Salam (Forward sale) and Istisna' (Manufacture contract) in modern applications: a Maqasid al-shari'ah perspective
The modern application of Salam such as parallel Salam and combination of Salam with waÑd (promise) exposes Islamic financial institutions (IFIs) to risks—credit risk, market risk, and operational risk. Modern applications of IstiÎnaÑ by financing houses and projects in the form of parallel-IstiÎn...
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| Format: | Article |
| Language: | English |
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International Journal of Business, Economics and Law (IJBEL)
2016
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| Online Access: | http://irep.iium.edu.my/47801/ http://irep.iium.edu.my/47801/ http://irep.iium.edu.my/47801/1/47801_Salam_%28forward_sale%29_and_Isti%C3%B8na%C3%B1.pdf |
| Summary: | The modern application of Salam such as parallel Salam and combination of Salam with waÑd (promise) exposes Islamic
financial institutions (IFIs) to risks—credit risk, market risk, and operational risk. Modern applications of IstiÎnaÑ by financing
houses and projects in the form of parallel-IstiÎnaÑ and IstiÎnaÑ based BOT (buy, operate and transfer) has exposed the IFIs to
hazards such as delayed and incomplete projects. This paper explores the extent to which modern applications of Salam and
IstiÎnaÑ support the maqÉÎid al-SharÊÑah. The study suggests new terms and conditions to minimise the risks if not eliminate
them. It advises IFIs to become IstiÎnaÑ contractors in the real economy rather than on paper only. Salam should not be a nearreplica
of speculative and risky future contracts. If adjustments are not made in modern application of both contracts, the
contracts risk jeopardising the very purpose of the SharÊÑah.
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