Institute of Islamic Banking

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Browsing Institute of Islamic Banking by Author "Mir Sajjad Rafiq"

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    Application of bai salam in agriculture sector of Pakistan
    (UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Mir Sajjad Rafiq
    Islamic Banking is taking up its roots fast in the Muslim World including Pakistanmainly due to the Islamic Shariah prohibition of indulging in the practice of Interest (Riba) and hence to earn their livelihood in conformity with the Shariah framework. The seed of Islamic Banking was sowed in Pakistanin 1981 with the establishment of Federal Shariat Court. But with the start of Islamic Banking in Pakistan, criticism also followed on its working and interpretation of Shariah Principles. Majority of the Ulemas of different Schools of Thought in Pakistandid not approve of the prevalent Islamic Banking which has thrown a challenge to the Islamic Scholars to bring forth True Islamic Products on the Financing side and their mode of administration to conform to Shariah laws. On the liability side the Scholars are in conformity that it should be done on Modarababasis. Bay al-Salam is a contract for supply of goods at a later date i.e., at the time of harvest in case of Agri produce, but the price is negotiated and FULLY PAID in advance at the time of the Contract. This mode was specifically approved by the Holy Prophet to favor the farmers who needed money for their livelihood till the time of the harvest. But this ruling of the Holy Prophet is also being applied in other fields of production to facilitate the suppliers. However in Pakistanthe farmers are forced to borrow from the “Aarthi's” stationed in the Market Committees at exorbitant interest rates for their financing needs of buying the required inputs for harvesting of their fields. Thus the advent of Islamic Banking in Pakistanhas thrown a challenge to Islamic Bankers and Islamic Institutions to implement true Islamic Products on the Financing side specially in the Agriculture Sector where small farmers are victim of centuries old usurious practices of Aarthi system. Bai Salam is being practiced in Pakistanat a very small level making it insignificant for the economic benefit. This study documents the viability of practicing Salam in the Agriculture Sector and chalks out some practical models for administration of Salam. Findings suggest that Salam is the most desirable product not only for the betterment of the Farmers and the Economy but also for the Administrator of Salam i.e., it is a WIN WIN situation for all the stake holders.