Islamic Agricultural Financing (IAF): An Option for the Developing Agricultural Sector in Nigeria
DOI:
https://doi.org/10.31436/ijema.v31i1.919Keywords:
Islamic agricultural financing, Agricultural credit, Economic diversificationAbstract
Nigeria has great land, water, labor, and market potentials. But the perceived failure of the existing credit facilities to meet the demand-supply gap of agricultural sector credit inhibits the sector’s performance. This causes serious concern to The Federal Government’s policy making, owing to some technical, resource, socio-economic, organizational, and religious constraints. It calls for policy shift toward economic diversification. This paper aims at underscoring the potential of Islamic agricultural financing as an innovative mechanism for enhancing agricultural performance. The paper uses secondary data covering 2013 to 2018 sourced from the Central Bank of Nigeria (CBN) and other relevant sources to analyze the trends of conventional agricultural credit performance. The paper, using qualitative method with exploratory content analysis, finds that conventional agricultural credit falls short as it fails to bridge the demand-supply gap of financial resources which adversely cause food price inflation and high food imports, which increases poverty, hunger and unemployment owing to the above-mentioned constraints. Hence, the paper recommends that Nigeria as an Islamic Development Bank (IsDB) member country operating the Non-Interest (Islamic) financial system, should properly fully implement the integrated Islamic agricultural financing modes of its newly introduced agricultural intervention schemes 2020, supported with effective legal and regulatory framework, vibrant market structure for enhancing financial inclusion and economic diversification for achieving micro and macroeconomic optimum growth and steady development of the sector in Nigeria, as successfully implemented in Malaysia, Indonesia, and Sudan.
References
Abdel Mohsin, M.l. “The Practice of Islamic Banking System in Sudan.” Journal of Economic Cooperation 26, no. 4 (2005): 27–50.
Adanikin, Olugbenga. “2019 Budget: 16 Years After, Nigeria Fails to Implement Maputo Declaration on Agric, Food Security.” ICiR News. 2018. https://www.icirnigeria.org/2019-budget-16-years-after-nigeria-fails-to-implement-maputo-declaration-on-agric-food-security/
Adesina, Akinwunmi. “Nigeria’s Agricultural Transformation Agenda (ATA) Mid-term Review.” Federal Ministry of Agriculture and Rural Development, Federal Republic of Nigeria, 2013.
Aguyi, Godswill. “Why Nigeria Must Increase Funding to the Agricultural Sector.” The Guardian Newspaper, 3 May 2019, https://guardian.ng/opinion/why-nigeria-must-increase-funding-to-the-agricultural-sector/
Al-Zuhaili, W. “Al-Fiqh Al-Islami Wa-Adillatuh.” Damascus: Dar Al-Fikr. 4th Edition 5 (1997): 2408-3411.
Askari, H., Z. Iqbal, N. Krichne, and A. Mirakhor. Risk Sharing in Finance: The Islamic Finance Alternative. Singapore: John Wiley & Sons (Asia) Pte. Ltd., 2012.
Ayegba, O., and D.I. Ikani. “An Impact Assessment of Agricultural Credit on Rural Farmers in Nigeria.” Research Journal of Finance and Accounting 4, no. 18 (2013): 80-9.
Boroh S.E, and E. Nwakamma. “Crisis of Infrastructure and Agricultural Development in Africa: The Case of Nigeria.” Abuja Journal of Sociological Studies (AJSS) 5, no. 3 (2018): 236-56.
Central Bank of Nigeria. “Circular to all Non-Interest Financial Institutions.” Financial Policy and Regulation Department, Central Bank of Nigeria (CBN), 16 July 2020. https://www.cbn.gov.ng/Out/2020/CCD/Circular%20to%20All%20NIFIs%20-%20July-16-2020.pdf
________. “Credit Delivery to Small and Medium Enterprises: Post Bank Consolidation in Nigeria.” Occasional Paper No. 53. Real Sector Division, Research Department, Central Bank of Nigeria, 2014.
