Instructions for Classification and Treatment of Ijarah Muntahia Bittamleek at Licensed Islamic Banks No. 13/2025

Central Bank of Jordan
CENTRAL BANK OF JORDAN

Reference No.: 10 / 1 / 16712
Date: 30 / 4 / 1447 AH
Corresponding to: 6 / 10 / 2025 AD

Instructions for Classification and Treatment of Ijarah Muntahia Bittamleek at Licensed Islamic Banks No. (13/2025)

Following the Instructions for Classification of Credit Exposures and Calculation of Impairment Provisions No. (2024/8) dated 30/6/2024, and taking into account the requirements of the standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the following provisions shall apply to Ijarah Muntahia Bittamleek:

1. Receivables of rental installments that have become due and unpaid in Ijarah Muntahia Bittamleek shall be classified, and impairment provisions against them shall be calculated - as a minimum - as follows:

Classification Category	Payment Default Period	Impairment Provision
Acceptable Risk	Less than (30) days	According to the requirements of the Financial Accounting Standards issued by AAOIFI No. (2020/6) dated 5/7/2020
Under Surveillance	Equal to or exceeding (30) days and not exceeding (89) days	50%
Non-Performing	Equal to or exceeding (90) days	100%

2. The Bank's Risk Management Department must monitor the volume of due rental installments (including those classified as non-performing) and submit periodic reports to the Risk Committee emanating from the Bank's Board of Directors, including necessary recommendations regarding them.

3. In the event that due rental installment receivables are classified as non-performing, and subsequently a modification is made to the contractual terms agreed upon with the customer, the following must be adhered to:
   a. Modification of the classification category of these credit exposures or reversal of the provision made against them is not permitted until a testing period of no less than (6) months has elapsed, with the period calculated from the due date of the first installment for the customer according to the new contractual terms, and the necessary evaluation must be conducted to verify the improvement in the customer's credit status after their compliance with paying the rental installments incurred during the aforementioned testing period. b. Revenues and commissions on due rental installment receivables must be suspended immediately upon the application of non-performing debt classification rules, and they shall not be returned to revenues until the customer complies with paying the installments due during the testing period.
   c. Ijarah receivables may be reclassified into the "Under Surveillance" and/or "Acceptable Risk" categories in accordance with the Bank's approved risk management policy, provided that the customer complies with paying installments on their due dates according to the new contractual terms.

4. The classification of due rental installment receivables classified as non-performing, for which no modification has been made to the contractual terms, may be modified to the "Under Surveillance" or "Acceptable Risk" category according to the actual situation at the time when the customer pays the dues owed, provided that this complies with the Bank's approved risk management policy.

5. In the event of a modification to the contractual terms specified in Ijarah Muntahia Bittamleek contracts for which the related rental receivables have been classified as "Under Surveillance," it is left to the Bank's discretion to determine whether the customer should be subjected to a testing period before modifying the classification, in accordance with the Bank's approved risk management policy.

6. Existing exposures (of any kind) with any customer whose rental receivables have been classified as non-performing shall not be increased until the classification is improved to a better category.

7. In the event that the definition of non-performing applies to Ijarah rental receivables, all other customer accounts must be classified as non-performing, and impairment provisions on the remaining accounts shall be calculated in accordance with the provisions of the prevailing instructions.

8. It is not permitted to settle credit exposures that have been classified as non-performing or any part thereof by arranging an Ijarah Muntahia Bittamleek from the Bank to any of the customers related to the customer or having an influential interest with them or their relatives up to the third degree.

9. In the event that the Central Bank identifies deficiencies in the Bank's procedures for identifying risks associated with Ijarah Muntahia Bittamleek assets, the Central Bank will consider issuing special orders containing corrective measures for any aspects of the deficiency, including the monitoring of impairment provisions at percentages determined by the Central Bank.

10. The Bank must prepare policies and work procedures governing Ijarah Muntahia Bittamleek to meet the requirements of these instructions at a minimum, starting from the establishment of the relationship with the customer until the transfer of ownership of the leased assets, and must include cases of contract termination, whether by mutual agreement or forcibly.

11. These Instructions shall be effective from 1/12/2025, and the Bank must take the necessary measures to prepare the systems required to implement these Instructions on the date of their effectiveness.

12. The Bank must provide the Central Bank with data related to these Instructions according to the attached forms, on a quarterly basis, with a maximum deadline at the end of the month following the date of the data.

13. The Instructions for Classification and Treatment of Ijarah Muntahia Bittamleek at Licensed Islamic Banks No. (60/2014) dated 17/11/2014 are hereby repealed.

Governor
Dr. Adel Al-Sharqah