Financing Services and Usufructs using the Ijara Mawsufa fi al-Dhimma Formula in Libya: The Reality of Application and Challenges

Abstract

The study aims to analyze the reality of applying Ijarah (Leasing) contracts for Utilities and Services, specifically the Ijarah Mawsufa fi al-Dhimmah (Forward Lease) structure, in Libyan banks. This structure is viewed as a legitimate and effective alternative for addressing individual economic and financing problems that emerged following the prohibition of bank interest in 2013. Despite its economic significance, the study revealed that the actual implementation of the Forward Lease structure in the Libyan banking sector remains very limited. There is a noticeable continued heavy reliance on conventional Murabahah (Cost-Plus Sale) structures. This deficiency is attributed to a combination of structural and operational obstacles hindering the expansion of these contracts