Trade Finance 59sell 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 sale price in the secondsalamwill be higher than the price paid by
the Islamic financier in the firstsalamand this profit will represent its
return. It is permissible to have a profit in relation to the secondsalamas
the Islamic financier is taking on a liability (to sell goods under the second
salam), and it is permitted under the Shari’a to receive a profit in return for
taking on a liability.
It is also possible for the Islamic financier to wait until the goods are
delivered to it and then for it to dispose ofthem in another Shari’a-compliant
manner, such as through amurabaha.
Generally, it is not permitted, however, to sell thesalamgoods before
delivery has been made; this is because thesalamcontractcouldberescinded
if the seller reneged on delivering thesalamgoods.
Immediate payment of purchase price
The majority opinion is that the purchase price must be paid when the
salamcontract is entered into. It is understood that the Shari’a imperative
behind this rule is that if there is a delay, this will amount to the sale of a
debt by debt which is prohibited.
Specificity of the goods
The majority rule is that it is not permitted to state that the goods will be
produced in a particular factory or come from a specific field.
Delivery to be after the date of the contract
The majority of the schools state that delivery must come after the date of
thesalamcontract. As the rationale ofsalamis to provide funds to allow the
customer to grow or manufacture the asset, if there were immediate delivery
then this would mean that the asset already existed, which would not be in
accordance with the rationale underpinningsalam.
Existence of the goods
The majority of the schools are of the view that the ability to deliver the
goods will be evidenced on the contractual date of delivery through actual
delivery taking place. The Hanafi school takes the position that, in
determining whether the customer is able to deliver, it is necessary to see if
the goods of the type described in thesalamwere capable of being acquired
throughout the period of thesalamand, if this requirement is not met, the
contract would be void.