Instruction 2012-05 on Ijara Tachghilia and Ijara Mountahia bi Tamlik Operations

CENTRAL BANK OF DJIBOUTI
INSTRUCTION 2012-05 ON IJARA TACHGHILIA AND IJARA MOUNTAHIA BI TAMLIK OPERATIONS

The Governor of the Central Bank of Djibouti,
Having regard to Law No. 116/AN/6ème L of January 22, 2011 on the establishment of Islamic banks in Djibouti, Having regard to Law No. 18/AN/06/6ème L of January 22, 2011 amending the Statutes of the Central Bank of Djibouti, Having regard to Law No. 119/AN/06/6ème L of January 22, 2011 on the establishment and supervision of credit institutions and financial auxiliaries, Having regard to Decree No. 2011-10/PRE of January 24, 2011 appointing the Governor of the Central Bank of Djibouti, Has issued this decision:

Article 1:
The provisions of this decision apply to Ijara Tachghilia and Ijara Mountahia bi Tamlik operations conducted by Islamic banks, which are not expressly excluded by another legislative or regulatory text.

Article 2:
Ijara is a leasing contract whereby the bank purchases an asset or equipment and leases it in exchange for a periodic rent determined in the contract. The lease is classified as Ijara Tachghilia when it does not end with the lessee acquiring the leased assets. The lease contract, signed by the bank as lessor, must clearly and precisely include at least the following elements:
The lease is classified as Ijara Mountahia bi Tamlik when it grants the lessee the option to acquire the leased assets.

Article 3:

• The nature of the lease (Tachghilia or Mountahia bi Tamlik)
• The identification of the leased asset and its intended use
• The lessee's option to acquire the leased asset, in the case of Ijara Mountahia bi Tamlik
• The rent and its payment terms
• The duration of the lease
• Maintenance costs
• Guarantees imposed on the lessee and their recovery procedures
• Cases in which a lease is terminated, expires, or renewed
• Mandatory insurance on the leased asset, provided that the bank is the beneficiary

Article 4:
Islamic banks must liquidate assets acquired for leasing purposes that have not been leased within six months from their acquisition date. They must also re-lease or liquidate assets already used in both types of lease operations, either within six months from the contract's maturity date if the lessee has not exercised their purchase option, or from the contract termination date prior to its term for any reason. If an Islamic bank is unable to comply with the aforementioned deadlines for reasons beyond its control, it must refer the matter to the Central Bank of Djibouti.

Article 5:
Islamic banks may not conduct both types of lease operations as lessors of immovable property prior to obtaining prior approval from the Central Bank of Djibouti. This decision shall enter into force upon its promulgation.

Article 6: