Reforming Ineffective Subsidies through Bay’ al-Salam: A Conceptual Framework

Abstract

This paper explores the possibility of Bay’ al-Salam as a tool for reforming ineffective government agricultural subsidies. Using a qualitative and literature-based conceptual analysis, it reviews Salam literature alongside studies on agricultural subsidies and documented cases of ineffective subsidies such as cases in Malaysia and Indonesia. This study reveals that Salam can effectively replace fiscal subsidies as it demonstrates superior potential in enhancing farmer empowerment including their autonomy and financial capacity, ensuring shariah compliance. The novelty of this paper lies in proposing Salam as a substitute for conventional subsidies, departing from the prevailing focus of Salam literature on structural modifications. Adopting Salam in place of subsidies may help reduce fiscal burden, help alleviate farmers socioeconomic conditions by breaking the cycle of ineffective subsidy, offering a practical, Shariah compliant support to expedite agriculture sector development and economic reform.