Juristic Frameworks for Risk Mitigation in Salam Contracts: An Analytical Study in the Context of the Agricultural Sector

Abstract

This study examines the key risks associated with the execution of Salam contracts and proposes practical mitigation measures grounded in Islamic jurisprudence. Several risks may arise during implementation, including non-delivery of the Muslam Fīh, delivery of goods below agreed specifications, delays in delivery, Challenges in the Sale of Muslam Fīh in the Market, significant price volatility at the time of receipt (potentially causing loss to either party), prolonged locking of the buyer’s capital, and the seller’s inability to deliver due to natural disasters. These risks call for a detailed evaluation.

The paper adopts a qualitative research approach, drawing on both primary and secondary sources. It also reviews contemporary Islamic banking practices to identify operational risks in Salam contracts and offers juristic solutions for their effective management.

The study argues that, where advance financing is required, Salam-based financing should be promoted as a viable alternative to interest-based financing, particularly in the agricultural sector, where farmers face acute liquidity constraints. In the absence of access to formal financial services, farmers often resort to high-cost borrowing from informal lenders, which worsens their financial vulnerability.

It is expected that the effective implementation of flexible Salam models, in line with Islamic economic principles and values, can significantly contribute to agricultural development, enhance farmers’ livelihoods, and promote broader economic stability.