Tuesday, 17 February 2015


5. Selling of goods
It is impermissible for the buyer of goods on Salam basis to sell these before actually receiving the same, particularly in case of grains and edible items as it has been explicitly prohibited in a Hadith.

In case of other than grains and edible items, a few jurists allow to sell the same. However, as a general rule these still should be avoided.The goods sold on Salam basis are considered a liability debt in form of goods (i.e. in exact quantity and quality of the goods agreed) and not in form of cash (i.e. the cash value of such goods).
The seller is obliged to deliver the same when it is due, according to the specifications stipulated in the contract. In case, due to any reason he could not produce or grow the same, he shall buy the same from market and deliver to the buyer instead of returning the advance money.
 6.Buy-back transaction
Salam sale should not be accompanied with a buy-back transaction i.e. the goods purchased on Salam should not be sold back to the same customer, either under a contract, or under a business norm. It is not permissible to link the obligations under the two Salam contracts together such that the execution of the obligations of one contract is contingent on the outcome of the other.
7.Delay in the delivery of goods

No additional amount can be charged or levied on the seller if he delays in the delivery of goods. However, in such case, the sale may be cancelled and the advance amount shall be returned to the buyer.
8.Documentation of Salam
In Islamic Shariah permissibility of any financial transaction is dependent on the fact that whether or not the clauses of the agreement conform to the principles defined in Shariah. The banks Salam Agreement and other related Appendixes have been approved by the banks Shariah Supervisory Committee / Shariah Advisor, which are as under:

This Agreement sets out the terms and conditions upon and subject to which the bank has agreed to have the Specified subject to all terms and conditions of the agreement.

A commercial bank has a diverse range of customers and bank does not possess the expertise of dealing in such a wide range of commodities. For this purpose Agency Agreement is executed between the customer and the bank to sell the Salam assets.

Friday, 6 February 2015

The Bank Of Khyber_SALAM

Essential Features
  Subject to specific Shariah rules, following are the essential features for Salam sale transaction:

1.Goods specifications

In   a   Salam  sale,   the   goods  shall   be   defined  with   due   specifications   making   it clear   and understandable and their description shall not be left to be decided on some future date.
Goods quantity and quality both should be measurable or may be adequately estimated. It shall be conducted in only such goods or commodities, each unit of which have similar characteristics e.g. grains of a particular type etc. These types of commodities are called Zawat-ul-Amthal (homogenous goods).
2. Delivery of goods

The date of delivery of goods should be fixed and preferably the place of delivery should also be fixed.The commodity for Salam contract shall be expected to be in market and should further be expected to be in possession of the seller on the agreed date of delivery.
Any decline or increase in the market price at the time of delivery of goods might result in a loss or gain. Such loss or gain pertains to the buyer and seller both, the seller and the buyer, have no recourse on sale.

3. Payment

Payment against Salam purchase must be fully advanced at the time of commencement of Salam transaction. Salam transaction is irrevocable by either party. However, in case the goods do not match with the agreed description or if some defects are found such transaction may be reversed.In case of identification of inferior quality of goods at the time of delivery, price may be changed/agreed with mutual consent.

4.Cancellation of Salam  Contract.
It is permissible, when both parties agree due to any practical impediment, to cancel the entire Salam contract in return for repayment in full of the amount of the purchase price advanced earlier at the time of commencement of contract. Partial cancellation, that is, cancellation of the delivery of part of goods, in return for repayment of a corresponding part of the purchase price, is also permissible. However, the contract cannot be cancelled unilaterally.

Thursday, 5 February 2015

SOP Reference
Date of Issue
Approved by
Qazi Abdul Samad
Basic Concept
·    Salam sale refers to advance payment for goods which are to be delivered later. The   seller undertakes to deliver goods to the buyer at a later date in exchange of an  advance payment.
·    One of the basic conditions for the validation of a sale transaction in Shariah is that the commodity (intended to be sold) must be in the physical or constructive possession of the seller. Salam sale is an exclusion from this general rule subject to certain specific provision.
·    In  Salam  sale,  the  seller  obtains  advance  payment  against  an  obligation  to  deliver  the commodity later and accordingly, he gets the benefits through covering his financial needs whether these are personal expenses or expenses for productive or trading activity. On the contrary,  the  purchaser  gets  the  discounted  prices  for  the  commodity  and  gets  the commodity according to the time of his desire.
·    Salam is beneficial to the seller as well as buyer, as one receives the price in advance a nd other is charged lower than spot sale price.
·    Salam  sale  is suitable  for  a  number of trading  and  business  operations  including  as  an alternate to traditional finance of agricultural operation.