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Model for Financing Agro Projects in Islamic Banking Institutions

Posted by admin
October 10th, 2019

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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