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Comparisons between Salam financing & Istisna Financing October 18, 2009

Posted by informationmedia in finance.
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Comparisons between Salam financing & Istisna Financing

By Rhesa Yogaswaraa, S.Si


Basically, salam and istisna are sale contracts whereby the seller undertakes to supply some specific goods to the buyer at a future date in exchange for an advance price fully or partially paid on the spot. In other words, the price is paid in cash (full or partial), while the supply of the goods is deferred to a future date.[1]

Salam usually involves agricultural products, while the subject of istisna is always a thing that needs manufacturing in which more attention is given to specifications of goods under order.

In salam, the price is paid in advance while in istisna, it may be paid in cash or by installment. Istisna deals with production in stages all of which require capital injection. However in salam, it is important to release all capital during most activities took place in the planting stage, after which less capital is required.

The time of delivery is an essential part of the sale of salam, while it is not necessary in istisna that the time of delivery be fixed. The last, the contract of salam, once effected, cannot be cancelled unilaterally, while the contract of istisna can be cancelled before the manufacturer begins work.

[1] Rosly, Saiful Azhar. 2005. Critical Issues on Islamic Banking and Financial Market. Dinamas. Kuala Lumpur. Al-Bai-bithaman Ajil Financing, pg 138



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