Guide to salam: A shining star in utter darkness

In-Depth Analysis

Last week I explained verse 282 in Chapter 2 of the Quran covering spot and deferred payment transactions. It amazes me no end when I measure the time distance of this and the other verses related to trading and financial transactions, and the legitimacy of the commandments contained therein to this day and age. Just imagine the environments in which God Almighty revealed such guidance, which is very much pertinent until now and the extent of their relevance will grow by the day as the world undergoes any future financial and market crises. Take Salam for example, it seems so perfect and extremely germane to the current situation in the world, particularly in underdeveloped countries having agrarian economies. Here, the most painful story we frequently come across is about farmers in India committing suicide when they fail to wriggle out of the debt trap laid by the private lenders who charge exorbitant interest. A small loan taken by illiterate farmers to buy seeds to grow the crop, or to meet with family expenses remains unpaid for decades in the books of the powerful private lenders operating in the area. This is because the borrower had put his/her thumbprint on a document without knowing the contents since he was in need of money. There are cases where the third generation is still repaying the loan taken by the grandfather. In several cases, the influential lender grabs the precious land from the hapless family and yet the loan does not get squared up. Imagine the state of mind a farmer would be having in this backdrop, ie not finding any ray of hope in utter darkness, except to end up taking his/her life. The same scenario currently observed in most parts of rural India also existed more or less in the pre-Islam Arab peninsula, and then emerged a shining star in the shape of Salam. All afflictions faced by farmers were removed and Salam was firmly implemented. The so-called exploitative private lenders vanished from the scene and genuine buyers took their place who make a 100% payment for the agreed purchase price of the quantity of commodities with delivery by the farmers at an agreed future date and place. What a relief. Shariah principles allow the Salam buyer to offer certain goods he/she owns as the upfront payment, provided the seller under the Salam contract accepts the same. Here, the in-kind payment in the shape of goods must be clear as to the quality, quantity, current market price and obtaining possession by the Salam seller. The Salam seller can either use the upfront consideration received in the shape of goods, or sell them in the market and realize cash. Nevertheless, this is to be noted that the transfer of a debt cannot be considered as the payment under the Salam contract. As discussed previously, the Shariah principles require that the full payment must be made by the buyer to the seller for the purchase of goods under a Salam contract at the time of entering into the contract. However, based on contemporary research, the scholars have agreed to extend the period of making the payment by the Salam buyer to a maximum of two to three days to accommodate the transfer of funds through banking and remittance channels. However, care should be taken that such a deferred period must not exceed the period of delivery of the goods under the contract, in case the delivery period is short. The commodities which can be traded under a Salam contract must have characteristics that can be measured, weighed or counted and graded based on the quality but must not be attributed to a particular farm or orchard, eg the origin must not be tagged to one particular source.