The socio-economic conditions of a vast majority of small farmers in developing and poor countries are miserable. There are various factors which hurt poor farmers like the shortage of water, costly seeds and fertilizers, poor patronage from the government, olden cultivation techniques, illiteracy and lack of training. These problems no doubt hurt the farmers at large. The lack of credit is one of the most serious issues which not only impedes the agricultural performance but also the welfare of farmers. The existing credit schemes for farmers in Pakistan have many demerits. Among them are exploitative conditions, interest-based, access-difficult and cumbersome procedures. Islam, in the form of Bay’s Salam, provides an alternative credit system that is not only much easier but also free from exploitation and many ills of conventional forms of credit. With the exception of the last century, Bay’ Slam had been practiced widely in many Muslim countries and had served the poor farming communities effectively. This paper analyses the potential and scope of Bay’ Salam as a substitute to the existing forms of agricultural credit using secondary and primary data.