05
Jun
08

PROSPECT OF SHARIA FINANCING IN AGRICULTURE SECTOR

By: Rio Ramadhian

TUTOR IKHWAN BRAIN STORMING TEAM

Written as the Material to Join Scientific Paper Competition

in Sharia Economics Activities 3 (SEHATI 3)

Agriculture sector shows important contribution in economic structure of South Sumatera structural. So that it is reasonable to give by attention to agriculture sector. Remembering that this sector becomes the main hope for most rural society is life. In supporting South Sumatera as a Nastional Food Barn. But RGDP South Sumatera’s sub sector was in decreasing condition for the last three years. One main problem is the weak in capitalization. Although the government has tried to cope that problem by releasing some credit programs for agriculture sector. The credit program shows the unsatisfied result, even pile up new problem like the increasing of farmer debt and non performing loan. Based on that matter it is need to find agriculture based alternative system, one of them is by sharia skim. This article has a purpose to give some introduction about sharia financing and prospect implementation in order to support South Sumatra food barn. Result of this research show that sharia financing have great opportunity to make financial in agriculture sector become strength ness.

Regional decentralization era which has been run in several years strive for government of south Sumatra to have big participation in order to explore their natural resources to economic development regional sector’s increases, agriculture sector is the big one of top sector in this region and this sector had been a great income to save big amount low line of suburban peoples.

Generally agriculture sector shows the significant contribution in economical structure in South Sumatra because in fact agriculture sector give a good condition (table 1.1), although RGDP of sub sector has been declined since 2002 (7.02%), in 2003 (6.75%) and in 2004 (6.29%). (Setijawan and Siregar, 2003).

Table 1. Structure of Economy South Sumatra at 2005 up to 3rd Quarterly of 2006

2005

2006

Sector

I

II

III

IV

I

II

III

1. Agriculture

18.70

18.92

19.98

17.06

15.17

17.45

20.05

2. Mining

27.82

28.19

28.13

28.68

31.47

28.83

27.03

3. Manufacturing

21.29

20.85

20.31

20.67

23.03

22.40

21.43

4. Electricity

0.61

0.65

0.64

0.62

0.53

0.54

0.54

5. Built

6.28

6.36

6.69

7.48

5.72

5.89

5.92

6. Trading

9.44

9.28

9.11

8.76

10.64

11.14

11.32

7. Transportation

4.45

4.39

4.25

5.18

3.88

3.96

3.97

8. Financial

3.51

3.54

3.49

3.39

3.20

3.30

3.18

9. Services

7.90

7.82

7.40

7.37

6.36

6.48

6.56

Total

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Source: Central of Statistic Department South Sumatra 2006

One of obstacle is investment and financial, actually local government has been solved that problem with compose any credit program for agriculture sector, this program which used interest system showed dissatisfaction result, in fact created new problem such as the payable of farmer become bigger and insufficient fund to pay that payable.

Base on this fact to solve this problem financing and investment so needed, one of them is with sharia skim. Different with credit model, sharia financing free of interest, and profit proportion base on dividend after all transaction ended.

South Sumatra As the Food Barn

South Sumatra as the food barn have wide meaning that is South Sumatra as the region which produce and supply the food resave as soon as other agriculture crops in fresh formed in spite of agro industrial product, in where people not in standard condition of food needed, but rather have a buying effort and easily to get food access until have the food strength ness which have a good position and get proper income in order to fulfill other needs, it is so explicit that in this explanation include any efforts of economic exertion that done by government and agriculture community in wide scope in order to be able to prepare agriculture crop, so that the farmer have buying efforts that enough from their income so can get food access, all at once to have the more than standard income that purpose is to improve their economical life in the future.

South Sumatra Food plants Sub sector and horticulture almost two last decade have good participated to preserve national rice stock, this participation actually need to be improved and optimized with the program South Sumatra as food barn which has been got reaction from government directly by Indonesia’s president and vice president

Table 2. Commodity to be Considered with Production Target per Year that Will be Reach in 2009

No

Commodity

Target that will be reach

1.

