans of Delhi. It was introduced in Bengal during the reign of Jahandar Shah to increase the revenue of the state, which was supported by Nobel Zulfiqar Khan.

When farmers could not cultivate the land due to the non-availability of resources or some calamity, the land was passed over to a third party called the revenue farmer.

Types of Ijarah System

There are various types of Ijarah systems such as Ijarah thumma al bai’ (hire purchase), Ijarah wa-iqtina (or al-ijarah muntahia bitamleek), and ijara mawsoofa bi al dhimma.

  • Ijarah thumma al bai’ (hire purchase): An Ijarah transaction includes two elements: a purchase agreement and a lease. While finding the property people negotiate the price and other aspects of the purchase.
  • Ijarah wa-iqtina (or al-ijarah muntahia bitamleek): This can include both a lease contract and a sales contract. However, in an Iqtina contract, a transfer of ownership occurs when the lessee pays the purchase price of the asset – anytime during the term of the lease.
  • Ijarah mawsoofa bi al dhimma: The service or benefit being leased is well-defined, but the particular entity providing that service or benefit is not identified. Thus, if the entity providing the service or benefit is destroyed, the contract is not void.

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