KARACHI: The State Bank of Pakistan (SBP) has announced that it has developed a model Islamic product based on the concept of “Salam” to meet production finance (working capital) needs of the farming community.
In a circular issued on Tuesday, the SBP said the model product, developed in consultation with all stakeholders, would facilitate Islamic banking institutions (IBIs) in improving access to agricultural Islamic financing for the farming community.
The product covers Shariah-related aspects as well as business cycle and financing requirements for farm and crop production activities.
SBP said the product based on ‘‘Salam’’ ie sale of agriculture produce against full payment in advance but deferred delivery on a specified future date, would give flexibility to the farmers to use the funds to meet input requirements.
IBIs may adopt the product in the present form or with some adjustments to suit their organisational and operational needs and market characteristics, subject to compliance with central bank regulations and approval from their Shariah advisers, the SBP added.
Farmers may enter into single or multiple transactions based on their specific funding needs. Under single transaction, total funds needed by the farmer will be credited to his account in lump sum whereas under multiple transactions funds will be disbursed in tranches.
This news was published in The Express Tribune, October 19th, 2011.