Salam Contract Islamic Finance

Salam and Istisna’ essentially refers to the necessity for the commodity being sold to be in the physical or constructive possession of the seller at the time the sale is agreed. This being necessary to validate the sale, in accordance with Shariah law. It is one of the most important aspects of Islamic banking and finance, representing a useful and popular mode of financing for smaller businesses and farmers. A full and detailed understanding of these two special types of sales is importance for anyone considering a career in Islamic banking.

Explore these two crucial concepts and the extent to which they can used as modes for financing, with this highly-targeted tutorial. Key topics covered include bai‘ salam/salaf, the benefits of salam and the economic role of bai‘ salam, features of a valid salam contract, subject matter of salam, salam in currencies, payment of price: salam capital, mode of payment, period and place of delivery, amending or revoking the salam contract, penalty for non-performance, parallel salam, obtaining promise for purchase, supply of goods as per contract, supply of inferior goods, istisna‘a (order to manufacture), delivery and disposal of the subject matter and more.