2024

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Challenges in Adoption of Salam Financing for Agriculture Sector Development in Pakistan
(UMT, Lahore, 2024) Tahir Mehmood
Background: The agriculture sector provides food and labour employment facilities in every country. In developing countries, though most of the population is involved in agriculture, they are stuck in traditional farming methods with little or no equity capital. The agriculture sector depends on the credit supply function. There are three major players. First government-owned institution, then the usurious banking system, and lastly the Middleman (Arthi) who provides informal loans. These economic agents did not give the Shari’ah based agri-financing facilities and are charging interest (usury) for providing credit facilities to the farmer without risk participation. Islamic banking was new in Pakistan, and did not involve the agriculture sector much. The Islamic mode of finance Salam is the best substitute of conventional financing, which helps to boost productivity, eliminate the riba factor, and provide easy financing to the agriculture sector. Many studies have discussed the financial problems of the farmers and the agriculture sector, but it was lacking in discussing the issues related to the Salam product developers.