Rice

>2 million ton

2.

Corn

200 thousand ton

3

Rubber

800 thousand ton

4.

CPO

1,8 million ton

5.

Coffee

150 thousand ton

6.

Copra

70 thousand ton

7.

Cow

623.740 classifier

8.

Shrimp

35 thousand ton

9.

Fish Cultivated

28 thousand ton

10.

Pulp

10.3 Million cubic

Source : Susanto (2005)

If South Sumatra as food barn program relate with revitalization agriculture program and suburban at national way, it is so relevant if applicator with Agropolitan development approach or agriculture town and Agriculture area, this approach is one of effort to develop main agriculture production areas with facility and infrastructure include agribusiness center to serve the other production center that will become hinterland.

So there will be appear new cities with economic agriculture activities as hoped will capable of make any work field and take new worker until prevent the migration’s flow. Beside that the distribution of regional development will go happen with the agriculture base in new grows cities that will grow up at following times.

The Condition of Agriculture Financial in Urban Area

The low farmer’s access toward credit institution (especially formal credit caused farmer’s capability to finance their effort become lower too. Fajardo (1992) In Ashari and Santana suggests that small farmer have susceptible accessibility to formal credit facility. It is caused by the small farmer hasn’t fulfill the qualification of requirement which has been settled by credit institution.

Whereas that credit for agriculture sector (especially credit program) fixed the interest rate lower than non agriculture sector. This case is purposed that to support the growth of agriculture sector, and increase the economic growth for this region. But, the fact show the credit used for agriculture is so slow than non agriculture sector. Saleh (1988) defined the indication as a one of its causal factor is its low capital investment rent ability in agricultural sector. Disability of farmer to fund of his farming make them have no more choice, except borrowing loan to informal and non-programmed credit institution.

Market segmentation (small farming) is a potential credit for informal credit provider. Near by distance either physically or socially with customer is a plus of informal credit institution in tilling potency or farmer segmentation (small farming). Besides some pluses, this informal market also has minuses, like a high interest rate and a possibility of money turnover mobility in a great amount. It is relatively less cause it is spread and isolated by it’s physically agriculture location. (Syukur, 2000).

Small farmers feel difficult to obtain access to formal credit institution and felt “forced” to choose informal credit sources. Because a feeling of continues moral duty to trader, the informal lender will relatively perpetuating impecunious people poorness. (Anonim, 1986).

With critical understanding to the agricultural business people and distribution of financing skim’s mechanism which are accessed by farmers, it is expected to formulate proper and relevant sharia skim financing in a way to obtain a way out to sharia financing institution manipulation in supporting an agricultural business development in villages.

Sharia View of Capital and Sharia Financing Characteristic

In sharia view, human is obligated to work obtaining an earning to fund his/her living. Afzalurrahman (1995) defined capital as a wealth then Quran mentioned this wealth and capital with an expression: “inventory is used by human” this is stated in order we can earn wealth continuously to fulfill our wishes. Capital is a third production factor, which can create wealth through various economy activity sectors.

Based on Sharia, the relationship between Ista’ara Musta’ara is not forbidden, it is even suggested in order to have a mutual profitable relationship. In Sharia Financial Institution, the word of Ista’ara Musta’ara is less properly to be used for its two main factors. First, loan is one of financial relationship method and like many other methods, like: selling-buying, profit and loss sharing, rent, etc. Second, qardh in aqd tathawwui is a social contract, not a commercial contract. It means if somebody borrows something, someone may not to be required to give the addition for his/her loan. Every loan that gives profit and interest according to sharia principle is called riba, and riba is haram. Therefore, In sharia financing Institution, loan is not to be called credit but financing.

Sharia view about capital and business activity in turn will influence economy behavioral which is expected to be parallel with Sharia principles. Forms of economy activity exposed by Islamic teachings are (Hafiduddin, 2003):

1. Human is commanded to work finding halal sources for the living. It means we are expected to have a high ethos work to be productive.

