A Review of Islamic Banking Products Offered by Agro Bank ...

Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB) An Online International Monthly Journal(ISSN: 2306 367X)

Volume:1 No.4 April 2013

243

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A Review of Islamic Banking Products Offered by

Agro Bank between 2008 and 2012

M. Ridhwan, A. A.

Faculty of Economics and Muamalat,

Universiti Sains Islam Malaysia (USIM),

Bandar Baru Nilai. Malaysia.

E-mail: [email protected]

Abstract

As an organized religion, Islam goes into great detail on the subject of agriculture, which plays a

very significance role in the daily life of a Muslim. The teachings of Islam puts a very high value

on efforts to consolidate the agricultural industry. Nevertheless, with regard to Islamic financing

facilities for agro entrepreneur, Agro Bank is considered as the champion for the rapid

development of agricultural activities in this country. Agro Bank is a Government Linked

Company (GLC) that functions under the supervision of the Ministry of Finance, Ministry of

Agriculture and Agro-based Industry and the Central Bank of Malaysia. Agro Bank is unique

because it focuses mainly on financing and banking in agricultural areas. Thus, the objective of

this article is to compare the Islamic banking products and services offered by the bank between

2008 and 2012. This comparison will show the differences, development and improvements of

Islamic banking products and services within the time frame, as the current aims of the bank is to

be a full Islamic bank by 2015. The methodology of research in this article is qualitative, namely,

through document analysis, interviews with relevant Agro Banks’ officers and observation from

pamphlets and website of the bank. The finding shows that Agro Bank needs to improve in many

areas especially in terms of product development in order to attain the status of a full Islamic

bank by the year 2015.

_______________________________________________________________________

Keywords: Agro Bank, Islamic Banking Products, Agro Entrepreneur, Muamalat, Islamic Bank

mailto:[email protected]



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1. Introduction

Production function in the Islamic economics has been regulated by the concept of

livelihood (al-Rizq) as well as lawful (halal) and unlawful (haram) sources of earnings. The term

al-Rizq is applied to connote livelihoods and means of further production, which has been

intimated by the Prophet Muhammad (s.a.w.) and predetermined by Allah (s.w.t.). Agriculture

has been an important source of food production for mankind since ancient times and therefore,

should not be neglected. Earnings through agriculture and becomes agro entrepreneurship is

regarded honorable endeavors from the Islamic spirit.

The Prophet Muhammad (s.a.w.) was very mindful about the economic utilization of resources,

with the concept that all the resources are a gift from God containing the suggestion that they

should be utilized carefully. As such, the Holy Prophet (s.a.w.) has laid emphasis on intensive

development of human resources, and assigned a high value on industry, efficiency and labor1.

Parasitic dependence on others, idleness or beggary are discouraged by Islam. People are

encouraged to put in hard work and earn livelihoods instead of wasting their energy in idle

pursuits. It is in this spirit that pasttimes, which do not add any utilities have been disliked by the

shariah2. In his prayer, Prophet Muhammad (s.a.w.) asked Allah (s.w.t.) to refuge himself from

hunger, poverty and destitution. The Prophet (s.a.w.) said in the following hadith:

“Allah, I seek thy refuge from hunger for it is the evil bed-

fellow”3.

“Allah, I seek thy refuge against poverty, and I seek thy refuge

from paucity and humiliation, and I seek thy refuge that I do

wrong or wrong is done to me”4.

Islamic law has therefore prohibited begging, with an exception for individuals in grave

difficulties. The attitude of Islam towards man’s position in the world is that Allah (s.w.t.) has

made the earth for the benefit of man, to whom He has given control over. It is the duty of man to

profit from this favor and to exert himself to seek Allah’s bounties throughout the earth5. Allah

(s.w.t.) says to the effect:

1 Muhammad Akram Khan (1992), Economic Teachings of Prophet Muhammad, Delhi: Oriental

Publications ,p. 214. 2Ibid.

