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Designing Salam-Muzara’Ah Linked Waqf To Financing Agricultural Sector

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  • Rifaldi Majid

    (Airlangga University, Indonesia)

Abstract

The main objective of this study is to propose an innovative integrated financing model at the microfinance level for the agricultural sector and how to mitigate the risk associated with the model. In the study, we perform in-depth interviews of experts and gather secondary data from relevant sources. The proposed model is called Salam-Muzara’ahLinked Waqf (SMW) as a sharia-compliant scheme that integrates Islamic commercial finance through the salam and muzara’ah contract with Islamic social finance through the utilization of cash waqf return as well as using the idle waqf land as agricultural lands to be implemented by Baitul Maal wat Tamwil (BMT). In the model, the risk of commodities delivered by farmers to BMT is subsidized or borrowed by Nazhir of waqf land while the surplus of cash waqf is distributed to cover Murabahamargin of necessary agricultural equipment purchased from BMT. This research is expected to solve the problem of limited land and financing as well as to create innovation and inclusiveness of Islamic financial products through the synergy of all parties in the agricultural sector.

Suggested Citation

  • Rifaldi Majid, 2021. "Designing Salam-Muzara’Ah Linked Waqf To Financing Agricultural Sector," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 7(3), pages 503-526, August.
    • Handle: RePEc:idn:jimfjn:v:7:y:2021:i:3d:p:503-526
    DOI: https://doi.org/10.21098/jimf.v7i3.1309
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    More about this item

    Keywords

    Integrated financing model; Salam-muzara’ah linked waqf; Baitul maal wat tamwil; Agricultural sector;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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