2. Human is expected to master and exploit economy activity sectors in larger and more comprehensive scale like trading, industry, agriculture, financial, service and others for togetherness prosperity.

3. In doing economy activity, it is forbidden to use negative ways like doing riba, manipulating, etc.

4. Supporting people to optimally implementation of zakah, infaq/shadaqah, either in taking or distributing.

5. Supporting people to do economy activity in a tidy, regular, transparent, and coordinated institution to develop cooperation.

From various forms of those economy activities, it is seen that sharia perspective between real and monetary sector is related each other. This is totally different with conventional economy practical which is not stressing the relation between both of them. Monetary sector is tending to move faster and over expansive, so what happens in monetary sector is truly deflect in its real condition. In economy based sharia, it is not agreed to have dissociation between real sectors in goods/service market with non real activity in a financial market.

Sharia Financing Characteristic

Theoretically, there are 3 characteristics of sharia financing, they are free of riba, principal to profit-loss sharing, and also profit-loss sharing is done after a real profit, it is not based on the assumption that the amount of business profit obtained over credit interest.

As the deeply follow up from agricultural-based Syariah Financing system, sharia banking suppose to be consistent to its Islamic principles. Therefore, in applying sharia system in funding, Islamic bank must do its responsibility based on some characteristics like shiddiq, tabligh, amanah and fathanah. Shiddiq means Islamic bank management must be done with morality that reveres the values of honesty. Thus the moral hazard which all this time ever coloring the banking world in doing its activity can be avoided. The tabligh characteristic shows that Islamic bank will always socialize and educate people about principles, products, and sharia banking service continuously so the excellent Moslem executive integrity will be reflected. The amanah principle reveals that Islamic bank always try to manage the fund deposited by the owner carefully and accurately (shahibul maal). Fathanah means Islamic bank has competition to manage the bank in professional and competitive way, so the profit is gained maximally trough the level of risk which has been calculated properly by the bank.

Table 3. The Comparison between Islamic and Conventional Bank:

Islamic Bank

Conventional Bank
Only doing halal infestations Halal and haram infestations
Based on the earning-share principle, buy and sell or rent Using interest equipment
Profit and falah oriented (seeking for wealthy in the world and akhirat) Profit oriented
The relationship with the customer is in partnership relation The relationship with the customer is in creditor-debtor
The fund collecting and distributing must be appropriate with the instruction from the sharia supervisor board There’s no similar type of board like in Islamic bank

Source: Antonio, 2001.

Easier way to differ between Islamic bank and conventional bank is there is no interest on Islamic bank, because interest is one of riba practice that is definitely forbidden on Islam

Islam supports the earning-share practice and forbids riba. Both of them give profit to the fund owner; but they have very significant differences which explained in this table:

Table 4. The Comparison between Interest and Profit-Loss Sharing

Interest

Profit-Loss Sharing

The interest value determination is done in agreement time with must-always-profitable assumption The determination of the earning-share ratio is done in agreement time which is guided by the profit and loss possibility
The percentage value is based on the amount of money (capital) lent by the bank The earning-share ratio value is based on the amount of profit gained
The interest payment is constant just like what has been agreed without consideration whether the project done by the customer is profitable or inflict a financial loss The earning-share depends on the profit from the project done by the customer. If the project suffers lost, the bank and the customer will be responsible for the loss
The amount of interest payment isn’t increasing although the amount of profit is multiplied or the economy is in booming condition The amount of profit share is increasing as the amount of income increase
The interest existence is doubtful (or even criticize) by all religions, Including Islam There’s no religion doubt about the legality of earning-share system

Source: Antonio, 2001.

Product Improvement with Sharia Funding

Product development of sharia banking is the important thing and the basic in sharia banking industry. It is appropriate with the vision and the target of sharia bank development like mentioned in the blue print of sharia banking development (Bank Indonesia, 2005). This development vision describes the expectation in order to posses the resolute position that contributes to the real sector. One of the serious challenges of product development in sharia funding is how far this organization can produces the sharia banking products which are can fulfill the real sector necessaries. So many the sharia banking products, which are, can fulfill the real sector needs, so more strongly the position that contributes to the real sector.

