LAHORE: AlHuda Centre of Islamic Banking and Economics Chief Executive Officer Zubair Mughal has said that Islamic finance provides an ideal mechanism to facilitate agricultural, irrigation, livestock, micro and rural financing products to boost the green economy.
Speaking at an international conference on ‘Best Practices in Rural and Agricultural Finance’, Zubair said, “Islamic finance not only provides a sustainable solution but creates a positive economic impact on lives of farmers and rural communities.”
Over 300 delegates from 40 countries attended the conference held last week in Rwanda, which was jointly organised by the African Rural and Agricultural Credit Association (AFRACA) in partnership with the Rwanda Development Bank (BRD) and Ministry of Agriculture.
Addressing the participants, Zubair Mughal said that 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.
He mentioned that Islamic finance have had specialised financial solutions for each segment of rural poverty. “For instance, Zakat, Sadqa and Fitr are available as grant-based financial product for poor or transit poor.”
He said that irrigation financing was a big challenge for the development of agriculture sector. “We can observe that only few banks and financial institutions have specialised products to cater the financial needs for irrigation financing, but we can understand that Islamic finance is a step ahead to address this issue.
“Islamic finance has a dedicated product for irrigation namely – Musaqah. It is a contract in which an owner of agricultural land shares its cultivations with another person in return for the services in irrigating the crops; but unfortunately, it is rarely utilised in the industry. Even Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI) has issued a proper guideline about how this concept can be opted for issuing ‘Sukuk’ (Islamic bond) for irrigation projects on crop share basis.”