3Sunan al-Nasa’i (1999), Riyad: Dar al-Salam, “Kitab al-Isti’adhah”, Hadith No:5471, p.744; Sunan Abi

Daud (1999), Riyad: Dar al-Salam, “Kitab al-Witr”, Hadith No: 1547, p.228. 4 This hadith was narrated by Abu Hurairah. See Sunan al-Nasa’i, op.cit., “Kitab al-Isti’adhah”, Hadith No:

5464, p.743; Sunan Abi Daud, op.cit., “Kitab al-Witr”, Hadith No: 1544, p.227. 5 Yusuf al-Qaradawi, The Lawful And The Prohibited In Islam. Kamal El-Helbawyet.al. (trans.), (1960),

Indinapolis: American Trust Publications, p.125; M. Umer Chapra (1992), Islam and the Economic

Challenge, Leicester: The Islamic Foundation, p.203.



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“It is He who has made the earth manageable for you, so

traverse ye through its tracts and enjoy of the sustenance which

He furnishes, but unto Him is the Resurrection”.

Surah al-Mulk (67):15.

It can be inferred from the above verse that Allah has created the earth full with various kind of

sustenance and sources for earnings, water, minerals, and therefore provided many things for man

to cultivate and do business with, so that they may enjoy all sustenance for their benefit. As such,

man has managed to make paths through deserts and over mountains, through rivers and seas by

means of ships, through the air by means of airways, and bridges and tunnels and other means of

communication6. Man has only been able to do so because Allah (s.w.t.) has given him the

necessary intelligence and has made the earth tractable to that intelligence. Therefore, man should

try his best to benefit for all sustenance provided to them and be thankful to Allah, the true

creator for everything7.

One of many ways to obtain benefits of all sustenance provided to mankind is through

the agriculture initiative. From the general perception it is clear that agricultural projects

seem to be less viable than any initiative in other sectors. While it is admitted that the risks

in agricultural investment are higher due to various factors, these risks are very rare in

respect to the effect weather and natural disasters on the production of primary produce.

With the introduction of high-technology farming and rapid advancement in the field

of bio-technology, the impact weather on agricultural production has been minimized.

Nowadays, many opportunities have been given in order to assist agro entrepreneurs not

only to finance their projects but also to expand them in a larger capacity, especially by

the local Islamic Banks. Agro Bank as one of the Malaysian local Islamic banking

institutions has been given special task in ensuring agriculture sector well developed in

this country. Since its inception, this bank has provided various types of banking and

service facilities with regard of agricultural financing.

6Sayyid Qutub (1986), Fi Zilal al-Qur´an, Beirut: Dar al-Shuruf, Vol.6, p.3637; Ahmad Mustafa al-

Maraghi (1998), Tafsir al-Maraghi, Beirut: Dar al-Kutub al-Ilmiyyah, Vol. 28, 29,30, p.154; The Holy

Qur-an And The Translation Of Its Meanings and Commentary, Madinah: King Fahd Holy Qur-an Printing

Complex, p.1786. 7Ibid.



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As such, there are number of questions need to be solved such as are all these

financing facilities able to meet customers expectation for developing agriculture

initiatives? Are there any value added features for all the banking products and services

provided by the bank? Are there any significant differences of products offered by the

bank between 2008 and 2012? All these questions will be analyzed and answered in this

article based on the products and services provided by the bank between 2008 until 2012.

The superior aim of this article is to explore the suitability and relevancy of all financing

facilities provided by the bank since 2008 until 2012.

2. Methodology of Research

The methodology of research in this article is qualitative, namely through document

analysis, interviews with relevant Agro Banks’ officers and observation from pamphlets and

website of the bank between 2008 and 2012. Since the purpose of this research is to find out

the differences of all product and service facilities offered by the bank between 2008 and

2012, the qualitative approach is thus, more appropriate to be used for this research. The

time frame between 2008 and 2012 is chosen because this period is considered as the

critical point for the progressive movement of the bank, before it comprehensively

transforms to full Islamic bank by 2015.

3. Literature Review

In terms of literature review, this article relied on various papers for instance,

“Financing in Agriculture”, (http://banktani.tripod.com/gm5.htm.). This paper

comprehensively discusses all the funds, schemes and facilities provided not only by

government sector but also financial institutions in promoting agriculture sector. Among

those available funds are Fund for Food, Fund for Small and Medium Scale Industries

and Fund for Rehabilitation of Small and Medium Scale Industries. Truly, this paper gave

authentic information on the financing facilities available in today’s market in this

country.

