Written Contract
There must be a written contract between the Bank and the client which shall be the principal instrument to govern the advance buying and selling.
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A Fair Deal, Sealed in Advance
Bai Salam
Bai Salam is a financing arrangement where the bank makes an upfront payment for a product or commodity before it’s produced or delivered. The contract specifies all the details, such as size, quality, and quantity, as well as the delivery time and location. It also outlines who will cover the transportation and storage costs to prevent any misunderstandings. This method is commonly used to provide funding for industrial and agricultural products, ensuring production can continue without delays due to lack of funds.
Features
Clear Product Details
The contract must specify the commodity, quantity, quality, delivery arrangements, and any related transportation or storage costs.
Advance Purchase Payment
The purchase price is paid immediately after signing, while delivery may take place in installments where agreed.
Delivery Terms
Failure to deliver as agreed requires repayment of the advance price, together with compensation for the delayed period.
Shariah-Approved Exception
Bai Salam allows goods to be sold before they exist or enter the seller’s possession, subject to Shariah requirements.
Benefits
Price Protection
Buyers can protect themselves from future price fluctuations.
Effective Inventory Planning
It can help buyers plan their inventory needs more effectively.
Improved Cash Flow
Buyers can spread out the cost of a purchase over time.
Better Financial Planning
Bai Salam provides a predictable income stream, enabling better planning.
