Religiosity and threshold effect in social and financial performance of microfinance institutions

 Mohammad Ashraful Mobin

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PRESENTED BY: MR. JAMIL HASSAN MANAGING DIRECTOR/CEO

TIJARAH MFB LIMITED BAUCHI, NIGERIA

AT: THE 6TH GLOBAL ISLAMIC MICROFINANCE FORUM – NAIROBI, KENYA 8-9TH NOVEMBER, 2016

ISLAMIC AGRICULTURE FINANCE: AN IDEAL MECHANISM TO FULFILL THE ALL CROPS/FARMER NEEDS

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OUTLINE:

Introduction

Why Islamic Finance

Importance of Islamic Agriculture Finance

Critical Areas in Agric Financing

Availability of Islamic Agriculture Finance in Africa

Islamic Agriculture Finance Product Offering

Limiting Factors

Future Outlook

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Introduction

“There is none amongst the Muslims who plants a tree or sows seeds, and then a bird, or a person or an animal eats from it, but is regarded as a charitable gift from him.” --- Al Hadith narrated by Anas bin Malik (ra).

The need for enhanced ethics in the pursuit of agricultural production is fundamental to ensuring the full

participation of Muslim farmers. Ethics, in the provision of finance, land and human capital, would be essential to the long-term success of the global effort towards

sustainable agriculture.

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Why Islamic Finance

It addresses the ethical problems associated with interestIt facilitates adherence to the divine callIt makes for better profits

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Importance of Islamic Agriculture Finance

Agricultural credit contributes to the development of agriculture in 3 basic ways; cover input/output gaps in production, credit rationing by banks due to imposition of ceiling on return from agric loans by government, augment inadequate farm savings. However, the dearth of financial products that are in tandem with the religious and social beliefs of the average Muslim farmer, have precluded financial inclusion in not only agric, but all facets of the rural economy of especially, Muslim majority countries. While agricultural finance contributes to the efficient use of factors of production and farm investment in the agric sector, Islamic agriculture finance could revolutionize the agric sector and guarantee sustainable growth of the rural economy.

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Critical Areas of Islamic Agriculture Finance

.Production

. Storage

. Processing

. Marketing

.Research and Development

.Bio-Fuel Development

.

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Availability of Islamic Agric Culture Finance in Africa

Many African countries practice some form of Islamic agric finance; however, Sudan has the most comprehensive Islamic Agric Finance practice. Egypt, Ethiopia, Kenya, South Africa, Gambia, Tunisia, Algeria, Tchad and Nigeria, have demonstrated increasing commitment and a growing appetite. Salaam and Murabaha are the most active modes at the moment.

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Islamic Agriculture Finance Product OfferingMurabaha A contract of sale where the seller

discloses the cost of goods and his profit, could be used to purchase inputs in crop production

Salam a sale contract where the seller receives payment now for the supply of specific goods to the buyer at agreed future date, could be used to finance farming overhead and augment working capital

Ijarah Is a contract where the owner of asset other than consumables, transfers its usufruct to another person at an agreed rental for an agreed period, useful in financing farm mechanization or transportation

Istisna’a A contract of sale at an agreed price where the buyer places an order to manufacture, assemble or construct the agreed asset to be delivered in future, it could be to provide farm infrastructure

Diminishing Musharakah

A partnership where profits are shared as per agreed ratio and losses are shared in the proportion of capital or investment, also for financing farm infrastructure and machinery

Musawamah A sale based on bargain without reference to the original cost of the asset

Musaqa’at A joint venture contract akin to Mudarabah, but only involves investment in economic trees

Muzara’at A variant of Musharakah that focuses on agriculture and permits the pooling of resources to finance commercial farming

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Limiting Factors to Islamic Agriculture Finance

Limited number of Islamic banks and Takaful operatorsFewer products on offer within the regionLarge numbers of excluded Muslim populationsDifficulty in attracting foreign investment to the regionPervasive poverty amid high corruption perceptionInadequate operational, managerial and jurisprudential skills

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Future Outlook

Need for a continental IBF strategy for Africa through sub-regional initiativesFocus on peculiar strengths of sub-regions and territoriesMassive investment in the areas of enlightenment, advocacy and capacity buildingDeliberate effort at breaking barriers to foreign participationEncourage, strengthen and deepen savings culture to build local capital on the long-run Improve local legislation to remove barriers to the entrenchment of IBF in AfricaEncourage frequent engagement to facilitate convergence and standardization.

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