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Islamic Finance by Keon Chee, Daud Vicary Abdullah

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OTHER DEBT-BASED METHODS

Now that we have covered the most important and popular debt-based contracts (BBA, murabahah and ijarah) and those that are equity-based (mudharabah and musharakah), let us briefly look at other debt-based methods. Some of these contracts are recent innovations while others contain some controversy:

1. Deferred delivery (bai salam);

2. Manufacture-sale (istisna);

3. Benevolent loan (qard hassan);

4. Pawnbroking (rahnu); and

5. Sale and buyback (bai inah).

Deferred Delivery (Bai Salam)

Bai salam is a contract where payment is made immediately while the goods are delivered at an agreed later date. It is equivalent to an advance payment. Bai salam was originally created to provide financing for farmers.

Basic Example

Suppose ...

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