- Published on
Islamic Contract – Bay’ al-Istijrār (Supply or Wholesale Sale)
1. Definition of Bay’ al-Istijrār
Literal Meaning
The word istijrār is derived from the Arabic verb:
istajarra
which means:
deferral,
particularly in relation to deferred debt or payment.
2. Technical Definition of Bay’ al-Istijrār
Technically, Bay’ al-Istijrār (hereinafter, istijrār) refers to:
a sale arrangement in which the buyer continuously takes merchandise from the seller in instalments or on a regular basis, while payment may be made either later or in advance.
Earlier Definition
Some jurists earlier defined istijrār as:
taking goods continuously from a vendor and paying later.
This definition focused mainly on:
More Accurate Definition
However, some scholars argue:
this definition is incomplete,
because:
Definition by al-Ashqar
Al-Ashqar defines istijrār as:
taking merchandise from the vendor in instalments on a regular basis while payment may be made in advance or deferred.
Definition by Securities Commission Malaysia
The Securities Commission Malaysia defines istijrār as:
“a contract whereby the supplier agrees to supply a particular product on an ongoing basis, e.g., monthly, at an agreed price and an agreed mode of payment.”
Main Features of Istijrār
1. Continuous Supply Relationship
Goods are supplied:
2. Goods Taken in Stages
The buyer:
3. Payment Flexibility
Payment may be:
✅ upfront;
✅ deferred;
✅ periodic;
✅ instalment-based.
4. Common in Commercial Supply Chains
Istijrār is commonly used in:
Example 1 – Istijrār With Deferred Payment
A restaurant regularly purchases:
Supply Arrangement
Week 1
100 kg chicken
Week 2
120 kg chicken
Week 3
90 kg chicken
The restaurant:
Analysis
The goods are:
✅ Istijrār with deferred payment.
Example 2 – Istijrār With Upfront Payment
A factory prepays:
Analysis
Payment:
✅ made upfront.
Goods:
✅ supplied gradually.
Result
✅ Istijrār with upfront payment.
Example 3 – Modern Commercial Example
A supermarket signs agreement with beverage company.
The beverage company agrees:
Features Present
✅ continuous supply
✅ repeated withdrawals
✅ agreed payment mechanism
Result
✅ Contemporary istijrār arrangement.
Importance of Istijrār in Islamic Finance
Istijrār is important because:
Application in Islamic Finance
Istijrār may be used in:
an alternative to murābahah or tawarruq-based trade financing.
Sharī‘ah Issues in Istijrār
The major Sharī‘ah issues concern:
Important Sharī‘ah Principle
Istijrār is generally permissible because:
the original rule in commercial transactions is permissibility,
provided:
✅ mutual consent exists;
✅ contractual obligations are clear;
✅ excessive uncertainty is avoided;
✅ Sharī‘ah requirements of sale are fulfilled.
1. Definition of Bay’ al-Istijrār
Literal Meaning
The word istijrār is derived from the Arabic verb:
istajarra
which means:
- to pull;
- to drag;
- to draw along.
deferral,
particularly in relation to deferred debt or payment.
2. Technical Definition of Bay’ al-Istijrār
Technically, Bay’ al-Istijrār (hereinafter, istijrār) refers to:
a sale arrangement in which the buyer continuously takes merchandise from the seller in instalments or on a regular basis, while payment may be made either later or in advance.
Earlier Definition
Some jurists earlier defined istijrār as:
taking goods continuously from a vendor and paying later.
This definition focused mainly on:
- deferred payment arrangements.
More Accurate Definition
However, some scholars argue:
this definition is incomplete,
because:
- payment in istijrār may be:
- deferred; or
- upfront.
- the concept is broader than merely deferred payment.
Definition by al-Ashqar
Al-Ashqar defines istijrār as:
taking merchandise from the vendor in instalments on a regular basis while payment may be made in advance or deferred.
Definition by Securities Commission Malaysia
The Securities Commission Malaysia defines istijrār as:
“a contract whereby the supplier agrees to supply a particular product on an ongoing basis, e.g., monthly, at an agreed price and an agreed mode of payment.”
Main Features of Istijrār
1. Continuous Supply Relationship
Goods are supplied:
- continuously;
- periodically;
- regularly.
- daily;
- weekly;
- monthly.
2. Goods Taken in Stages
The buyer:
- does not necessarily take all goods at once.
- goods are withdrawn progressively.
3. Payment Flexibility
Payment may be:
✅ upfront;
✅ deferred;
✅ periodic;
✅ instalment-based.
4. Common in Commercial Supply Chains
Istijrār is commonly used in:
- wholesale trade;
- supermarkets;
- restaurants;
- manufacturing supply chains;
- trade finance.
Example 1 – Istijrār With Deferred Payment
A restaurant regularly purchases:
- chicken supplies from wholesaler.
Supply Arrangement
Week 1
100 kg chicken
Week 2
120 kg chicken
Week 3
90 kg chicken
The restaurant:
- takes goods continuously;
- pays supplier at month-end.
Analysis
The goods are:
- supplied regularly;
- taken in stages;
- paid later.
✅ Istijrār with deferred payment.
Example 2 – Istijrār With Upfront Payment
A factory prepays:
- RM500,000
to steel supplier.
- delivers steel monthly over one year.
Analysis
Payment:
✅ made upfront.
Goods:
✅ supplied gradually.
Result
✅ Istijrār with upfront payment.
Example 3 – Modern Commercial Example
A supermarket signs agreement with beverage company.
The beverage company agrees:
- to supply drinks weekly.
- to pay every 30 days.
Features Present
✅ continuous supply
✅ repeated withdrawals
✅ agreed payment mechanism
Result
✅ Contemporary istijrār arrangement.
Importance of Istijrār in Islamic Finance
Istijrār is important because:
- modern businesses require continuous supply arrangements;
- repeated contracting for every transaction may be impractical;
- it facilitates trade and commercial efficiency.
Application in Islamic Finance
Istijrār may be used in:
- Islamic trade finance;
- import financing;
- wholesale supply arrangements;
- Islamic letter of credit facilities.
an alternative to murābahah or tawarruq-based trade financing.
Sharī‘ah Issues in Istijrār
The major Sharī‘ah issues concern:
- certainty of price;
- contractual formation;
- deferred payment;
- ownership and possession;
- uncertainty (gharar).
- pricing methods;
- sale by conduct (bay‘ al-mu‘āṭāh);
- unknown pricing structures.
Important Sharī‘ah Principle
Istijrār is generally permissible because:
the original rule in commercial transactions is permissibility,
provided:
✅ mutual consent exists;
✅ contractual obligations are clear;
✅ excessive uncertainty is avoided;
✅ Sharī‘ah requirements of sale are fulfilled.
0 Comments