URDU-16 Salam Contract in Islamic Financial Institutions: Structure and Contemporary Shariah Implications

Abstract

Salam Contract is an exceptional kind of sale transactions up to a considerable extent. The basic wisdom behind its permission was to cater to the financial capital needs of farmers and other needy persons as an effective substitute measure to avoid indulging in usury (interest) based financial activities. Afterward, it has been used as a mode of Islamic Finance. Consequently, Islamic Institutions have adopted this mode in their financial activities and transactions on a large scale. This research article deals with a detailed review of its basic kinds, practiced structure, and executed transactions in IFIs from Shariah point of view; to study the possible questions which may be raised in this regard, convincing replies to such objections and doubts, Shariah safeguards which determine restricted boundaries of this mode of Islamic finance and prevent it from including or comprising prohibited matters which might cause the invalidity of these transactions. This study is remarkably unique and unprecedented research on the topic in many aspects.