________. “Economic Report of Fourth Quarter 2014.” Central Bank of Nigeria, 2014 Fourth Quarter. Statistics Department 1, no. 4, 2014
Chapra, M.U. “The Islamic Vision of Development in the Light of Maqasid al-Shari’ah.” International Institute of Islamic Thought (IIIT), London Office, UK. 2008.
Food and Agriculture Organization. “Country Profile: Nigeria.” Food and Agriculture Organization of the United Nations, 2016. http://www.fao.org/countryprofiles/index/en/?iso3=NGA
Haneef Mohamed, M.A. “Kuala Lumpur Declaration: Communique of the 11th ICIEF.” International Journal of Economics, Management and Accounting (IJEMA) 25, no. 2 (2017): 439–42.
International Islamic Financial Market. “Sukuk Report: A Comparative Study of the Global Sukuk Market.” Third Report, International Islamic Financial Market, 2013.
Kahf, M., and M.K. Fahim. “Short-term Financing of Commodity Production in Islamic Perspective.” A Paper Presented at the Seventh Meeting of the Experts of Islamic banking, Kuala Lumpur, 1992.
Kamali M.H. “Maqasid al-Shari’ah, Ijtihad and Civilizational Renewal.” Jointly Published by International Institute of Islamic Thought (IIIT), London, UK and International Institute of Advanced Islamic Studies (IAIS), Malaysia, 2012.
Khasanah, U., U. Salim, I. Triyuwono, and G. Irianto. “The Practice of Profit and Loss Sharing System for Rice Farmers in East Java, Indonesia.” International Research Journal of Finance and Economics 9, no. 3 (2013): 1-7.
Lotus Bank. “Welcome to Non-Interest Banking Made Just for You: Non-Interest Banking Products” 2021. https://www.lotusbank.com/
Meyer, R.L. “Subsidies as an Instrument in Agriculture Finance: A Review.” The World Bank, BMZ, FAO, GIZ, IFAD and UNCDF, Agriculture and Rural Development, Joint Discussion Paper, no. 70730 (2011).
National Bureau of Statistics. “Demographic Statistics Bulletin: 2017.” National Bureau of Statistics (NBS). Federal Republic of Nigeria, 2018.
Nwaoguji, Charles. “Nigeria’s Post-Harvest Losses Rise to $9billion – FIIRO DG.” Sun Newspaper. 25 September 2017. https://www.sunnewsonline.com/nigerias-post-harvest-losses-rise-to-9bn-fiiro-dg/
Obaidullah, Mohammed. “Islamic Financial Services.” Islamic Economics Research Center King Abdulaziz University. Jeddah, Saudi Arabia, 2005.
Ogbalubi, L.N., and C.C. Wokocha. “Agricultural Development and Employment Generation: The Nigeria Experience.” Journal of Agriculture and Veterinary Science 2, no. 2 (2013): 60-9.
Ogbonna, S.I., and C. Osandu. “Determinants of Supply of Funds to Agricultural Sector from Formal Sources in Nigeria from 1992 to 2012. Greener Journal of Agricultural Sciences 5, no. 3 (2015): 81-92.
Okoro, F.N., and N.I. Nwali. “Agricultural Funding and Challenges of Deposit Money Banks in Nigeria.” Arabian Journal of Business and Management Review 7, no. 5, 2017
Pandey U.K. “Agricultural Cooperation, Finance and Business Management. Agricultural finance.” Department of Agricultural Economics. CCS Haryana Agricultural University. 2008.
