Bay al-kali bil kali is a type of Islamic financing that is similar to the western financial arrangement of a forward sale or deferred payments. In essence, both parties who enter into the Bay al-kali bil kali are agreeing to make a purchase of an item with actual value, with both the delivery of said item and payments for the item in question to be delayed. It is important to remember that with this type of agreement, payments can be delayed for a significant amount of time as can receipt of the item.
What It is
However, this term literally translates to the sale of a debt for a debt, so it is not always used in this way. It also allows the lender to extend the terms of a loan for a period of time, which can be of immense benefit to the borrower for a brief period of time. Ultimately, as with the majority of loan extensions, Bay al-kali bil kali results in the accrual of higher interest rates. This, and the associated need for a long-term relationship with Islamic financial institutions, is often not the most ideal arrangement for anyone besides the Islamic financial institutions.
The term kali’ means debt, and Kali translates to something that will be or is already delayed.Islamic financing is often closely related to the recommendations of Sharia. Current guidelines prohibit this type of Islamic loan, and therefore even though it may be available, it is not as popular as other types of Islamic financing. In addition, if this agreement is entered into, it may reflect badly on one or more of the parties who are participating in the agreement.
Any Islamic loan that relates to a sale must meet certain standards that have been established through long-held beliefs associated with religious and other texts Any actions that are in direct opposition, in any way, to those teachings must be closely judged prior to engaging those actions. An Islamic loan will allow qualified persons to obtain a service, possession or piece of property before they actually have the necessary funds to do so, but the terms of the contract are known to favor the lender significantly.
Islamic financial institutions exist to meet the needs of lenders, and that means that many of the people who need to borrow funds will be able to do so. If it seems as if the terms of the contract are too restrictive, the option always exists to find another lender. It is important to know, and understand, the rights and responsibilities of all the parties before signing.