SALAM contract is basically a mode of financing for small farmers and traders. It is also known as SALAF. The purpose of SALAM is to meet the needs of small farmers who need money to grow their crops, the need of liquidity problems and the needs of traders for import and export business.

SALAM is beneficial to the sellers, because they receive the price in advance and it is beneficial to the buyers also because normally the price in SALAM usually is lower than the in spot sales.

SALAM capital is paid at the time of contracting, while the delivery of the item to be sold is deferred.

As for PARALLEL SALAM, the bank enters into another contract. In the first SALAM contract the bank is a buyer but in the second one the bank becomes the seller. Each one of these contracts must be independent of the other. They cannot be tied up in a manner that the rights and obligations of one contract is dependent on the rights and obligations of the parallel contract. Each contract should have its own force and its performance should not be contingent to the other.