Shariah Compliant Solution

Bai Muajjal is a sale transaction of commodities/sukuk etc. in which both the parties agree that the payment of agreed contract price shall be deferred. For validity of Bai Muajjal it is important to fix date of payment of contract price in an unambiguous manner. The deferred contract price may be more than the cash price, but it must be fixed at the time of sale. Once the price is fixed, neither will it decrease in case of early payment nor will it increase in the case of default. Similarly, it is important for all the parties to know about the subject matter of sale.

Al-Wa’ad literally means ‘promise’. The promise or al wa’ad is explained as a commitment made by one party to another to undertake a certain actual or verbal disposal, beneficial to the second party. The transactions of forward based sale/purchase of currency are initiated and executed in the bank on the basis of unilateral promise (Al-wa’ad basis). A unilateral promise is an offer or promise by the party to purchase/sell the currency on the due date as agreed.

To cater to post shipment requirements of exporters, currency salam is offered for purchase of Foreign Currency (FCY) on Salam basis. Salam is a type of sale transaction where the bank purchases foreign currency from the exporter and the sale is completed upon delivery of the foreign currency to the bank on deferred basis. As per Shariah Guidelines related to Salam Financing; the payment against FCY purchased by the bank must be paid in Advance to the exporter.