ch 10 - salam n istisna

8/13/2019 Ch 10 - Salam n Istisna

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Forward Sales Salam andIstisna Bai Salam/Salaf Benefits and Economic role of Salam

Features of valid Salam contract

SalamPost Execution Scenarios Salam as a financing technique by IBs

Istisna (order to manufacture)

Concept and features Parallel Salam Contract

Post Execution SenarioIslamic Finance, Dr. Waheed

Akhter, COMSATS, Lahore 1


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Bai Salam Salaf Salamadvance payment for future

delivery of specified goods

Salam vs. Bai Muajjal (credit sale) Specification of quality, weight, price and

time of delivery

Concept of necessityrationale forsalam

Islamic Finance, Dr. WaheedAkhter, COMSATS, Lahore

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Benefits and Economic Roleof Salam No exploitation to any party

Beneficial to both due to genuine need of

business It boosts economic activity as buyers r

not consumers rather traders

Fulfilling of productive & consumptionrequirements of cultivators


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Features of valid Salamcontract Subject matter

Specification of quality & quantity

Salam in currencies (gold, silver,$ etc.)

Payment of price (cash or credit)

Period & place of delivery

Period (varies from 1 day to 3 years)

Specification of place and time of delivery


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Salam Post Execution Scenarios Supply of goods as per contract Failure in supply of goods

Wait until commodity is available

Cancel the contract & recover price Agree for replacement

Supply of inferior goods

Bank may refuse to accept goods

Ask seller to supply any other goods Accept only partly supply & revise the

purchase order


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stisn order tomanufacture Istisna a kind of bai where sale of a

commodity is transacted before it comes

to existence Leather products, shoes, carpentry etc.

Infrastructure & industrial projects,

building of ships, airplanes, machineryetc.


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Subject matter of Istisna Items should be manufactured or

constructed & identified by specification

not designation Specification: kind, type, quantity, quality

Invalid for natural things, fruit, animal etc.

Existing identified vs. unidentified assets

Specification of time & place of delivery


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Price in Istisna

Pricecash, tangible goods, usufruct BOTbuild, operate and transfer

Price should b known in advance

Price change subject to materialmodification (change in input prices)

Murabaha in Istisna is not allowed

Arbunsecurity deposit (down paymentas a part of price)


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ch 10 - salam n istisna

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