Among the targets of Islamic bank development is creates the systemic stability and also makes the advantage realization for social life (Bank Indonesia, 2005). Those are can be signed by:

1. The needs of Islamic bank can be reached by all over in Indonesia with target in the market shares about 5 percents from total assets of national banking. The society needs in sharia banking services relate with the society who wants the services in sharia banking products its self. Thus, the efforts to complete the society needs, basically as the efforts to serve the banking product that appropriate with the needs. Product development is the appropriately efforts of sharia banking product with the characteristics of society needs.

2. Realized the function of sharia banking entirely and can give the services for the whole segments of society. Sharia banking products, which are match and can complete the necessaries for all of the society segments its self, will put the position of Islamic bank as the society servant.

Before it will be implemented, the product development of sharia banking industry need to get Central Bank of Indonesia agreements which are based on the official religious advice from Dewan Syariah Nasional (DSN). The coordinated relations between Central Bank of Indonesia and DSN as an obligation, it is cleared in law number of Bank Indonesia. 6/24/PBI/2004 about the performance activities of general bank with based on the sharia principles.

Figure 1. This Product Development Approach of Sharia Banking

Appropriate with wary principles

Appropriate with sharia principles

Appropriate with society needs

Product Development

From the figure 1, it can be said that the product development of sharia banking is influenced by:

1. The approaching which has done by Central Bank of Indonesia so that the product development still in suitable corridor with the wary principles, which are, can support the continuity and stability of sharia banking industry.

2. The approaching which has done by DSN so that the product development still in suitable corridor with sharia principles.

3. The approaching which has done by Islamic bank performer so that the product development still in suitable corridor with society needs.

Based on Bank Indonesia report (2005), the product development of sharia banking in 2004 describes some inclinations. First, there is an effort to create the product alternative of Islamic bank such in the conventional banking with some appropriates. It can be happened because the society still have a high loyalty to the conventional banking products so that as technically sharia banking tried to make the products equal with the conventional banking products (mirror image syndrome). And the second, it has a tendency to make the variety alternative products, not only recognized as the banking products but also for another products. It comes from the opinions that sharia banking products naturally has spacious spectrum compared to the conventional banking. This tendency need to get more attentions, commonly from the sharia banking sides, so the intermediate process can be run carefully and still on the real sector line without to have loss the nature.

Sharia Banking Prospect In Agriculture Sector

According to Law number. 10 in 1998, sharia banking institutions supported growth significantly. In this law also gives advice for conventional banks to open sharia branch or self converse to be Islamic Bank.

Indonesia ought to get a thumb on the bravely of done profit and loss sharing. In the very young age, Muamalat Bank has given 15% its finance from its profit and low sharing; even on the end of 2000 achieved 51% from its finance was shared by profit and low sharing. As noted, this changes was caused by two things, first, there was credit government program bent KKPA (Primary Credit Cooperation for Member) that had to be shared as profit and low sharing. Second, many murabahah on problem caused economic crisis, is converted become profit and low sharing.(Karim, 2001).

Taken by the growth, banking in South Sumatera at three monthly report-3rd 2006 had distributed Rp 431 billion and Rp 409 billion at three monthly report-2nd 2006 or increased 5,37 percent. Relatively same with previous period. Primary funding was given by murabahah receivable (80,04 %) and mudharabah fund (17,16 %) greater of sharia banking was determined by general of Islamic bank. Sharia enterprise unit and provider network of sharia banking. Until November 2005, the total of sharia bank in South Sumatra reached 4 consists of 2 general of Islamic bank and 2 sharia enterprise unit taken by conventional bank and 1 BPRS with total office 1 building.