The article, “Effects of the Farm Financial Crisis on the Profitability of Agribusiness

Firms” provides better understanding with regards of the effects that may occur when

financial crisis happens on agribusiness firms. This article which has been written by

James O. Wise and published in Journal of Agribusiness (1992), among others discusses

the economic effects and hardships faced by farmers and agribusiness firms during “farm



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financial crisis period”. Poor farm financial performance would be expected to have

different impacts on different types of agribusinesses, whereby some purchases can be

delayed (land and machinery), while some can be reduced (fertilizer, feed and storage).

Rahji M.A.Y. and Adeoti A.I. (2010) explains the determinants that influencing

commercial banks to ration agricultural credit in South-Western, Nigeria. It shows that

farm size of the farmers, previous year’s income, enterprise type, household net worth

and level of household agricultural commercialization are significant, but has negatively

influenced the banks’ decision to ration credit to their customers and farmers.

Joni Tamkin Bin Borhan et al. (2009) has listed down various Islamic financing

facilities in agriculture provided by Islamic banking institutions in Malaysia. Indeed, this

article is among the local published article in journal discusses in detail the availability of

Islamic financing facilities in agriculture.

According to Abd. Rahaman Rasid (2008), the financing facilities provided by Agro

Bank can be classified into two categories, namely commercial funds and special funds.

The commercial funds are basically market and profit driven, whereas special funds are

special funds established by Malaysian government in providing funds for agriculture

sector that are channeled through the Agro Bank.

M. Ridhwan, A. A. (2011), explains that in Malaysia, not all Islamic banks or

Islamic windows of conventional banks offer Islamic financing facilities for land

cultivation and development projects. Nevertheless, because of the important of

agriculture to the country, there are some Islamic banks and Islamic windows of

conventional banks provide financial helps to agro entrepreneurs such as Agro Bank,

Bank Rakyat and Maybank Islamic Berhad. According to him, Agro Bank provides the

most comprehensive products and services to the agro entrepreneurs in the country.

4. Background of Agro Bank

Agro Bank is an institution which provides financial and banking facilities. Agro Bank gives

utmost priority to the needs of customers by providing attractive products and services such as

saving activities, banking services, loan facilities, insurance coverage and advisory services. As it

trusted by the government, Agro Bank is likely to be a government-linked-company (GLC) under

the Minister of Finance Incorporated (MFI). The bank’s financing of the agricultural sector is

driven by a policy set forth by the Ministry of Agriculture and Agro-based Industries.



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Agro Bank is a continuity of the former Bank Pertanian Malaysia, and they already has 40

years of experience in agricultural banking sector and outstanding track record in shaping and

developing successful entrepreneurs. Agro Bank is highly confident in providing the best services

to the community by its wide network of branches throughout Malaysia. The vision of this bank

is to be a leading bank with a focus on agriculture. The bank will provide a full range of financial

services in a market and client driven with specific target groups such as micro, small and

medium entrepreneurs and private individuals8.

The objectives of the bank are to promote Malaysia’s agricultural development, to co-

ordinate and run the grant of credit from public funds for agricultural purposes by the various

persons or bodies whether incorporate or unincorporated, to afford loans, advances and other

credit facilities for the development of agriculture sector and agriculture related business, to

mobilize savings with particular regard to the agricultural sector and to accept savings and time

deposits, to encourage the well-being of the agricultural community and to carry on the general

business and progressive financial services institution for the needs of its customers9.

5. Islamic Banking Products for Agro Entrepreneur in 2008

The facilities available for financing the agriculture sector, provided by Agro Bank, can be

classified into two categories ; commercial funds and special funds established by government to

provide funds for agriculture sector (that are channeled through Agro Bank). The objective of

providing these financing facilities is to give working capital for a new agriculture initiatives and

expanding existing agro project10

. From time to time, the Malaysia government has

established schemes and provided funds for financing agriculture sector. These funds can be

considered as incentives to promote investments and give priority to agricultural sector. These

incentives usually are taken in the form of low cost of financing, longer duration of financing

period and higher margin of financing, with these schemes open to all institutions and companies

incorporated in Malaysia (as long as the ownership by Malaysians is more than 50%), as well as

to all Malaysian citizens11

.

8 Agro Bank, http://www.agrobank.com.my, 15

th December 2008 and 23

rd July 2012.

9Ibid.

