Riba-free (RF) financial institutions offer a variety of trade-based modes. With reference to this, explain each...
Riba-free (RF) financial institutions offer a variety of trade-based modes. With reference to this, explain each of the following modes:
a] Sale on order (Istisna)
b] Commodity sale (Salam)
c] Cost-Plus Financing (Murabahah)
Homework Answers
Islamic finance is based upon the principle of interest free finance.
1.Istisna - Istisna is contract of exchange in Islamic finance where the funding party agrees to deliver a manufacturing asset or real estate on a predetermined date at a predetermined price.
2. Salam- Salam is contract of exchange in Islamic finance where the funding party agrees to deliver a commodity on a future date at a predetermined price. it is important to note that Istisna deals with manufacturing while Salam deals with Commodity sales.
3. Murabahah - it is a cost plus financing project in Islamic finance where the seller and the buyer agrees to cost and markup which is also a substitute for interest as interest is not allowed in Islamic finance.
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Riba-free (RF) financial institutions offer a variety of
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