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Local agricultural financing and Islamic banks: is Qard-al-Hassan a possible solution?

Local agricultural financing and Islamic banks: is Qard-al-Hassan a possible solution? Purpose – This paper aims to study Qard-al-Hasan (QH) (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of Riba (interest)-free agricultural financing for Muslim farmers of Islamic countries like Pakistan. Design/methodology/approach – This paper is a study of QH (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of Riba (interest)-free agricultural financing for Muslim farmers of Islamic countries like Pakistan. Findings – The study reports that Riba-free financing is essentially needed by poor Muslim farmers who, owing to prohibition of Riba, do not rely on interest (Riba)-based financing. The study also shows that QH is a viable option for fulfilling this need and is beneficial for the farmers as well as for the Islamic banks or financial institutions. Research limitations/implications – The case of QH as a potential mode of agricultural financing, as presented in this paper, is based on a theoretical or conceptual framework. The findings need to be further substantiated with empirical evidence. A future study, based on reliable empirical data would certainly add value to the subject. Originality/value – Islamic banks and financial institutions typically rely on Musharakah (partnership), Murabaha (sale with profit), Ijarah (leasing), Salam (advance payment sale), Istisna’ (manufacturing contract), etc., and they rarely use QH as a mode of financing. Despite its huge utility, QH is practically non-existent in its application as an agricultural financing instrument. This paper presents a case for QH that can be adopted by Islamic banks or financial institutions for provision of the much needed financing for the small farmers of Islamic countries, as well as those living in non-Islamic countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Islamic Accounting and Business Research Emerald Publishing

Local agricultural financing and Islamic banks: is Qard-al-Hassan a possible solution?

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References (10)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1759-0817
DOI
10.1108/JIABR-04-2012-0018
Publisher site
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Abstract

Purpose – This paper aims to study Qard-al-Hasan (QH) (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of Riba (interest)-free agricultural financing for Muslim farmers of Islamic countries like Pakistan. Design/methodology/approach – This paper is a study of QH (good loan) from the stand point of its possible application to agricultural farming with a view to augmenting the sources of Riba (interest)-free agricultural financing for Muslim farmers of Islamic countries like Pakistan. Findings – The study reports that Riba-free financing is essentially needed by poor Muslim farmers who, owing to prohibition of Riba, do not rely on interest (Riba)-based financing. The study also shows that QH is a viable option for fulfilling this need and is beneficial for the farmers as well as for the Islamic banks or financial institutions. Research limitations/implications – The case of QH as a potential mode of agricultural financing, as presented in this paper, is based on a theoretical or conceptual framework. The findings need to be further substantiated with empirical evidence. A future study, based on reliable empirical data would certainly add value to the subject. Originality/value – Islamic banks and financial institutions typically rely on Musharakah (partnership), Murabaha (sale with profit), Ijarah (leasing), Salam (advance payment sale), Istisna’ (manufacturing contract), etc., and they rarely use QH as a mode of financing. Despite its huge utility, QH is practically non-existent in its application as an agricultural financing instrument. This paper presents a case for QH that can be adopted by Islamic banks or financial institutions for provision of the much needed financing for the small farmers of Islamic countries, as well as those living in non-Islamic countries.

Journal

Journal of Islamic Accounting and Business Research – Emerald Publishing

Published: Apr 13, 2015

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