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Salam and Istisna
Salam and Istisna
Salam and Istisna
Key points
01 Definition, purpose and condition of salam
03 Istisna’a
Salam Definition
Seller undertakes to supply specific goods to the buyer at a future
date in exchange of an advanced price fully paid at spot.
Price is in cash but the supply of goods is deferred.
Salam - Purpose
To meet the need of small farmers who need money to grow their
crops and to feed their family up to the time of harvest.
To meet the need of traders for import and export business.
Conditions of Salam
It is necessary for the validity of Salam that the buyer pays the
price in full to the seller at the time of effecting the sale.
The two contracts cannot be tied up and performance of one should not be
contingent on the other.
SALAM AS A MODE OF FINANCE
Using Salam as mode of finance Bank follows the following steps;
Bank pays the full price against a commodity which will be delivered in future.
A distinct party undertakes to purchase the commodity of same quantity and
quality without referring to the first contract. Like wise Bank can make a
parallel salam contract matching the terms of first salam contract without
referring to it.
SALAM AS A MODE OF FINANCE (cont)
Bank gets the delivery of the commodity and passes on to the other buyer in
parallel salam OR enters in to a sale agreement with the promiser OR makes the
seller of the first salam its agent to sell the commodity
ISTISNA’A
Istisna`a Definition