10Abd. Rahaman Rasid, “Peluang Pembiayaan Dalam Sektor Makanan”,

http://banktani.tripod.com/arar.htm, 9th

November 2008; “Financing of Agriculture”,

http://banktani.tripod.com/gm5.htm, 9th

November 2008; Agro Bank, http://www.agrobank.com.my, 15th

December 2008; Agro Bank Pamphlet (2008), “Financing Facilities”. 11

Dato’ Mohd. Rosli Abd. Aziz, “Financing of Food and Agricultural Production”,

http://banktani.tripod.com/gm3.htm, 9th

November 2008; Dato’ Mohd. Rosli Abd. Aziz, “Peranan Bank

Pertanian Dalam Memajukan Sektor Pertanian Negara”, http://banktani.tripod.com/gm1.htm, 9th

November

2008; “Financing of Agriculture”, http://banktani.tripod.com/gm5.htm, 9th

November 2008; Agro Bank,

http://www.agrobank.com.my, 15th

December 2008.

http://www.agrobank.com.my/

http://banktani.tripod.com/arar.htm

http://banktani.tripod.com/gm5.htm








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Through these special funds, Agro Bank will continue its social responsibility to finance

agriculture sector, as has been assigned by the government through Ministry of Agriculture and

Agro-Based Industry in achieving the related policies under Ninth Malaysia Plan (RMK-9)12

. The

examples of funds provided by the Agro Bank are as follows:

Table 1.1 Agro Bank: Fund for Food (3F Loan).

Features: Description:

Objective: •To promote investment in the food

production activities at a reasonable cost.

•To promote primary food production

(including sea-food, animal husbandry,

vegetables and fruits).

•To promote the efficient distribution of food

and food products.

Eligibility: •Malaysia citizens residing in Malaysia.

•Malaysian owned institutions and companies

(at least with 51% local ownership).

Financing Limit: •RM10,000-RM10 million.

Maximum Financing: •90% of project cost.

Financing Period: •Up to 10 years.

Shariah Concept Applied: •Bay’ Bithaman Ajil.

Collateral: •Fully secured.

Projects Eligible for Financing: •Food production, processing and marketing

(crops, livestocks and fishery).

•Eligible items for crops are vegetables, tea,

paddy, Roselle, maize, tapioca, production of

seeds and planting equipment for food crops

and fruits such as banana, mango, guava,

watermelon, papaya, pineapple, sugar cane,

coffee, cocoa and etc.

Source: Suhaimi Bin Yacob, Executive 2, Financing Division, Agro Bank, Jalan Padang Garong,

Kota Bharu, Kelantan. Interview carried out on 14th December 2008 at 11.15 a.m. to 11.50 a.m.;

Agro Bank Pamphlet (2008), “Financing Facilities”; Agro Bank, http://www.agrobank.com.my,

15th December 2008.

12

Habsah Dinin, “Skim Pembiayaan dipelbagai”. Berita Harian, August 8, 2008, 30.




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Table 1.2 Agro Bank: Bumiputera Industrial and Business Community Scheme (MPPB)


Objective: •To encourage and develop Bumiputera

Entrepreneurs in the agriculture sector.

•To provide fixed capital and working capital

to Bumiputera Enterprise in developing

agriculture project or agro based businesses.

Eligibility: •Companies with paid up capital exceeding

RM100,000.

•For farmer and fishermen institutions, they

should have equity more than RM100,000.

•Priority is given to the individual

entrepreneurs who are expanding their

businesses.

Financing Limit: •RM10,0000-RM5 million.


Financing Period: •Not exceeding 10 years or up to 23rd

October

2014.


Collateral: •Fully secured.

Projects Eligible for Financing: •Commercial agriculture sector, sectors of

agriculture based manufacturing or processing

and also agriculture services.




15th December 2008.




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Table 1.3 Agro Bank: Commercial Agriculture Graduate Entrepreneur Scheme (SUTKS)


Objective: •To reduce unemployment rate among graduates

and to produce commercial farming graduates.

Eligibility: •Unemployed graduates.

Financing Limit: •RM50,000 and not exceeding RM100,000.




Collateral: •Case by case.

Projects Eligible for Financing: •All upstream and downstream commercial

agricultural production activities (short and

medium term or 1 to 5 years projects).




15th December 2008.

Table 1.4 Agro Bank: Youth Farmer’s Scheme-i


Objective: •To assist youth in self improvement activities

related to the agriculture and agro-based

industry.

Eligibility: •Malaysian citizens.

•Individual or group of individuals.

