Abstract
This paper attempts to look at the possibility of collaboration of Islamic agricultural finance in agricultural land development realizing the farmers’ financial problems during the case study and the government efforts in invigorating agricultural sector in Malaysia. Agricultural product and Loss Sharing (aPLS) which based on the contracts of al-muzara’a and al-musaqa from Islamic jurisprudence, partnership between the landowner and the farmer in brief, was highlighted in this paper. Agro Bank has the potential to employ Islamic agricultural finance realizing its roles in developing agricultural sector in Malaysia and its direction to be a full-fledged Islamic bank. The case study was carried out based on two methods that are interviews and questionnaire. These two methods have been used among the farmers under the one-off subsidy program by the Department of Agriculture in the selected six states in Malaysia. It was found that the farmers at the survey areas faced the financial problems during the second cycle cultivating yet the farmers have the capability in saving at the financial institutions. Thus, the main theme of this paper is that how Islamic agricultural finance can play a positive role and possible solutions to the farmers in Malaysia and eventually promoting agricultural development in Malaysia.
Highlights
The agricultural sector works in an environment of its own
It was found that the farmers at the survey areas faced the financial problems during the second cycle cultivating yet the farmers have the capability in saving at the financial institutions
Based on this case study in Malaysia which has revealed the real scenarios of farmers’ lives, there are some alternative solutions from an Islamic perspective and in particular related to Islamic agricultural financing that can be highlighted here
Summary
The agricultural sector works in an environment of its own This sector is vulnerable to many natural risks such as droughts, floods, and attacks from wild animals, and these need to be taken into account by the farmer and the landlord. Due to these risks, financiers are reluctant to invest or finance this sector. By and large, the predominant attribute in the ownership of properties and assets Most of these small-scale agricultural and non-agricultural enterprises are left to themselves. They have limited capacity to generate revenues beyond the equivalents of subsistence needs of the families. The asset holdings and products of these agricultural activities are not amenable to market transactions
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