Alhuda CIBE - Presentation on Agriculture Islamic Financing by M. Farooq Ahmed Tung

1. Dynamics of Agri - FinancingDynamics of Agri - Financing
Lecture By M. Farooq Abid TungLecture By M. Farooq Abid Tung

2. Agriculture & Economy StrengthsAgriculture & Economy Strengths
• Back bone and main stay of economy. Major contributor to GDP(21%). Provides
80% raw material to local industry.
• Major contributor of food, fiber & shelter.
• Major source of foreign exchange earning through exports (65 to70%Exports).
• Wide scope, Milk Production 5th in the world. Livestock share is 45% of
agricultural share in G.D.P.
• Ample human resource deployment sector. Provides employment to more than
52% of our work source.
• Contribution to Banks deposit is 25%.
• Stationed, Permanently located, secured loaning sector.
• Instant borrower history. Small size credit. Low default history.
• Shortest gestation period. Short term investment.
• Easy to recover, low resistance area, friendly environment.
• Pollution free contended nature. Low cost living standard.

3. WEAKNESSES OF AGRI SECTORWEAKNESSES OF AGRI SECTOR
• Lack of institutional credit due to Limited network of financial institution and
reluctance of bankers.
• Low or lack of interaction with agriculturists. Poor information about each
other. Lack of extension services.
• Non-availability of collateral, particularly by landless farmers.
• Extra ordinary profit taking. High rate of interest by informal sector.
• Middleman influence, Formal financing in agri sector is expensive.
• Lack of education and initiative in farmer, traditional approach. Unskilled
labour. Lack of water, crop, soil &fertilizer management.
• Unorganized & non-documented sector. Needs / Requirements and
production values not registered.
• Remote area, lack of farm to market approach & transportation facilities.
• Non-availability of communication services.
• Lack of farm & market infra structures of marketing information.
• High population growth rate, unawareness of family planning.
• Poor management & dependence in family elders.
• Lack of insurance coverage. Crop, asset & life. Hidden strength.

4. OPPORTUNITIES IN AGRI SECTOROPPORTUNITIES IN AGRI SECTOR
• Government of Pakistan & SBP priority sector.
• Farmer needs are much higher than supply of credit. Big gap is available.
Rs.500 billion required - Rs.200 to Rs.220 billion presently disbursed.
• Easy to lend at higher rate of mark up. Dire need & low resistance.
• Ample opportunity of deployment of excess liquidity available in the
Banking Sector.
• Commercially viable sector, great credit potential and absorption capacity in
the sector.
• Vast range of area of operation. More needs, scope of development, credit
starved sector.
• Diversified and multipurpose financing.
• Massive migration of labour to cities can be checked / stopped.
• Corporate financing will become a niche in lending market.
• NGO’s outsourcing Agencies, companies are available in the market.

5. PRESENT & FUTUREPRESENT & FUTURE
THREATS TO AGRI SECTORTHREATS TO AGRI SECTOR
• Implementation of WTO. Open, competitive, commodity pricing. Phytosenitation.
• Bankers, community reluctance. Fear of default.
• Natural calamities. High risk. Water shortage.
• High rate of mark up, extra ordinary profit taking by non-institutional creditors.
• Defective and unorganized markets. Imbalance between prices of inputs & outputs.
Rising trend of cost of production. Higher rate of interest as compared to profit ratio.
• Lack of media projection, non-recognition of problems. Monopoly of multinationals.
• Non-friendly attitude, LIP-SERVICE by agencies/functionaries, increasing taxations
public & private enterprises. GST 15% on inputs.
• Non-availability of developed NGOs’ & community organizations. Lack of research. Out
dated farm practices.
• Lack of coordination towards common causes & goals.
• Sheepism, lack of awareness about economics, demand & supply in market.
• Poor class, low saving, low holding capacity. Increasing level of poverty.
• Loosing soil fertility, intensive use.
• Show & Pump culture. Non implementations of land reforms. Continuous divisions.
• Non-availability of subsidy, tax holidays as compared to neighbors .
• Slow & non-implementation of court orders.

6. Traditional Financing
Inputs
Tractors
Tube wells
Implements

7. Diversified Financing
Inputs
Floriculture
Horticulture
Crops
Agri- Farm Sector
Water Management
Livestock, Goat & Sheep.
Poultry, Fisheries.
Dairy Development
Financing
Value Addition
Chain Farm to Market
Development
Agri - OFF Farm Sector
Community Based Lending
Farm Transport

8. Financing Schemes
Askari Kissan Evergreen Finance
Purchase of seeds, fertilizers, pesticides, Orchards and Nursery,
Manual Sprays, Sericulture, Apiculture and Non Farm working
capital etc.
Askari Kissan Tractor Finance
Purchase of New Tractors
Askari Kissan Aabpashi Finance
Installation of tube wells, water management equipment, modules &
culverts, lining of water channels, solar energy plants & pumps,
sprinkle and drip irrigation system.
Askari Kissan Green House & Tunnel Finance
Construction of Green Houses & Tunnels for growing seasons
vegetables / fruits in controlled environment.

