DEFINITION OF BAI MURABAHAH

Literally : Increase in capital / profit of trading

Technically : Purchaser mark up the price of specific assets or commodity for a trustsale to another
person (buyer) by adding some profit.

DEFINITION OF BAI SALAM

Contract in which advance cash payment is made for goods to be delivered later on.
Supply specific goods to the buyer at future date in exchange of an advance price
fully at the time of contract.
Also known as sales by order.

DEFINITION OF BAI ISTISNA

It is an order to producer to manufacture a specific commodity for the purchaser.

MODULS OPERANDI BAI SALAM

1) This is a contract of sale of goods where the purchase price is paid in

advance while the goods are delivered in the future.

2) Under this contract, the farmer will undertake to supply crops of a specific
quality and quantity to the bank at a future date in exchange of an advance
price fully paid at the time of contract. It is necessary that the quality of the
commodity intended to be purchased is fully specified leaving no room for
ambiguity.

3) The bank will then sell the crops and the difference between the selling
price and the purchase price is therefore the bank's maximum profit.

4) In essence, Bay Salam is a prepayment sale, i.e. contract of sale whereby

payment is made today by the bank and goods are delivered in the future.
Such an agreement benefits both parties.

MODULS OPERANDI OF BAI ISTISNA

1) The buyer (mustsni) places an order to purchase an asset (e.g. building,

house) to be delivered in the future.

2) The buyer (mustasni) requires the seller (sani) to construct the asset
based on the specification that stipulated in the sale and purchase contract
that agreed by both of the contracting parties. These specifications include
the nature, type, quantity of the asset and also delivery date.

3) Then, both of the parties decide and agreed with the sale and purchase
price and any changes cannot be making after that.

4) The payment can be made either spot cash or installment. Its no required
for the (mustsni) to pay the full price at the time of contract.

5) Lastly at the delivery date, the seller (sani) will deliver the order to the
buyer (mustsni).