Islamic Banking Finance for the Agricultural Sector and its Impact in the Economy: Cases from Selected Muslim Countries

Agricultural activities occupy a central part in the economies of many Muslim countries. Rich oil countries have also given increasing consideration to develop their agricultural sector in recent decades. In fact, the agricultural sector can play an important role in the economic development of the Muslim world. Financing agricultural activities is among factors that are most important for its development. Unlike the past, modern agricultural activities are dependent on machineries, equipment, technology and modern marketing matters that increase the weight and importance of the financial aspect in agricultural development. Farmers and Small Businesses in this sector in many cases lack sufficient financial support from both banks and the government due to many factors. Therefore, though many problems facing the agriculture sector but this research is going to focus on the financial problems.The research would display the size and structure of finance that is flowing to the agricultural sector through the banking system and analyze its suitability, and sufficiency for its growth. However, the main concern of the research is to find out the contribution, in some selected Muslim countries, of Islamic banking finance. Islamic banking is relatively new in many Muslim countries, but theoretically, it can play an important role particularly through specialized modes such as Muzara'a, and Salam. Yet, how far these modes been employed in practice? What kind of problems that may be involved in application of Islamic banking finance in agricultural activities? And what can be done to develop Islamic banking finance to the agricultural sector for purposes of its healthy development?The research would select three countries: Qatar, UAE, and Jordan, which are having interest in developing their agricultural activities. The financial sector in the selected countries has experienced a growing Islamic banking sector. However, the critical question is: how far Islamic Banks have given financial support to this agricultural sector? How far something extra or different is given to this sector by Islamic banks in comparison to conventional interest-based banking system?For the three countries that are selected for study, Qatar is having a small agricultural sector with a tiny weight in its national income, but would benefit much from its development. UAE was having small scale agricultural sector but has done great efforts for its development in the last decade. Jordan has a larger traditional agricultural sector but has gone successfully for its development for decades. Comparison of different conditions for the agricultural sector within different sets of banking systems, and different size of Islamic finance would lead to better understanding of the role that can be played by Islamic banking in financing agriculture and its development.