Table 5. Developed of Sharia Banking Institution in South Sumatra at Year 2002-2004

Group of bank

2002

2003

2004

2005

Islamic Bank

2

3

3

4

Number of offices

2

3

5

8

BPRS

1

1

1

1

Sources : Bank Indonesia (2005)

The position of storage fund was collected (third party) at three monthly report-3rd 2006 a little bit increase compare than three monthly report-2nd, 2006 increased from Rp 225 billion to Rp 257 billion. Financial compositions come from Mudharabah depository (43, 57 %) and Wadi’ah demand (8, 56 %). Also included fund in the form of foreign exchange was reached by Wadi’ah demand and Mudharabah depository but the amount relatively small.

The small banking credit value in agriculture sector (18,80 %) from credit generally was caused by agriculture group activity as one of business that has high risk in banking. Because of that, the problem must be handled by implementing sharia system, gained by Wadi’ah (trust depository), Mudharabah (profit and loss sharing), Murabahah (sale and purchase), operational-financial lease, and fee-based services. Beside that, non-performing loan in agriculture sector is small enough, so there is not only give benefit for business but also high guarantee for banking credit.

Ashari and Saptana. classified some of aspects as basic prospect in sharia fund for agriculture sector are as follows:

1. Characteristic of sharia fund based on agriculture industrial condition

In business world (included agriculture sector) the high income fluctuation had been being common phenomenan. Sharia financial skimming (actually for share) very suitable with agriculture industrial characteristic, so it is more fair because surplus and deficit can be copied together means farmer and owner equity have same responsibility to make the business, it is different with conventional bank where the farmer has full responsibility.

2. Sharia financial skimming had been implemented by Indonesian farmer widely

Cultural, most of farmers had recognized financial model which same with sharia system (Mudharabah) like macro (share 50:50) and Mertelu (1:2) by socializing intensively, farmer can easier and more understand the usage of sharia financial concept, because the model was implemented historically and factually.

3. Agriculture industrial sector has great aspect

Agriculture/agribusiness industrial sector covering the largest sub-system started on infrastructure for agricultural production, providing sub-system, cultivation, harvest, after harvest, manufacture and also sell the product. In any sub-system tend to use sharia financial model, and also looked by agriculture sector commodity aspect covering food (rice and crops planted)

4. Sharia financial product is complicate

Greater of agricultural and industrial commodity had been anticipated by sharia financial product which complicated also. This case support customer to choose sharia financial product according to their business characteristic and condition.

5. The rate of farmer obedience

Nowadays, agriculture industrial was run by rural small farmer and commonly they obey religious rule and expect emotionally farmer in receiving sharia financial system easily. Beside that the principle which used by sharia financial institution included value hierarchy as universal and non-exclusive.

6. Commitment of Islamic bank to support small medium enterprise

By looking previous experience, the highest allocation aim to small medium enterprise. This commitment can be great chance for small medium enterprise in agriculture sector.

7. Agriculture industrial sector is real business

It is based on sharia financial principle which focuses on real sector and prohibits people to do speculative.

The important thing to support sharia financial in agriculture sector is outsider. by giving great financial in agriculture sector. Government as policy maker support significantly in law and information facility about prospective agriculture industrial related by sharia financial model. (Syukur, 2005).

Agriculture department as said before (2004) had responded by composing map of agriculture industrial sector potency. Mapping of sharia financial institution can give detail potency in the way agriculture industrial sector was paid. Beside that Islamic bank had provided data and information about profit investment in many areas will be able to support sharia financial implementation to small village.

Challenging of Sharia Fund

The developing in sharia financing will be faced by any challenges. From the agriculture it self, this problem has been clear that there is high risk but the other problem had been recognized by sharia officer. The real problem related by existence of sharia financial institution as new comer in national banking industry.

Ashari and Saptana described some of challenges. need serious attention on sharia banking officer and director who has synergy with legalize officer are:

1. Market share and volume of Islamic banking is relatively small

During five years last, sharia banking growth significantly but is not followed by market share and volume nationally. Based on Central Bank of Indonesia in sharia directorate until December 2004 total asset of Islamic bank nationally (excluded BPRS) only 1,03 percent from total assets of national banking. Third party fund (TPF) was collected 1 percent from TPF in any banking. Small asset and sharia banking marker share will influence the amount of financial in agriculture sector.