9. Askari Kissan Livestock Development Finance
Purchase of cattle / milch animals, goat / sheep etc.
Askari Kissan Model Dairy Finance
Purchase of Farm Cooling tanks, fodder harvesters, hay bailers,
animal cooling system, any other machinery / equipment for dairy
farming.
Askari Kissan Gold Fish Finance
Renting / leasing of ponds & tanks, purchase of inputs i.e. oilcakes/
rice barn, purchase of medicines, nets, boxes, packing material and
any other overhead expenses.
Askari Kissan Farm Mechanization Finance
Purchase of agri implements, power tillers, boom sprayers,
cultivators, riggers, drills, press machines for wheat straws and dry
fodder etc.

10. Askari Kissan White Pearl Finance
Purchase of milking animals, feed grinders, mixing machines,
vaccination, medicines including artificial insemination material &
equipment, labor, electricity and fuel expenses etc.
Askari Kissan Murghban Finance
Purchase of chicks, feed and raising charges, construction of
sheds i.e. conventional / controlled environment, machinery,
equipment, packing material and other overhead expenses.
Askari Kissan Transport Finance
Purchase of new motorcycles, small pickups, trucks, auto-trailers,
vans and chillers carriers etc.

11. Askari Kissan Farm Storage Finance
On Farm and Off Farm construction / repair and renovation
(including purchase of machinery, cost of fixture) Pucca Godown,
Storage facility, Bins, Silos etc.
Askari Kissan Samar Bahisht Finance
Cultivation / growing of fruits / Nurseries, purchase of seeds,
fertilizers, farm machinery / equipment, packing material,
transportation cost, overhead expenses etc.
Askari Kissan Gulban Finance
Cultivation / growing of flowers for decorative / export purposes,
purchase of seeds, fertilizers, labor, packing material,
transportation and over head expenses etc.
Asan Mali Shaulat
Cane Procurement Receipt / Deferred Payment Voucher
discounting / purchase / payment facility

12. Islamic Modes which can be applied for
Agri Financing without much debate.
1. Murabahah - It is a sale in which seller discloses the cost of
goods and the profit.
2. Salam - It is a sale whereby the seller to supply some
specific goods to the buyer at a future date at
agreed price fully paid in advance.
3. Ijarah - Is a contract whereby the owner of an asset, other
than consumables, transfers its usufruct to another
person at an agreed period for agreed consideration.
4. Istisna’a - It is a sale at agreed price whereby the buyer places an
order to manufacture, assemble or construct the agreed
assets to be delivered in future .
5. Diminishing - It refers to a partnership where profits are shared as
Musharaka per agreed ratio and losses are shared in proportion of
capital or investment

13. Other Islamic Modes being considered for
implementation
Musawamah - It is a general and regular kind of
sale in which price of the commodity
to be traded is bargained between
seller and buyer without any reference to the
cost incurred by the seller.
Musaqaat - Majority of the fuqah agree that Musaqah is an
agreement between two individuals
wherein one provides the orchards or trees
owned and the other the labour and enterprise
for irrigation services and up keep and share
the profit as per agreement.

14. Other Islamic Modes being considered for
implementation
Muzaraat - Musharakah has several derivatives . Muzara’a for
instance, is a special kind Musharakah. It
is defined as a partnership in farming
whereby one or more individuals enter into a
contract to invest in an agricultural
enterprise or operation. Output or produce is
shared between the partners in accordance with
the agreement stipulated in the contract.

15. MurabahahMurabahah
Purchase of inputs for crop production i.e.
a) Seeds
b) Fertilizer
c) Insecticides
d) Herbicides
e) Weedicides
f) Manual Sprayers
g) Sericulture
h) Apiculture

16. SalamSalam
1. Labor Charges, electricity charges and maintenance of farm
machinery / implements.
2. Lining of water courses, Cost of land leveling.
3. Different working capital requirements and running expenses.

17. IjarahIjarah
Farm Mechanization Financing i.e.
• Purchase of agri implements, equipment i.e. Trailers & Threshers
• Power tiller
• Power & Boom sprayer
• Plough
• Cultivators
• Rigers / drills
• Rotavators
• Driggers
• Cotton Picker
• Saw machines for crate making
• Press machines for wheat straw and dry fodder
• Chiesel ploughs
• Potato planter
• Sugarcane planter
• Rice trance planter
• Self propelled reaper for harvesting wheat and rice crops

18. Transport Financing including
• Purchase of tractors
• Refrigeration vans
• Farm cooling tanks
• Motorcycles for milking
• Small pickups
• Mini trucks and chiller carriers
Aabpashi Financing:
Installation of Tube wells / Turbine, Sprinkle / drip system for water
management, solar energy plants, pumps for irrigation system.
Dairy Farming (Milk processing plants, other machineries etc.)
IjarahIjarah

19. Diminishing MusharkahDiminishing Musharkah
Transport Financing including
a) Purchase of tractors
b) Refrigeration vans
c) Farm cooling tanks
d) Motorcycles for milkman
e) Small pickups
f) Mini trucks and chiller carriers
Livestock Financing Includes:
a) Purchase of cattle, buffaloes, sheep etc.
b) Construction of sheds, storeroom etc.
Land / forest development and enhancement.
Dairy Farming (Milk processing Plants, other machineries etc)

20. Establishing of Green Houses
Construction of godowns and cold storage
Development of Dairy & Livestock farms
Construction and improvement of livestock laboratories
Setting up seeds processing and milk chilling units
Installation of fruit and vegetable machinery
Istisna’a / Diminishing MusharkahIstisna’a / Diminishing Musharkah

21. ThankYou