The Potential of Bai Salam in Islamic Social Finance to Achieve United Nations’ Sustainable Development Goals

Abstract

Ending poverty is the first of the 17 goals of the 2030 Agenda for Sustainable Development set by the United Nations. The target is to have no more than 3 percent of the world’s population living on just $1.90 a day by 2030. A review on existing literature suggests that the United Nations need a more diverse approach to boost farming and alleviate poverty in order to meet its target. The paper is an effort to explore the possible application of an Islamic banking instrument in meeting the 2030 Agenda for Sustainable Development. This paper aims to explore the feasibility of Salam as an alternative mode of agricultural financing. The concept of the paper can be extended to non-farming industry especially the manufacturing industry. This paper describes the modus operandi of the proposed models, and identifies potential risks involved. Some recommendations are also given as risk mitigation methods.

Experts' views on ḥiyal in Malaysian Islamic banks: the case of tawarruq-based deposit products

“…Meanwhile, there have been recommendations for the salam contract to replace the tawarruq contract in Islamic banking product offerings (Mahaini, 2016; Dchieche and Aboulaich, 2016; Putri et al. , 2019).…”

“…To begin with, usage of the salam contract is more in accordance with economically-friendly transactions (Mahadik, 2013) as it is utilised to finance agricultural and manufacturing operations (Saleem et al. , 2014; Obaidullah, 2015; Putri et al. , 2019; Ahmad et al.…”

“…Meanwhile, there have been recommendations for the salam contract to replace the tawarruq contract in Islamic banking product offerings (Mahaini, 2016;Dchieche and Aboulaich, 2016;Putri et al, 2019). The salam contract is a sale and purchase contract whereby the asset price is paid in advance for future delivery of a defined asset.…”

“…The salam contract provides several advantages over the tawarruq contract. To begin with, usage of the salam contract is more in accordance with economically-friendly transactions (Mahadik, 2013) as it is utilised to finance agricultural and manufacturing operations (Saleem et al, 2014;Obaidullah, 2015;Putri et al, 2019;Ahmad et al, 2020). Furthermore, salam contracts benefit both sellers and buyers since the former require advanced payments to finance their production operations while the latter benefit from the salam commodity price which is lower than the spot selling price.…”

Investigasi Praktik Riba Pada Pembiayaan Kepada Nelayan: Studi Kasus Pada Kabupaten Takalar

“…Instrumen keuangan Islam, seperti Bai Salam dan Qard Al-Hasan, adalah alternatif yang layak untuk pinjaman berbasis bunga seperti yang dibayangkan oleh ekosistem keuangan Islam (Obaidullah, 2015). Jika diterapkan dengan benar, kontrak Salam dapat membantu mengurangi kemiskinan dan berpotensi mengakhiri kelaparan (Putri et al, 2019) mengembangkan suatu instrumen keuangan Islam menggunakan akad salam dengan membandingkannya dengan bantuan berbasis dana. Mereka menemukan bahwa model wakalah-salam yang dimodifikasi dapat mengurangi ketergantungan petani kecil pada uang donasi (dana amal) dan mengeluarkan mereka dari kemiskinan.…”