Abstract
Islamic rural microfinance represents the confluence of three rapidly growing activities: microfinance, Islamic finance and agricultural development. It has the potential to not only respond to unmet demand but also to combine the Islamic social principle of caring for the less fortunate with microfinance’s power to provide financial access to the poor people involved in rural farming. This paper aims to analyze the governmental agricultural microfinance based on the Islamic principle of Murabaha, using the rural area of Hama government, Syria as case study. The qualitative approach and collected data from the microloan provider was used in this research. The main results show the success of this type of agricultural microcredit to develop the livestock production and its high likelihood of sustainability because it does not conflict with religious and social considerations of the targeted group as well as the high repayment, and it uses the participatory approach of the target group. It could play a very important role regarding the empowerment of rural women by establishing their own projects, owning shares in the village fund, obtaining annual profits, and household investment which can help to improve their family's living conditions. The risks to this type of agricultural microfinancing includes agricultural sector exposure to natural, productive, price and institutional risks. Key words: Agricultural microcredit, microfinance, Murabaha, village funds, Syria.  
Highlights
Achieving "rural development, combating poverty and improving the living standard of rural families" remains meaningless without a change in current modalities of thinking from bureaucratic approaches to a more pragmatic approach that helps implement and practice policy recommendations
This research aims to study the mechanism of microfinance based on the Murabaha by using data obtained from the Livestock Development Project (LDP), in the Governorate of Hama, Centre of Syria and this study aims to reach conclusions that can be applied and expanded in different rural areas and to ensure acceptance and participation by the target groups and their ability to repay
The data were obtained from the following sources: (i) Statistical information published in the annual agricultural statistical books, obtained from the Ministry of Agriculture and Agrarian Reform, as well as statistical data provided by the Central Bureau of Statistics, the country study prepared by the research centers on financing and loans such as the National Centre for Agricultural Policies and the reports of international organizations. (ii) Data provided by the LDP management and interviews conducted in the Department of Livestock Development Project in Hama governorate
Summary
Achieving "rural development, combating poverty and improving the living standard of rural families" remains meaningless without a change in current modalities of thinking from bureaucratic approaches to a more pragmatic approach that helps implement and practice policy recommendations. A pragmatic approach may better tackle natural, political, economic, administrative and technological constraints as well as financial constraints. It is necessary to think of other ways to finance the agricultural sector. These methods must be accepted by target groups and rural residents and it should not contradict their beliefs. Agriculture is considered to be the backbone of the Syrian economy, as it accounts for the second largest share of the economy after oil (NAPC, 2013). It is an economic source for more than 46% of the population
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