2. Limited of human resources

The developed of sharia banking is great enough was not followed by providing good human resources, quantity and quality. Human resources insist to raise professionalism and also must understand and work seriously based on sharia values, weak of human resources exist in top and middle level of management. In fact, most of human resources don’t have education background based on sharia principle but conventional. This case will visible problem because lack of educate about sharia principle will fade vision and mission of sharia banking.

3. Paradigm of conventional bank is strong enough

Because there is no good human resources yet, management often use conventional ways and sometimes out of sharia boundaries. This case will be worst by less understanding of owners with essence, vision and mission of sharia banking. Finally it will raise business policies which small oriented so out of vision and mission of sharia banking. The effects are the real Mudharabah and Musyarakah financial must be improved but in fact it was leaved. As we know, mudharabah and musyarakah products there are greatest different and also good positioning in Islamic bank when they competed with conventional bank.

4. Lack of “political will”

The growth of Islamic bank was not faced by regulation, but policy maker is still low, the evidence in dual system banking is so far from ideal. The comparison sharia banking assets reached 1:99 from national banking assets, according to Dewan Syariah nasional (DSN) the ideal comparison is 50:50.

5. Lack of social process

Few of people and public officer don’t understand the implementation of sharia banking as detail, which related with product and mechanism. And the other word was being used in sharia banking, unfamiliar different with conventional bank. Nowadays, socialize non-intensively. Even a certain advertisement had provided information about Islamic bank, in fact the information is hard to be accessed. Most of challenges must be answered by sharia financial officer by increasing job skill simultaneously. Meanwhile, some of challenges can be signal as opportunity which prospective enough to develop sharia financial in the future. Lack of sharia banking market share, for example can be explored market was faced by sharia financial institution never feel satiate, so it can be done as optimal as possible.

6. Limited of sharia banking network

Network of sharia banking officer (included BPRS) limited compare than conventional bank. In some rural, banking officer who gives serviced by using sharia banking only exists in big city. This circumstance can influence customer services and financial expansion in agriculture sector and most of them still centralize in rural.

Syariah Financial System Based on Agriculture Sector

Developed of sharia financial need of revitalization institution. Farmer institution aspect is weak enough. Generally, the farmer try to run the business by they them self and never work together to create farmer group or cooperation. Cultural aspect support strong factor to improve productivity and farmer bargaining position.

First until now, each developing program almost introduces a new institution to people. Institution is used as agent of change. In spite of it, not all of introducing institution is needed to succeed a program, except just make confused, unused government procedure and make many structural barriers on execution developing programs.

Basic principle of skimming concept is to handle small farmer problem to get capital in other to increase farmer business concentrated in rural area. Using sharia financial system, increase productivity and farmer welfare can be improved, finally can implement and stimulant as professional and the farmer proud to run in agriculture industrial sector. In other word, during this time farmer industrial was trained by each sub-sector and can be classified as feasible business but is not cover business requirement, we suggest it can be solved next.

Figure 2. Agriculture-Based Sharia Financing System

(5)

(9)

(8)

(1)

Negotiation

&

Akad

(8)

(7)

Mudharib

Investment Manager

Agriculture

specialist

Islamic

Bank

Group of farmer

·   Place of the member to communicate

·   As a farmer unit enterprise to implement cooperation to reach high economic scale

·   Having good facility

·   Having business work planning

(4)

(2)

(6)

Descriptions:

1. Prospectus applied 6. Sharia financial investment order
2. Business feasibility review order 7. Capital benefit
3. Business feasibility review 8. Result of investment realization statement
4. Review of result statement 9. Investment result information
5. Capital flow

