29 August 2022
The article by Jakarta Globe discusses about influence of Russia and Ukraine war on the global economic that created crises in many countries with significant level of food shortage.  It noted that these countries as a major producers of energy, remaining also main bread producers to the world supplying about one-tenth of all calories globally consuming. They are one of the large fertilizer manufacturers, while the economic sanctions makes agriculture production vulnerable globally.

Indonesia stays unprotective to food supply disruptions, also the country tackles hike in price for main food commodities such as eggs, chili, and others. Insufficient in supply doubled by raising demand for commodities generated market imbalance that leads to low inflation level that in May 2022 reached 3.55 percent, the highest since country had in December 2017.

Despite Indonesia is an agricultural country with vast fertile land enriched by tropical climate and significant farming population, but by Global Food Security Index, the food security performance is 59.2 which is lower than the previous year. Country’s food security sustainability requires state support to face current issues and strategy to strengthen food security should be formulated. In this term state in order to contribute to food security protection needs a financial institution able to have social impact.

Islamic finance is perofrming on the Islamic law principles aimed to serve interests of people, it is also considered highly essential to preserve human life, ensuring food security. Food security is the right to halal and tayyib food for everyone so no one is hampered from worshiping Allah because of starvation.

But the share of agricultural financing is at insignificant level in Islamic banks, amounting 5.4 percent, which is far below in comparison with others sector such as real estate or retail trade.

Apparently, subsidization agriculture is demanding due to its high-risk-low-return nature, while Islamic financing provides salam as a financing product supposed to increase the food supply.

Salam is assumed to embrace to contractors intended to sale agriproducts with the payment in cash at the time of signing the deal. The salam assists farmers and enables the importance of food security. While a mark-up sale murabaha is widely practiced at about 56 percent, which illustrates accusation of Islamic banks copying conventional products.

Islamic finance has social and financial implications to secure people’s primary need, but without introducing innovations, utilizing the maqasid sharia remains difficult approach.