LAHORE, Aug 10 (APP): Islamic Financial (IF) products were ideal for financial inclusion for those segments of society who averse interest based financial products due to religious reasons.
Talking to media here Wednesday, Al-Huda Center of Islamic
Banking and Economics (CIBE) CEO Muhammad Zubair Mughal stressed the need for promoting Islamic financial products as system, which could be benefited by Muslim and non-Muslim equally. For Muslims, there was an extra benefit that IF was according to their religious belief and for non-Muslims, it was an ideal solution of banking,
finance and business for prosperity and development.
He said that Islamic Finance also provided an ideal mechanism to facilitate agricultural, irrigation, livestock, micro and rural financing products to boost green/rural economy. The IF not only provided a sustainable solution but also created positive economic impact in the lives of farmers and rural communities, he asserted.
Zubair Mughal said that he had recently briefed the world
community about Islamic Finance at an international conference on ‘Best Practices in Rural and Agricultural Finance’ at Kigali, the capital of Rwanda.
He said the impact of Islamic Financial products was much higher than any other financial products due to its uniqueness of asset-based financing and other features, these features also averse the diversion of cash fund for other purposes.
He mentioned that Islamic Financial products could be utilized
in many folds for the development of agricultural, rural and micro financing such as ‘Murabaha’ could be utilize for purchase of seed, fertilizer, harvesting and planting equipment, agricultural inputs, tractor, pesticides, farming goods, solar tube-wells etc.
While ‘Salam’ was an ideal product for agricultural financing
through which a farmer could fulfill all the financial needs for whole crop circle e.g. liquidity, seed, pesticide, fertilizer, harvesting, irrigation, market linkages, and ‘Istesna’ could be utilized for small manufacturing business, dairy or agri. production, construction of warehouses and cold storages, rural entrepreneur development.
He added that ‘Ijara’ was good for leasing of tractors, agri equipment, threshers, tube-wells, small production unit lease, sugarcane planter, rice planter, harvesting vehicles etc.
Farmer could also utilize Musharaka, Mudaraba and Diminishing Musharaka for rural housing, forest development, agri. Inputs, farming, sprinkler/drip/solar pumps, tube-wells, microenterprise and SMEs setup, agricultural joint venture projects, dairy and livestock development etc.
He mentioned that Islamic Finance had specialized financial solutions for each segment of rural poverty e.g. for extreme poor; Zakat, Sadqa, Fitre were available as grant based financial product, for poor or transit poor; Islamic finance had Qarz-e-Hassan, Murabaha, Musharaka, Mudaraba etc.,
while for Non-Transit Poor or fair poor; Islamic Finance had some advance level products ‘Salam’ and ‘Istesna’ especially for agricultural sector, while for non-poor and rescue the poor to drop down from their poverty level; IF had mechanism of micro Takaful ( Islamic Micro Insurance) to sustain their financial positioning in the case of any uncertainty especially in rural areas by floods, livestock diseases/deaths, drought, heavy rain, health issues, insure the agri. assets/inputs etc.
Mughal also mentioned that irrigation financing was a big challenge for the development of agricultural, “We can observe that only few banks and financial institutions had specialized products to cater the financial needs for irrigation financing but we can understand that Islamic finance again a step ahead to address this issue, as in the IF, we have different products for the irrigation financing e.g. Murabaha and Ijarah can be utilized for tube-well financing,
drip/sprinkler irrigation system, solar tube well, micro-sprinkler systems, installation of electric/diesel pump etc. to irrigate their fields.
The CIBE Chief said that Islamic Finance had a dedicated product for irrigation namely ‘Musaqah’, a contract in which the owner of agricultural land shared its cultivations with another person in return for the services in irrigating the crops or garden, but unfortunately, it was rarely utilized in the industry, even Accounting and Auditing Organization for Islamic Finance Institutions (AAOIFI) issued a proper guideline that how this concept could be opted for issuing the Sukuk (Islamic Bond) for irrigations projects on crop share basis.
He also mentioned that the concept of Muzara, Musaqa, Mugarasa could be utilized for Share-cropping, irrigation and orchid financing respectively.
