The Contribution of Bay-Salam to Agricultural Development in Oke-Aje Market, Ijebu Ode, Ogun State

Abstract

This study examined the role of Bay-Salam, a Sharia-compliant financing model, in promoting agricultural development in Oke-Aje Market, Ijebu Ode, Ogun State. Bay-Salam allows farmers to secure interest-free funding from financial institutions, such as Al-Hayat Microfinance Bank, Imowo Microfinance Bank, and Jaiz Bank, in exchange for delivering agreed-upon quantities of produce at a later date. The findings emphasized Bay-Salam’s contributions to financial inclusion, increased productivity, and ethical alignment with Islamic principles, particularly for small-scale farmers often excluded from conventional banking systems. However, these benefits faced challenges such as limited awareness, contract complexity, preference for traditional banking, insufficient institutional support, and cultural resistance, which hindered its broader adoption. Qualitative interviews revealed that farmers appreciated Bay-Salam for its risk-sharing structure and transparency, which fostered trust and aligned with their religious values. However, misconceptions about Bay-Salam’s terms and the rigid conditions of the contracts deterred many farmers. Recommendations include enhancing outreach, simplifying contract terms, and providing short-term financing options to address farmers' immediate needs. Financial institutions should establish dedicated support systems to increase Bay-Salam’s accessibility.