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Erudite AfricaCenter of Excellence
← Interest Free Banking Financing: Practitioner

Ijarah and Diminishing Musharakah

Module 03 / 9 · 65 min

Finance the use of an asset through Ijarah, and joint ownership that passes to the customer through Diminishing Musharakah, with schedules that follow ownership.

In this module you will learn to

  • Explain what the bank as lessor must carry in an Ijarah and what the customer as lessee carries
  • Calculate an Ijarah rental schedule and apply an agreed rent review
  • Structure the transfer of ownership at the end of an Ijarah through a separate promise
  • Build a Diminishing Musharakah unit buy-out and rent schedule
  • Compare Ijarah, Murabaha and Diminishing Musharakah for a machinery or building request

Built on

  • Erudite Africa training outline: Interest Free Banking Financing, Three-Level Course, Level 2 Practitioner (October 2026)
  • A typical Ethiopian bank's IFB financing business procedure (May 2025), unnamed: definitions, governance, roles, modes, products, processing, pricing, collateral and disbursement
  • AAOIFI Sharia'h Standards, including No. 8 Murabaha, No. 9 Ijarah, No. 10 Salam and No. 11 Istisna'; the host bank's Sharia'h Advisory Committee rulings take precedence in that bank
  • NBE Directive No. SBB/72/2019, Licensing and Authorization of Interest Free Banking Business; Directive No. SBB/91/2024, Bank Corporate Governance; Directive No. NBE/INT/13/2026, Interest Rates (As Amended)
  • NBE Foreign Exchange Directive No. FXD/01/2024 as amended, including Directive No. FXD/05/2026

Examples and companies are fictional. Bank practices are shown as typical Ethiopian practice, not as any one bank's policy. Always apply your own institution's approved policy and the current NBE directives.