BASIX Social Enterprise Group launched most authentic Islamic Finance product called Bai Salam terming it as Forward Sale under Participatory Micro Finance. Considerably Bai Salam has been referred in maximum number of Hadith compared to other Islamic finance products in the collection of Hadith and Sunnah.
Bai Salam is a forward sale contract mutually signed by the buyer and the seller wherein the quality, quantity and sale price of any non perishable agricultural commodity is fixed at the time of signing the contract with condition that the buyer makes full payment in advance and the supplier agrees to deliver the said commodity at mentioned point of delivery on specific future date.
Through Bai Salam the farmers are privileged to get finance to manage their financial needs without burden of interest bearing loans and protect their produces from the risk of lower market prices for their harvest; the traders also manages smooth business flows with assured supply of produce on future date with known price paid in advance.
On Saturday, 23rd November 2013 Bhartiya Samruddhi Finance Ltd. (BSFL) a registered NBFC of BASIX Social Enterprise Group executed Bai Salam in Nuh at Mewat district of Haryana to purchase Barley and two different types of wheat.
The process began about a month ago with describing the features of Bai Salam to the farmers in Mewat. It was first decided to sign an agreement with a Farmer Producer Company in Nuh block of Mewat. Samples of two types of wheat and one quality of barley were sent to SGS India at Gurgaon for quality test report. After receiving the report sale enquiry was sent to the concerned Farmer Producer Company. Since the registration of that Farmer Producer Company is still in process and company has yet to open any bank account, BSFL decided not to do the forward sale agreement proposal with that company. After dejecting the Farmer producer company, BSFL decided to initially sign forward sale contracts with farmers on individual basis.
So, on 19th November 2013 BSFL submitted sale enquiries to three farmers for supply of different quality of wheat and Barley. By next day the written offers received from the farmers. After formal process of application and appraisals, on Saturday 23rd November 2013, at its Nuh unit office BSFL executed specific forward sale contracts with three individual farmers namely Tayyab Hussain, Shahabuddin and Arshad Hussain all belonging to Meoli village in Nuh block of Mewat district of Haryana. The delivery of said commodities is scheduled for 15th of April 2014.
Quality specifications of the goods were bought into the forward sale agreements signed with individual farmers annexed as the Sale Enquiry. Since the amount paid to individual farmers does not exceed the limit of micro finance set by the RBI, farmers were not asked for any sort of collateral or security. During signing the contracts BSFL made full payment to the farmers (through cheques) and took promissory notes from farmers indemnifying BSFL from any loss due to their negligence or willful default.
BSFL is yet looking for more farmers to supply good quality of barley and wheat. The company is also looking for farmers to supply Oats through forward sale contract.
Considerably the forward sale contracts can be quite handy to resolve following challenges in any economy.
Help farmers avail interest free finance before sowing
- Protect the farmers from uncertain risk of fluctuation in harvest prices
- Assure buffer stock and smooth supply of particular grain
- Manage inflation of food grain under control
- Assure smooth supply chain of food grains under supervision.
Now with pilot of Bai Salam, BSFL has light to torch to resolve above mentioned issues. The question is whether the Honorary Agriculture Minister Shri Sharad Pawar and the State Minister Mr. Tariq Anwar take note of it to resolve the problems associated with farmers and food grain supply management?