This chapter explains the concept of salam and istisna'a in the Islamic finance framework. Bai' Salam is an ancient form of forward contract wherein the price was paid in advance at the time of making the contract for prescribed goods to be delivered later. Forward sale in the form of salam has been allowed by the shariah with such a structure that it becomes free from riba, gharar and, therefore, from exploitation of one party by the other. It is rather based on genuine need of the business and, therefore, beneficial to both buyer and seller. Islamic banks can use istisna'a for manufacturing of high technology goods like aircraft, ships, buildings, dams, highways, etc. It can also be used for housing and export financing, meeting working capital requirements in industries where sale orders are received in advance.
Forward Sales: Salam and Istisna'a
Understanding Islamic Finance ; 241-277
2012-01-02
37 pages
Article/Chapter (Book)
Electronic Resource
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