From that figure 2 Agriculture-Based Sharia Financing System, some matters that needed to be emphasized are:

a. Empowering the farmer group to be the proactive institution to maximize farmer’s potential.

b. Empowering the agricultural specialist (field officer) to be the farmer group assistance in farming and financing, and establish the Agricultural Business Assistance Institution in sub district area.

c. Applying relation system of bank with group to guarantee small-scale farm business financing appropriate with sharia concept.

d. The unclear future income matter can be minimized by not just let farmers go alone, but also as the equal partner. The existence of intense consolidation sponsored by the bank side in purpose to help solving the problems in farmer circle. The bank can criticize farmers about the way and management step which is considered not appropriate with market demand.

e. The main key for the success of equal partner concept is that the Syariah bank takes initiative to improve information system as the kind of socialization.

f. The information between Islamic bank and farmer is the main machine of sharia-based financing system, so the farmer need to report the improvement of the capital invested. The sooner information obtained, the faster Islamic bank and farmer can minimize the problem in the future.

This system can run well if it is supported by the assistance activity. Actually, in this matter the existing agriculture specialist (field officer) now can perform this assistance function. Nevertheless, to keep the sustainability of that assistance activity, the new innovation is needed trough Independent Assistance concept. All of field officers at sub district area merge in Agricultural Business Assistance Institution which becomes the connector between the self-supporting society groups (farmer group) with the bank. From that role as the connector, the assistant get incentive which can be used to support his life. In this case the field officer not only be deeply involved in agricultural technique, but also improve the financing agreement that is appropriate with sharia concept that can be socialized to the farmers. For that reason, the reinforcing effort for the agriculture specialist (field officer) and the institutional of Agricultural Business Assistance institution is needed trough training and organizing activity.

By using agriculture-based sharia financing system sector can create balance relationship between farmer as supplier and society as owner’s equity covering strong financial system, transparency, accountability and competency.

Implementation of Policy

Because of decentralize applied, which give real rural income and any possible resources widely, some of rural government which less attention to develop investment would expected to rise in the future. For those, government of south Sumatera province wants to create sub-region government which cooperates with Sharia financial institution to enhance the capital in agriculture sector. The chance must be respond by any good policies till create synergy between development of sharia financial institution and agriculture industrial sector.

On the first short step capital problem or fund on the developing of agriculture on South Sumatera will be done by:

a. On People Agriculture

  1. Expanding Area

Fund can be supplied by farmer independently that is personal fund or from the finance institution, sharia institution expenditure, by private investor as independent fund or capital and cooperation fund as soft fund from investor factory to farmer.

2. For Diversification and Intensification

Fund is provided limitedly for sample by government, financing monetary institution is facilitated government and independent fund by farmer.

b. Research and Prosperity

Fund for this activity will be devoted come from manufacture/exporting industry association, a big manufacture industry, government and foreign aid. Supplying application will be done together for the efficiency and ease to control regulate activity.

c. Developing the Institution

Fund for developing the institution come from government and private such as manufacture industry and farmer association

d. Developing Loan/ Capital System

e. Now is the pioneer capital developing system with model system giro from the government or manufacture/exporting industry association and scheme district monetary institution system is managed by district government.

Some steps of operational policies needed are: First, explore the theoretical concept to be applicative concept which easy to be implemented. Second, enhance sharia funds on farmer society and public officer handling in agriculture sector. Third, increase human resources understanding in agriculture sector, sharia financial participant, and policy maker for sharia financial principle. Fourth, arrange agriculture industrial map which feasible to be paid by sharia ways. Fifth, define the right purposes in financial. Sixth, make the skim concept of simple applicative procedure. Seventh, develop incentive system and strict penalty. Eight, there are guarantee and accountability in transaction and capital flow. Ninth, there is supported by government law in rural area as a decentralize unit or centralize.

Sharia financial implement in agriculture sector in any kind of corporate can be done individually, group business, cooperate business, or partner. Potential cooperation can be connected by core-plasma, sub-contract, chamber of commerce, dealer and agribusiness operational cooperation.


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