The presentation discusses the concepts and applications of bai muajjal, bai salam, and istisna within Islamic banking, emphasizing the interest-free nature of this system as per Shariah law. Islamic banking prohibits usury and fixed interest, focusing instead on risk-sharing and equitable transactions. The document also highlights the procedures for implementing these concepts in Pakistan, illustrating their importance in fostering an Islamic economic framework.

3. A PRESENTATION ON
“BAI MUAJJAL, BAI SALAM &
ISTISNA IN ISLAMIC BANKING:
CONCEPTS & APPLICATIONS “
PRESENTED TO:
PROF. SYED HASEEB ZAIDI
PRESENTED BY:
FARIA ANWAAR (BS-HONS)
MOHSIN KHAN (BBS)

4. Islamic banking is interest free banking, in which there is no fixed rate of
return. Islamic banking is the banking system which is run in accordance with the
Islamic laws & the Shariah board; that guides the institutions.
This Shariah board authorizes the products that whether these are Shariah
compliant or not. In particular, Islamic law prohibits usury, the collection &
payment of interest, also commonly called Riba in Islamic discourse. Islamic
banking also finds its roots in Islamic finance & all type of transactions are interest
free & of risk sharing.
The interest is prohibited in Islamic ways of banking as it is also obvious
from Quran. In Quran, in Sura Al-Imran (3:130), Allah said that;
“O you who believe! Do not devour Riba multiplying it over & keep your duty to
Allah that you may prosper”
Same kind of prohibition regard fixed interest is also lead in Sura Al-Rum(39) , Al-
Nisa (160-161) & Al-Baqarah(275-281) of Quran.

5. "We must work our destiny in our own way & present to the world an
economic system based on true Islamic concept of equality of manhood &
social justice"
Quaid-e-Azam Mohammed Ali Jinnah
Opening Ceremony “The State Bank of Pakistan” July 1, 1948
The procedure of Islamization, the money related arrangement of
Pakistan is linked with the broadly reappearance of islamically managing an
account in the late seventies. Pakistan was among the three nations on the
planet that has been attempting to actualize Islamization at national level. This
procedure began with presidential request to the locality Council of Islamic
Ideology(CII) on September 29, 1977. The board was solicited to set up the
plan from interest free monetary framework.
The gathering included specialists of investors & financial analysts who
presented their report in February 1980, featuring diverse ways & acceptable
mild elements for providing with the interest from the money related
arrangement of Pakistan. This report was a historic point in the happenings for
ORIGIN & EVOLUTION OF ISLAMIC BANKING IN
PAKISTAN

6. The islamically managing an account development in Pakistan was across
the country & complete. At this very moment an immense mission, the switch-
over arrangement was actualized in stages. The procedure was begun by
changing the operations of particular monetary institutions like National
Investment Trust (NIT), Investment Corporation of Pakistan (ICP), & House
Building Finance Corporation (HBFC) to the framework fitting in with the Islamic
standards with impact from July 1, 1979.
Separate without interest counters began working in all the nationalized
business banks, & one remote bank from January 1, 1981, to prepare stores on
benefit & lose sharing premise. From that date, no bank in Pakistan, including
outside banks, was permitted to acknowledge any interest bearing stores. Every
current store in banks was dealt with to be on the premise of benefit & lose
sharing.
To realize these changes Modes Of Islamic banking were introduced:
• Bai Muajjal
INITIATIVES TAKEN IN
PAKISTAN

7. The term 'Bai-Muajjal' has been acquired from Arabic words ‫ﻴﺒﻊ‬ & ‫ﺍﺟﻝ‬
(Bai'un & Ajalun). The word ‫ﻴﺒﻊ‬ means buy & deal & the word ‫ﺍﺟﻝ‬ implies a
settled time or an altered period. "Bai-Muajjal” implies deal for which
installment is made at a future settled date or inside of an altered period.
So, it is a deal on Credit.
Bai-Muajjal can be described as an understanding between a Buyer
& a Seller. Under which the Seller offers certain specific items acceptable
under Islamic Shariah & Law of the region to the Buyer at an agreed pre-
settled quality, payable at a modified future date.
BAI MUAJJAL, ITS CONCEPT &
DEFINITION

