On the Experience of Islamic Agricultural Finance in Sudan:Challenges and Sustainability

Bamakhramah, Ahmed

doi:10.4197/islec.18-2.4

Cited by 2 publications

(5 citation statements)

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“…In other words, the Sudanese commercial banks play a significant role in Sudan's agricultural production. On the other hand, despite all the problems and challenges facing the agricultural sector in Sudan, the low ratio of commercial banks using the Salam mode of finance, and the wide range of risks exposed to the use of the Salam mode of finance during the study time, Salam mode of finance and the commercial banks financing had outstanding contributions and a positive impact on the Sudanese agricultural sector production as suggested by Abdullah (2002), Adam (2003), Bougheri (2005( , Abdullah (2015, Central Bank of Sudan (2018), Mustafa and Nadir (2019), Mohammed El-Ameen, 2021), and Mawhubi and Gondi (2021).…”

Section: Discussionmentioning

confidence: 92%

“…In this respect, Sudan has pioneering experience in financing agriculture using Salam; however, the banks are exposed to several types of risk in their experience of using Salam. These risks comprise markup, liquidity, and operational risks due to the complex process of collecting, storing, and marketing the crops, quality, and credit risks (Adam, 2003;Abdullah, 2015;Mustafa and Ndir, 2019).…”

Section: The Practice Of Applying Salam Mode Of Finance In Sudanmentioning

confidence: 99%

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Salam As Banking Financing for Agriculture in Developing Countries: Lessons From Sudan

Mualley

Moh'd

2022

IJIEF

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The objective of this study is to measure the impact of commercial bank financing via Salam mode of finance on the Sudanese agricultural production and determine whether the Salam mode is suitable for financing agriculture or not. For the purpose of the analysis, the ordinary least squares method (OLS) was applied to a log - linear form of a simple regression model with a time series data on Sudan’s total annual agricultural production as a dependent variable and the commercial banks total annual financing via Salam for explanatory variable. The empirical results indicated that Salam mode of finance is appropriate for financing agriculture in Sudan due to its significant effects on agricultural production with a significant and positive relationship. In addition, agricultural sector highly contributed to the country economy during the study period and highly positively elastic to bank financing. However, it is hindered by heavy direct and indirect taxes, high marketing cost, long distance with poor rural infrastructure and weak agricultural returns. Therefore, relevant policy implications for both agriculture and bank financing are required. Hence, results of study suggest that banks should increase the provision for Salam mode for high agricultural production, reduce tax burdens, renovate the infrastructure, and facilitate financing procedures to agricultural sector.

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Section: Discussionmentioning

confidence: 92%

Section: The Practice Of Applying Salam Mode Of Finance In Sudanmentioning

confidence: 99%

Salam As Banking Financing for Agriculture in Developing Countries: Lessons From Sudan

Mualley

Moh'd

2022

IJIEF

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“…In Pakistan around 65% of the population lives in rural areas and is directly and indirectly linked with agriculture (Kaleem and Wajid, 2009). The same case applies to Sudan, where agriculture has been the dominant sector throughout its history and contributes about 40% of GDP, 90% of non-oil exports and provides employment to more than 50% of the population (Elhiraika, 2005).…”

Section: Imefm 151mentioning

confidence: 99%

“…This phenomenon continues to occur in almost all regions of Indonesia. Similarly in Sudan, an informal agricultural financing of Shail was Salam financing practiced which involves deferred delivery sale of crops to a village lender who is normally a merchant (Elhiraika, 2005). Likewise, with the practice of Ijon in Indonesia, Shail also results in middleman playing around with the selling prices of agricultural produce.…”

Section: Imefm 151mentioning

confidence: 99%

“…Salam has long been practiced in numerous Muslim countries, particularly in Sudan, where it had been extensively introduced in its early full conversion into the Islamic financial system. Besides musharakah financing offered by Sudanese IBs, Salam is also a popular mode of finance in the Sudanese agricultural and livestock sectors (Elhiraika, 2005;Elzahi, 2002;Mohsin, 2005). The full adoption of the Islamic financial system in 1990 has led to remarkable increases in formal agricultural loans, from just around 1% of total bank credit in the 1980s to around 30% in 1992-1997.…”

Section: Imefm 151mentioning

confidence: 99%

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Salam financing: from common local issues to a potential international framework

Mulyany¹,

Indriani²

2021

IMEFM

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Purpose This research is concerned with the development of Salam, which caters for the specific needs of farmers, who form a vital yet fragile group in most developing nations. Based on the local context of Aceh Province in Indonesia which is considered to be parallel with other developing countries, the purpose of this paper is to embrace the whole set of issues and sketch out an extended Business Model Canvas (BMC) for Salam financing by delineating the three W’s of What, Why and How Salam can be offered by Islamic Banks (IBs). Design/methodology/Approach In-depth interviews were conducted with key stakeholders comprising of farmers, higher-ranking bankers of IBs, members of the Syariah Supervisory Board and academicians who are experts in Islamic finance. The re sults of the interviews added to a review of the literature were also mapped onto an extended canvas model. Findings Several interesting insights are derived and, primarily, that Salam is a feasible product to be offered by IBs, provided that there is a significant change in the thinking paradigm and risk mitigation models by all stakeholders, but mainly the IBs and the regulators. Research limitations/implications This study may be limited in the number and range of respondents who were chosen for interview. There are possibly other key informants, such as regulators and local custom figures, who may willing to provide useful information. The application of BMC for Salam may also be relatively new, hence its justification for a wider implementation may still need further analysis. Originality/value This study is deemed to add significant perspectives on product development and innovation in Islamic banking and particularly regarding Salam. This study advances the method used to study Salam by contextualising the product mapping of Salam into an extended BMC.

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On the Experience of Islamic Agricultural Finance in Sudan:Challenges and Sustainability

Cited by 2 publications

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Salam As Banking Financing for Agriculture in Developing Countries: Lessons From Sudan

Salam As Banking Financing for Agriculture in Developing Countries: Lessons From Sudan

Salam financing: from common local issues to a potential international framework

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