Salam financing: from common local issues to a potential international framework
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 13 August 2021
Issue publication date: 18 January 2022
Abstract
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.
Keywords
Acknowledgements
This paper was selected as prize winner for 2019 FREKS paper competition by Otoritas Jasa Keuangan (OJK) of Indonesia and Ikatan Ahli Ekonomi Indonesia (IAEI). The authors are thankful to the judges and all participants who given constructive comments during the event.
Citation
Mulyany, R., Indriani, M. and Indayani, I. (2022), "
Publisher
:Emerald Publishing Limited
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