8. In Banks, Bai-Muajjal is managed as an assertion between the Bank & the
Client under which the Bank offers the items, gained by & determination of the Client, to
the client at an agreed worth payable at any settled future date in inconsistency entire
or within a changed period by adjusted bits.
In this manner it is a Credit offer of items by which obligation regarding stock is
traded by the Bank to the Client however the portion of offer cost by the Client is
surrendered for a settled period.
Bai Muajjal may be described as arrangement under which the expense of the
thing included is payable on a yielded preface either in full absolute or in segments.
This structure could be of huge use in banking current information essentials of industry
& cultivating & also in the banking of private & import trade.
A valid example, if the present cost of a sack of fertilizer to the bank is Rs. 50,
the bank may offer it through its masters to agriculturists obliging bank cash at Rs. 55
subject to honest portion of this expense after an agreed period. The bank would of
course pay Rs. 50 to its administrators before or immediately after the supply of the
fertilizer by the authorities under its rules.
APPLICATION OF BAI
MUAJJAL

9. 1. The cost to be paid must be agreed & fixed at the period of the procedure. It
may incorporate any measure of benefit without objections of Riba.
2. Complete/absolute ownership of the object being referred to must be given to
the purchaser, while the conceded cost is to be dealt with as obligation
against him.
3. When the cost is settled, it can't be diminished in the event of prior installment
nor would it be able to be expanded if there should arise an occurrence of
default.
4. With a specific end goal to secure the installment of value, the merchant may
request that the purchaser outfit a security either as home loan or as a thing.
5. In the event that the merchandise is sold on portions, the merchant may put a
condition on the purchaser that on the off chance that he neglects to pay any
portion on its expected date, the remaining portions will turn out to be
expected promptly.
CONDITIONS FOR BAI
MUAJJAL

10. Rabb-us-salam: Buyer
Muslam ilaih: Seller
Ra’s-ul-maal: Cash price
Muslam fih: Purchased commodity
The term Bai-Salam has been taken from Arabic words "‫"ﻴﺒﻊ‬ & “‫”ﺴﻠﻡ‬ (Bai'un &
Salamun). ‘‫’ﻴﺒﻊ‬ signifies 'buy & sale' & the word '‫ﺴﻠﻡ‬ " signifies 'advance'. 'Bai-Salam'
means advance buy & sale.
Bai-Salam may be described as an assertion between a Buyer & a Seller.
Under which the seller undertakes to supply some specific goods to the buyer at a
future date in exchange of an advance price fully paid at the time of contract. The
item is passed on as indicated by specific, size, quality, quantity at a future time in a
particular spot.
Figuratively speaking, Bai-Salam is an arrangement whereby the seller
grasps to supply some specific Commodity to the buyer at a future time
consequently of amount paid on the spot. Here the expense is paid in genuine
cash, however the movement of the conveyance of the merchandise is agreed.
BAI SALAM, ITS CONCEPT &
DEFINITION

11. To address the issue of little farmers who need cash to develop their
products & to sustain their family up to the season of harvest. At the point when
Allah announced Riba haram, the ranchers couldn't take haram credits. In this
manner Holy Prophet permitted them to offer their agricultural items ahead of
time.
To Address the issue of merchants for import & fare business. Under
Salam, it is taken into consideration that they offer the commodities ahead of time
so that in the situation of getting their money value, they can without much of a
stretch embrace the aforesaid business. Salam is gainful to the merchant in light
of the fact that he got the cost ahead of time & it was useful to the purchaser
additionally on the grounds that typically the cost in Salam is lower than the cost
in spot deals.
The admissibility of Salam is an exemption to the general selections that
disallows forward deal & in this manner it is liable to strict conditions.
APPLICATION OF BAI
SALLAM

12. 1. It is essential for the validity of Salam that the buyer pays the price in full to the seller at
the time of affecting the sale. Without full portion, it will be comparable to offer of a debt
against a debt, which is expressly banned by the Holy Prophet. Other than the crucial
knowledge for allowing Salam is to fulfill the "minute need" of the trader. If it’s not paid in
full, the major reason won't be achieved.
2. Simply those items can be sold through a Salam contract in which the sum & quality can
be correctly decided e.g. profitable stones can't be sold on the reason of Salam in light of
the way that each stone differentiation in quality, size, weight & their exact subtle element
is improbable.
3. Salam can't be influenced on a particular product or on a consequence of a particular
field or property e.g. Supply of wheat of a particular field or the result of a particular tree
since there is credibility that the harvest is obliterated before transport & given such
likelihood, the movement stays questionable.
4. Every single modest component in deference to nature of items sold must be expressly
decided leaving no instability, which may provoke an inquiry.
5. It is principal that the measure of the stock is settled upon altogether terms. It should be
measured or said something its common measure just, significance what is normally
CONDITIONS OF
SALAM

