Salam and Istis. na¯‘: From Current Issues to an Ideal Model for Islamic Banks in Pakistan

Abstract

This research intended to explore issues in the existing application of Salam and Istis.n¯a‘ by Islamic banks in Pakistan. For this purpose, the respective model agreements devised by the State Bank of Pakistan and by two Islamic banks for salam and istis.n¯a‘ were examined on the basis of content analysis. Resultantly, some issues were identified in the description of these modes, customer responsibilities, and goods receiving by the banks under these modes. The expert opinion of Shar¯ı‘ah scholars was explored through interviews to analyse those issues. The content analysis of the interviews confirmed that leaving an unlimited time to confirm the fitness of the goods to be delivered in salam and istis.n¯a‘, could create gharar (uncertainty) in the transaction. However, accepting the goods without examining is considered a practical issue. Shifting the ownership related responsibilities of the goods to the customer (the seller) by the bank after receiving the goods created a serious Shar¯ı‘ah issue in the current practice of salam and istis.n¯a‘. Moreover, there appeared an ethical problem on the part of the Islamic banks owing to following a non-standardized approach in respect of these modes. These findings may prove a step forward towards improving the prevailing application of salam and istis.n¯a‘. Therefore, the study proposed an alternative process for the application of trading modes in their true spirit through the Zarie Taraqqiati Bank Bank Limited (ZTBL).