Salam Sale and its Contemporary Applications
In the Name of Allāh,
the Entirely Merciful, the Especially Merciful
Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.
Resolution No. 85 (2/9)
Salam Sale and its Contemporary Applications
The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 9th session in Abu Dhabi, United Arab Emirates, on 1–6 Dhū al-Qi’dah 1415h (1–6 April 1995),
Having examined the research papers submitted to the Academy concerning
Salam Sale and its Contemporary Applications,
Having listened to the discussions on the subject,
First: Salam Sale
- Commodities in which a Salam contract may take place include any permissible tradable goods with definable features, imputable as a debt, be they raw materials, agricultural products or manufactured goods.
- Salam contract must be well-defined either by tying it to a well-known deadline or to an event whose happening is an absolute certainty even if the date of its occurrence may be subject to a slight difference not likely to cause discord such as the harvesting season.
- Salam capital should – in principle – be received promptly during majlis al-aqd (attendance of the parties). However, it is permissible to defer it for two or three days, albeit on condition, the period of deferment being neither equal to nor above the date fixed in the Salam contract.
- There is no restriction in Shariah for the purchasing party to take a pawn or a security from the recipient (the selling party).
- It is permissible for the buyer to exchange the goods subject to Salam for something else other than cash after maturity of the deadline, be it of the same nature or not, since there is no specific Islamic text or consensus forbidding it, on condition that the substitute is itself amenable for Salam against the Salam capital.
- In case the recipient (i.e. the selling party) fails to deliver the goods
subject to Salam on maturity date, then the creditor (i.e. the buyer) may, at his discretion, either wait until the goods are available or cancel the contract and recover his capital. However, if the default is due to genuine incapacity, then tolerance is in the order of the day until better times.
- It is not permissible to include a penalty clause for the delay of providing the commodity since a commodity sold through Salam is a debt and it is not permissible to impose an additional charge for delayed repayment of debt.
- It is not permissible to use a debt as a capital for a Salam sale since this would amount to selling a debt against another debt.
Second: Contemporary Applications of Salam
Salam is considered today as a highly effective financing instrument in Islamic economy and in the activities of Islamic banks due to its flexibility and respon- siveness to the various needs of financing, be it for short, medium or long terms, as well as its adaptability to the needs of various and multiple sections of custom- ers, be they producers, agrarians, industrialists, building contractors, or traders, in addition to the capacity it offers to finance operating as well as other capital expenses. Hence, the wide range of Salam applications may include:
- A Salam contract may be used to finance various agricultural operations, in which case the Islamic bank deals with farmers expected to have the commodity in the right season, either from their own crop or from that of others, which they may purchase and deliver in case of failure on their part to honor the delivery out of their own crops. Thus, the bank would extend to them this benefit of a great value and protect them against the failure to meet their production targets on account of financial
- A Salam contract may be used to finance agricultural or industrial activities, particularly for financing the stages before the production and export of the tradable goods, by means of buying them with a Salam contract and remarketing them at profitable
- A Salam contract may be applied in the financing of handicraftsmen, small producers, farmers, and manufacturers by providing them with the necessary production requirements in the form of tools, equipment, or raw material as a forward capital (Salam capital) in order to access some of their products and remarking them.
To further elaborate the contemporary forms of Salam applications after con- ducting specialized research on the subject.22
Indeed, Allāh is the Giver of success.
Resolution 63 (1/7), method 2, and no. 74 (5/8), article 3.