Bai Salam

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Bai Salam (Arabic بيع سلم, more accurately transliterated as Bai us Salami) is an Islamic contract in which full payment is made in advance for specific goods (often agricultural products) to be delivered at a future date. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. Bai salam covers almost every thing which is capable of being definitely described as to quality, quantity and workmanship. For Islamic banks this product is an ideal for Agriculture financing but can also be used to finance the working capital needs to the business customer. It is one of the most popular Islamic Modes of finance used by banks in Islamic countries to promote riba-free transactions.^[1]

Early and contemporary jurists agree on the legitimacy of Salam.^[2] In general under Shariah law, no sale is lawful unless the goods being sold are in existence at the time of the agreement. Salam sale is an exception found in the hadith of the prophet of Islam Muhammad (collections of his sayings and teachings) provided the goods are defined and the date of delivery is fixed.^[3] Upon migration from Makkah, Mohammed came to Madinah, where the people used to pay in advance the price of fruit or dates to be delivered over one, two or three years.^[4] However, such sale was carried out without specifying the quality, measure or weight of the commodity or the time of delivery. Mohammed ordained: “Whoever pays money in advance for fruit to be delivered later should pay it for a known quality, specified measure and weight (of dates or fruit) of course along with the price and time of delivery”.^[5]