Journal of Islamic Social Finance

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

Jamiu Oluwadamilare Awesu — 2025-07-09

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.

Risks in Islamic Green Finance and Takaful as a Solution

Nur Farhah Mahadi — 2025-07-09

Islamic green finance faces unique risks that require careful consideration and mitigation strategies in promoting the success of sustainable projects. This paper highlights Takaful, with its unique risk-sharing mechanisms, Shariah compliance, and community-based approach, can offer valuable and innovative solutions to address these risks and enhance the viability of Islamic green finance in promoting sustainable development and environmental responsibility. This research employs a qualitative approach through secondary data analysis. This paper, meticulously crafted based on an extensive analysis of documents and reports from financial regulatory and supervisory bodies, multilateral organizations, and industry experts, examines the integration of climate risk considerations into Takaful sector business models, encompassing both the challenges and opportunities arising from climate-related risks. By addressing the key challenges and seizing the opportunities, insurance and takaful operators’ (ITOs) can play a leading role in building a more resilient and sustainable future. Indeed, by leveraging ITOs’ strengths, Islamic green finance institutions can enhance the viability and impact of their investments, effectively manage risks, promote sustainable practices, and contribute to a more sustainable future.

Zakat and Its Role in Achieving Main Pillars of Sustainable Development Goals (SDGs) in Indonesia

Asma Munifatussaidah — 2025-07-09

As Islamic social finance, zakat has the potential to support the achievement of the Sustainable Development Goals (SDGs) in Indonesia. The economic pillar, the social pillar, and the environmental pillar are the three core pillars of the SDGs. This study aims to analyze the role of zakat in achieving the three main pillars of the SDGs in Indonesia. Using regression model estimation, we found that (1) in terms of the economic pillar, zakat has a positive contribution to boosting national economic growth and also decreasing the unemployment level in Indonesia. (2) In terms of the social pillar, zakat not only contributes to decreasing poverty but also to the increasing level of education in Indonesia. In addition, (3) in terms of the environmental pillar, zakat in Indonesia also contributes to improving and supporting access to clean water and sanitation for all Muslim communities, especially poor people. Therefore, we concluded that zakat has a positive impact on social and economic welfare as well as on overcoming environmental problems. Further, for the robustness test, the model in this research is stated to be robust. The empirical findings are expected to provide an alternative policy for government authorities to continue to create and promote zakat programs to support the achievement of the main pillars of the SDGs in Indonesia.

Profit Commission from Reinsurance Arrangement An Analysis from Shariah Perspective

Muhammad Fakhrul Razi Bin Zakaria — 2025-07-09

This research analyzes the profit commission from reinsurance arrangements payable to the Takaful fund from a Shariah perspective. To address the research questions and achieve the objectives, this study employs a qualitative research methodology, including a literature review and an examination of primary and secondary sources such as academic papers, books, and articles related to the topic. In addition to textual analysis, the researchers have conducted non-structured interviews and discussions with experts from the General Underwriting department of a takaful operator in Malaysia. As a result, the study identifies two differing opinions on this issue, each supported by various justifications. After analyzing these justifications, the researchers acknowledge the presented evidence. However, it is evident that the second opinion allowing the recognition of profit commission from reinsurance arrangements holds stronger justification based on the analysis conducted.

دور القوانين والتشريعات الناظمة للتمويل الإسلامي على محدودية تمويل السلم في قطاع التمويل الإسلامي الفلسطيني

Amjad Mahmoud Idais — 2025-07-09

ملخص البحث

يتناول هذا البحث أثر القوانين والتشريعات الناظمة للتمويل الإسلامي على محدودية تطبيق صيغة السلم في القطاع المالي الفلسطيني، باعتبارها إحدى أدوات التمويل الشرعي التي تتيح تمويل الإنتاج المسبق، خاصة في القطاعات الزراعية والصناعية. يسلط البحث الضوء على الإطار القانوني والتشريعي الذي يحكم عمل المؤسسات المالية الإسلامية في فلسطين، ويحلل مدى توافقه مع متطلبات العقود الشرعية، لا سيما عقد السلم، الذي يتطلب مرونة تشريعية وضمانات تنفيذية خاصة. يعتمد البحث على منهج وصفي تحليلي، مدعوم بدراسة ميدانية تشمل مقابلات مع خبراء في التمويل الإسلامي، ومراجعة للأنظمة القانونية ذات الصلة، مثل قانون المصارف الفلسطيني، وتعليمات سلطة النقد، وقوانين التجارة والعقود. كما يستعرض البحث تجارب بعض الدول الإسلامية التي نجحت في تفعيل تمويل السلم، ويقارنها بالواقع الفلسطيني، مستخلصًا العوائق التشريعية والتنظيمية التي تحد من انتشار هذا النوع من التمويل. توصل البحث إلى أن محدودية تمويل السلم في فلسطين تعود إلى عدة عوامل، أبرزها: غياب تشريعات خاصة بالعقود الإسلامية، ضعف التنسيق بين الجهات الرقابية والشرعية، وعدم وجود آليات قانونية لحماية حقوق الأطراف المتعاقدة في عقد السلم. ويقترح البحث مجموعة من التوصيات، منها: تعديل القوانين الناظمة لتشمل العقود الإسلامية، إنشاء هيئة شرعية مستقلة، وتطوير نماذج تمويلية متوافقة مع البيئة القانونية الفلسطينية.

الكلمات المفتاحية

تمويل السلم، القوانين والتشريعات، التمويل الإسلامي، فلسطين، العقود الشرعية

Abstract

This study examines the impact of regulatory and legislative frameworks governing Islamic finance on the limited application of the Salam contract in the Palestinian financial sector. As one of the Shariah-compliant financing tools, the Salam contract enables advance payment for goods, making it particularly suitable for supporting productive sectors such as agriculture and industry. The research highlights the legal and regulatory environment that governs Islamic financial institutions in Palestine and analyzes its compatibility with the requirements of Shariah contracts, especially Salam, which demands legislative flexibility and specific enforcement guarantees.

The study adopts a descriptive-analytical methodology, supported by field research that includes interviews with Islamic finance experts and a review of relevant legal frameworks, such as the Palestinian Banking Law, the instructions of the Palestinian Monetary Authority, and commercial and contractual laws. It also reviews successful experiences from other Islamic countries in implementing Salam financing and compares them with the Palestinian context, identifying the legislative and regulatory obstacles that hinder the expansion of this financing model.

The findings reveal that the limited use of Salam financing in Palestine is due to several factors, most notably the absence of specific legislation for Islamic contracts, weak coordination between regulatory and Shariah bodies, and the lack of legal mechanisms to protect the rights of contracting parties. The study proposes several recommendations, including amending existing laws to accommodate Islamic contracts, establishing an independent Shariah supervisory authority, and developing financing models compatible with the Palestinian legal environment.

Keywords

Salam financing, Islamic finance, legislation, Palestine, Shariah contracts