Bai Istijrar

NOOR HALIMAH BINTI HJ. AHMAD 01AWM12F2013

THE CONTENT
(1) THE DEFINITIO N

(4) THE APPLICATIO N

CONTENT

(2)

THE TYPE

THE CONDITION

(3)

THE DEFINITION
Istijrar = recurring / continuous sale

Different quantities are bought from a single seller

over a period of time. Sometimes it is also referred to transactions whereby seller delivers different quantities in different installments to complete the full purchase. Some divergence among the scholars in terms of the timing of fixation and pricing. Bai Istijrar = supply sale When a supplier agrees to deliver to a client on a regular basis at an agreed price and mode of payment.

THE TYPE OF BAI ISTIJRAR

There are two types of Istijrar:

(1) Whereby the price is determined after all transactions of purchase are complete

(2) Whereby the price is determined in advance but the purchase is executed from time to time.

THE CONDITION
1. In the case where the seller discloses the price of goods at the

time of each transaction; the sale becomes valid only when the buyer possess the goods. The amount is paid after all transactions have been completed.
2. If the seller does not disclose each and every time to the buyer the

price of the subject matter, but the parties to the contract know that it is being sold at the market value and the market value is specified and determined in such a manner that it does not vary and it does not lead dispute between the contracting parties.
3. If at the time of possession, the price of subject matter was

unknown or the parties agree that whatever the price shall be, the sale will be executed. However, if there is significant difference in the market price and the agreed price, it may cause conflict. In such a case, at the time of possession, the sale will not be valid. However, at the time of settlement of the payment, the sale will be valid.

THE APPLICATION OF BAI ISTIJRAR

Overview of istijrar Istijrar involves 2 parties Bank purchases on behalf

of its customer The difference in price is banks earning/ return P* = Po (1 + r) Istijrar could be P* or an average price of commodity between the period +0 an + 90 Which party choose to fix the settlement price embedded option

CONT.
Both parties agree on following 2 items. a) pre determined Murabaha price P* b) upper and lower bound

PO = Murabaha price P*= PO (1+r)

PL B

P O

P*

PuB

PLB = The lower bound price PuB= The upper bound price

CONT.
Ps = Average price, if the underlying

asset price remained within the bound. Ps = P* ; if the underlying asset exceeds the bounds and one of the parties choose to exercise its option in use P* as the price at which to settle at maturity. This application show, the value of money or currencies will change from time to time, and depending from the period of time.

The other example of application of Bai Istijrar

retailer
New Strait Times

The co. of new strait Times sell their subject

matter (the papers) to retailer. Newspaper company sells its products through sales istijrar. Newspapers co. give the time to retailers to sell its products. After the expiry of the period given by the newspapers co. to the retailer or refer the agreement, then the retailer must pay the sales of newspapers co. according to the set time and the

The End