By
Muhammad Ridhwan Ab. Aziz
Muhammad Mohamad Yusoff
Abstract
The main aim of Islamic financing in agriculture is to finance
agriculture-based projects and to prevent any involvement of haram elements by
using banking and financing instruments which is Shariah-compliant among
agro-entrepreneurs. However, there are several risks that need to be faced by
agro-entrepreneurs which may force them to accommodate possible loss from
effect of risks using the same funding. Both agro preneurs and banking
institutions are increasingly seeking effective and sustainable strategies and
approaches to mitigate, transfer, or cope with these inherent risks. Hence, the
main aim of this paper is to develop a suitable financing model as a solution
to the risks. The methodology of the research in this paper is mixed
methodology, using qualitative and quantitative approach in answering research
questions. The methodology of data collection is semi-structured interviews and
survey questionnaires. This paper shows various noteworthy findings such as
agro preneurs’ risks issues, awareness on Islamic financing, and
Shariah-compliant financing constructs. The newly developed agro financing
mechanism that complies with sharīah law will be proposed in the end of this paper.
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