Findings of the Research of Sharia and Legal Issues in Salam Contract Bank

        The findings of the study shows that there are Shariah and legal issues which occur in Salam Contract. The rules & regulations in various jurisprudences show variations.  The Schools of Fiqh have differences on the matter of price. Maliki Jurisprudence, Hanafi jurisprudence, Shafi jurisprudence and Hanbali jurisprudence all have some variations in discussing the price. In discussing the Sale object different Fiqh have discussed it differently which means that Shariah issues do exist in Salam Contract. The Scholars have agreed on the point that selling goods which does not owned can lead to uncertainty. However Salam contract has exception.

    Through performing excessive literature review it can be said that the major issue which is occurring in the Salam contract regarding the Sariah are the various variations which exist in different Fiqh. Different Scholars have provided different views on Salam Contract which causes issues for the Islamic Bank to adopt the Salam contract effectively. In the meeting of International Islamic Fiqh Academy and AAOIFI (Accounting and Auditing Organization of Islamic Financial Institutes) have set standards for the Salam contract.

        The Research shows that the Shariah related issues are mitigated by the AAOIFI standards. Some contemporary scholars have also contributed in proposing the framework of the Salam Contract. The major issue which the Salam contract was facing was regarding the various point of views which different Fiqh have regarding the price and sale object. The Sariah Standards issued by the regulatory body has improved the Salam contract framework and in future it can be expected that the performance of the Islamic banks will be improved.

        The Noor bank (Previously Noor Islamic Bank) faces the same issue which the other Islamic banks faced regarding the Salam contract. It is important to set such standards on which various scholars are agreed upon and Standards regulated by a governing body. With the establishment of AAOIFI it can be said that Salam Contract will be successfully implemented in future and the ambiguity that exist regarding the Salam contract will ultimately come to an end.

        However the findings shows that there is a need to further create awareness in the Islamic Banks regarding Salam Contract. Along with Shariah issues the legal issues also need to be identified so that a proper mitigation strategy can be formed or implemented. The legal issues can occur due to various conditions such as the insolvency of the seller. There is need to focus on legal issues as well so that Salam Contract wont effect the agreement and parties won’t have to face financial loss. The legal issues can be resolved by implementing special risk mitigation measures.

References of Sharia and Legal Issues in Salam Contract Bank

Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank performance. 36, 3213–3226.

Dchieche, A., & Aboulaich, R. (2016). New approach to model Salam contract for profit and loss sharing. International Journal of Applied Engineering Research, 11(2), 909-916.

Razak, D. A., & Tazwar, F. (2018). Islamic Home Financing Practices In Selected Oic Countries: An Assessment In The Light Of Maqasid Al-Shariah. Journal of Islamic Management Studies, 1(2), 1-11.

Zaabi, O. S. (2011). Salam Contract in Islamic Law: A Survey.