13. The word Istisna is taken from the word Sana'a which genuinely means
"making, assembling or building something". Istisna is an understanding between
a producer/vendor & a buyer under which the maker/merchant offers specific
things ensuring to being delivered, allowable under Islamic Shariah & Law of the
Country in the wake of having made at an agreed worth payable early or by
segments within an adjusted period or on/within a settled future date on the
reason of the solicitation put by the buyer.
"As demonstrated by Ibn-Manzur, Istisna happens when some individual
invited, actuated or realized another to make the thing.”
AI-Fayruzabadi says that Istisna happens when someone asked for
something to be made for him. The word Istisna has similarly been used as “a
piece of” in the al-Qur'an & al-Hadith.
ISTISNA, ITS CONCEPT &
DEFINITION

14. Truly, al-Kasani, al-Hanafi depicts Istisna as "when one requests a
Craft-man to set up a bit of furniture at a picked or restricted cost, to be gone
on later” or “one may hire a shoemaker to make a few shoes at a settled
cost," or "an agreement on a thing on obligation with the procurement of
work" or "to request a maker to make a particular stock in a particular
manner".
The person who makes it is called Sani & the thing made Masnu, & the
individual who makes it be made mustani. Mustafa Ahmad al-Zarqa depicts
Istisna as a comprehension of offering a social event skillful thing with an
attempt by the dealer to present it made from his own particular material with
exhibited depictions & at a picked expense.
From the above examinations, it could be said that Istisna' is the giving
of a requesting to an expert or artisan to make a positive article with consent
to pay an explicit cost for that article when made.

15. • The Islamic bank can use Istisna as a buyer by contracting with current &
creating foundations, or with any skilled worker to make or create for it a couple
of things with specific description. By then it can offer them after receipt, for
cash, presented or surrendered portion through Murabaha or channel' bi-
thaman ajil. Thusly the Islamic bank will be incorporated in direct theory.
• Of course, this strategy is subject to the level of the position of the Islamic bank
where eventually some Islamic banks are not allowed to be incorporated
particularly in exchange. It is moreover drivable for the Islamic bank to enter
Istisna contract in the utmost of shipper to the people who demand the
purchase of a particular thing.
• By then it will draw a parallel Istisna contract in the point of confinement of a
buyer with another social occasion to make or create the item settled upon in
the first contract. This framework is most suitable to the demonstration of
Islamic banks nowadays.
APPLICATION OF
ISTISNA

16. • The subject of Istisna is dependably a thing which needs manufacturing.
• Manufacturer utilize his own material.
• Quality & Quantity ought to be agreed in ultimate terms.
• Purchase value should to be settled with mutual understanding.
• In the case the products are prepared & available to be purchased, here
Istisna is not permitted in Shariah. At that point the deal may be done either in
Bai-Murabaha or Bai-Muajjal method of speculation. In this mode,
conveyances of products are conceded & installment of value may
additionally be conceded.
• It encourages the producer now & then to get the cost of the merchandise
ahead of time, which he may use as capital for creating the products.
CONDITIONS OF ISTISNA

17. The above examination can be safely considered that Bai Muajjal, Bai
Salam & Istisna contract in Islamic Commercial Laws are one of the basic
schedules for awareness of Islamiclly managing an account & can accept a
sharp part in financial change. It engages the enthusiasm for gathering items,
banking monetary activities, adding to the values of expenses of created
stock, pushing current & resourceful progress & making use of the available
possible results of the economy. The customers oblige banking either to make
or generate something for their own usage or expansion of business.
As a result of stand-out threats, Islamic banks don't make these trades
on a broad scale & execute only if there should be an event of huge need
where the implementation of various modes are limitless. In addition, Islamic
banks use these trades with their specific customers who are trustworthy.
CONCLUSION