Investment Banking 101reneged on delivering the salamgoods. The Islamic financier will not want
to retain the goods. A back-to-backsalamcan be used but the date of delivery
to the onward purchaser must be after when theIslamic financier’s customer
has delivered the goods to it. In addition, this back-to-backsalammust also
specify the goods in general terms (as in the firstsalam) and must not make
specific reference to the goods being purchased by it in the firstsalam.The
structuring of Shari’a-compliant derivative style agreements using salam
has been based on the use of back-to-backsalam.
There is, however, a current debate amongst the Shari’a scholars on some
of the structures and rationale that has been used in the structuring of some
products that has been generated by, in particular, the issues raised by
Sheikh Yusuf Talal DeLorenzo in his paper titled “The Total Returns Swap
and The Shari’a ConversionTechnology Stratagem.”
All this has merely reinforced the view that the creation of Shari’a-
compliant derivatives is one of the most challenging areas for Islamic finance
practitioners.
Sukuk al Ijara– Department of Civil Aviation, Dubai, UAE