Paul, I.A. “A Historical Perspective of Petroleum on Nigeria’s Economic Crisis Since Independence.” Global Journal of Human and Social Science 15, no. 2, 2015
PwC. “Transforming Nigeria’s Agricultural Value Chain.” PricewaterhouseCoopers Limited (PwC) Nigeria, 2017. www.pwc.com/ng
______. “Evaluating Agriculture Finance in Nigeria: Towards the US$1 Trillion Africa Food Market by 2030.” PricewaterhouseCoopers Limited (PwC) Nigeria, 2018. www.pwc.com/ng
______. “Unlocking Nigeria’s Agricultural Exports.” PricewaterhouseCoopers Limited (PwC) Nigeria. 2019. www.pwc.com/ng
Rahman, A.A., and P.F. Othman. “The Agricultural Land Tenancy Contract from the Islamic Perspective and its Practice Among Farmers: A Study in Selangor, Malaysia.” African Journal of Agricultural Research 7, no. 10 (2012): 1584-94.
Rahim, S., and M.O. Mohammed. “Operationalizing Distributive Justice from the Perspective of Islamic Economics” International Journal of Economics, Management and Accounting, 26 no. 2, (2018): 415–42.
Rochow, R., M. Pero, K. Pook, D. Tchonkova, D. Marinova, R. Gheorghio, and V. Nita. “FenRIAM Full Guide: Proposal for a Foresight-enriched Research Infrastructure Impact Assessment Methodology.” 2012. http://www.fenriam.eu/doc/FenRIAM%20full%20guide.pdf
SAHEL Capital Agribusiness. “Financing the Agricultural Sector.” Sahel Capital Partners and Advisory Limited, 2014.
Shafiai, M.H.M., and M.R. Moi. “Financial Problems Among Farmers in Malaysia: Islamic Agricultural Finance as a Possible Solution.” Asian Social Science 11, no. 4 (2015): 1-16.
State Bank of Pakistan. “Prudential Regulations for Agriculture Financing.” Agricultural Credit and Microfinance Department, State Bank of Pakistan, Karachi Pakistan, 2014.
Statista. “Nigeria: Distribution of Gross Domestic Product (GDP) Across Economic Sectors from 2008 to 2018.” Statista, 2018.
Subba Reddy, S., and P. Ranghu Ram. Agricultural Finance and Management. New Delhi, India: Oxford and IBH Publishing Company PVT. Limited, 2005.
Sulaiman, S.M., A. Yahaya, A.M. Muhammad, and A.D. Muhammad. “Evaluation of Fadama III Development Project in Kano State, Nigeria: Using Difference in Difference Estimation with Propensity Score Matching Approach.” International Journal of Economics, Management and Accounting 29, no. 2 (2021): 499–517.
Tahir, I. N. “Poverty Alleviation Strategies Implemented by ’Umar ibn ’Abd Al Aziz: Lessons for Muslim Economists on Achieving SDG of Poverty Alleviation.” International Journal of Economics, Management and Accounting 28, no. 2 (2020): 483–515.
______, and G. Oziev. “Zakat Administration: An Analysis of the Past Approach. International Journal of Economics, Management and Accounting 26, no. 1 (2018): 57–90.
Umana. K. “Problems of Agricultural Development in Nigeria and Solutions.” Research Cyber. 4 January 2019. https://researchcyber.com/problems-agricultural-development-nigeria-solutions/
Vaughan, I.O., C.A. Afolami, T.O. Oyekale, and A.O. Ayegbokiki. “An Analysis of Nigeria Food Imports and Bills.” International Journal of Economics, Commerce & Management 2 (2014): 1–14.
Yahuza, B.S., M. Idris. “An Assessment of the Shari’ah Compliant Muzara’ah with Local Sharecropping Practice in Kano State, Nigeria.” Conference Proceedings, International Conference on Islamic Banking and Finance, The International Institute of Islamic Banking and Finance (IIIBF), Bayero University, Kano-Nigeria, 2015.
______. “Viability of Muzara’ah Contract on Agro-financing in Alleviating Rural Poverty in Kano State, Nigeria.” Al-Muzara'ah – Journal of Islamic Economics & Finance 6, no. 2 (2018): 91-102.
Downloads
Published
How to Cite
Issue
Section
