Sharia-Compliant Transaction Review of Ijon Agricultural Contracts: Empirical Study from Sobrah Village, East Java

Abstract

This study examines the Sharia compliance of the ijon agricultural financing system in Sobrah Village, East Java, focusing on its alignment with Islamic economic principles. The ijon system, a pre-harvest trading mechanism, provides farmers with immediate liquidity but often involves excessive uncertainty (gharar) and exploitative pricing resembling riba. Through qualitative methods, including interviews with 20 farmers, 5 traders, and 3 Sharia scholars, the research identifies significant violations of Sharia law, such as ambiguous contract terms and unfair pricing, which undermine maqashid sharia objectives like wealth preservation and justice. The study proposes a reformed model based on three pillars: transparent pricing using market benchmarks, risk-sharing mechanisms inspired by mudharabah, and institutional oversight through Village Sharia Councils (VSCs). This model aims to balance liquidity needs with ethical compliance, drawing on successful Islamic finance practices. Findings highlight the potential of integrating Sharia principles into traditional agricultural finance to promote fairness and sustainability, contributing to SDGs 1 (No Poverty) and 10 (Reduced Inequalities). The research underscores the need for policy interventions and further empirical testing of the proposed framework in similar contexts.