Salam Certificates

Definition of "Salam Certificates"

A proposed financial instrument for raising funds by the government. The government can offer to sell specified quantities of a certain commodity at a specified price on the basis of bai‘ al-salam. The government can use the cash immediately and supply the commodity at a future date. The holders of these certificates can sell them in the market at going market price of the commodity. To overcome the difficulty of selling something which does not exist and over which a seller does not have the possession, the sales contract can provide for a refund of the sale price by the immediate seller and the original seller’s consent to transfer his collection rights. The salam certificates once sold can be re-purchased by a party, and this would not clash with the shari‘ah restriction on trading debt for debt.