HOUSE ENDORSES ISLAMIC BANK LAW

Aditya Suharmoko , The Jakarta Post , Jakarta Wed, 06/18/2008 10:44 AM HeadlinesThe House of Representatives on Tuesday passed the Islamic banking law aimed at accelerating growth in the industry, while failing to address the issue of double-taxation.Nine of the 10 factions at the House agreed to pass the law, aiming to provide certainty for investors in an industry that has grown rapidly in the past two years.Sharia bank lending increased by 30 percent in 2007, higher than the 25.5 percent lending growth of conventional banks.Melchias Markus Mekeng, a member of the House's Commission XI overseeing financial affairs, said after the session that the commission would try to address double taxation in later discussions with the director...

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DEFINITION

IjaraIjara is a form of leasing. It involves a contract where the bank buys and then leases an item – perhaps a consumer durable, for example – to a customer for a specified rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance. Islamic Bank of Britain retains ownership of the item throughout the arrangement and takes back the item at the end. Ijara-wa-iktanaIjara-wa-iktana is similar to Ijara, except that included in the contract is a promise from the customer to buy the equipment at the end of the lease period, at a pre-agreed price. Rentals paid during the period of the lease constitute part of the purchase price. Often, as a result, the final sale will be for a token sum.Ijara...

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