Financing Limit: •RM15,000-RM50,000.




Collateral: •No collateral and guarantor are required.

Projects Eligible for Financing: •All upstream and downstream agriculture and

agro-based industry projects.




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15th December 2008.

6. Islamic Banking Products for Agro Entrepreneur in 2012

Listed below are some of the examples of current financing facilities offered by Agro

Bank until July 2012:

Table 1.5Agriculture Financing Provided by Agro Bank in 2012

Fund For Food (3F Loan)

Financing Objectives ~ To increase the National food production.

~ To reduce food imports.

Eligibility Sector ~ Commercial agricultural sector (crop,

livestock, fishery).

Eligibility for Financing ~ Production of commodities

~ Upstream and downstream projects in food

producing industries

~ 50% financing of factory acquisition /

construction.

~ Maximum financing of land acquisition lease

up to 30%.

Financing Limit ~ Up to 90% of project cost

~ Ranges from RM 10,000 to RM 10 million

Eligibility of Applicant ~ Malaysians

~ Malaysian-owned companies

Return of Investment/interest ~ 3.75 % per year for RM5 million

Financing Period ~ 8 years

Security/Guarantee

~ Full security/guarantee as follows: land for

the project, buildings, fixed deposit, certificates,

share certificates and other security acceptable

to the bank.

Bumiputera Industrial and Business Community Scheme (MPPB)

Financing Objective ~ To promote and develop Bumiputera




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entrepreneurs in agriculture sector, particularly

in the production of food crop, processing and

marketing of agriculture products except for

rubber, oil palm, tobacco, cocoa, pepper,

forestry, drinks and vegetable oil.

Eligibility Sector ~ Commercial agricultural sector (crop,

livestock, fishery).

~ Agricultural sectors of

manufacturing/processing food, feed, fish, food

and chemicals.

Eligibility For Financing ~ 20% financing of land acquisition/lease.

Financing Limit

~ Up to 90% of project cost.

~ Ranges from RM10, 000 to RM5 million.

Eligibility Of Applicant

~ Individual/group of entrepreneurs/

Bumiputera institution.

~ Bumiputera company with 70% Bumiputera

equity

Return of Investment/interest ~ 3.75% per annum

Financing Period ~ Up to 120 months (10 years).

Security/Guarantee

~ Full security/guarantee as follows: land for

the project, buildings, fixed deposit certificates,

share certificates and other security acceptable

to the bank.

Youth Farmer’s Scheme-i (SBT-i)

Financing Objectives ~ To provide financing to assist youth to

embark and expand business venture on full

time basis.

Eligibility Sector ~ Livestock including bee farming

~ Fishery, farming service

~ Short-term crop

Eligibility for Financing ~ Written recommendation and support from the

Youth and Sports Ministry



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~ Fixed and working capital

Financing Limit ~ Loan amount: RM5, 000 – RM15, 000 (no

guarantor)

~ Loan amount RM15, 001 – RM50, 000

(guarantor with fixed income of at least RM800

per month)

Eligibility of Applicant ~ Individual Malaysian citizen aged between

18-40 years old

~ Must register online as an applicant through

the portal of ‘ Majlis Penggalakan Ekonomi

Belia (MPEB)’ at www.mpeb.gov.my

~ Passed the screening test conducted by

Ministry of Youth and Sport

~ No adverse record with financial institutions.

Financing Period ~ Maximum 7 years

Security/Guarantee ~ Full security/guarantee acceptable by Agro

Bank are, fixed deposit, fixed assets

(land/building) and others

Commercial Agriculture Graduate Entrepreneur Scheme (SUTKS)

Financing Objectives ~ To encourage graduate to embark in the

commercial agriculture sector as an alternative

career development.

Eligibility sector ~ Food production and processing involving

crops, livestock and fishery

~ Upstream products for food production for

example fish fry and feed meal

~ Projects with quick returns are encouraged

Eligibility for Financing ~ Working capital and expansion in productive

capacity e.g. purchase of fixed asset

Financing Limit ~ Maximum financing RM500,000

Eligibility of Applicant ~ Unemployed graduates with keen interest to

develop a full time career in agriculture sector.

http://www.mpeb.gov.my/



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Return of Investment/interest ~ 3% per annum

Financing Period ~ 6 years

Security/Guarantee ~ Full security/guarantee acceptable by Agro

Bank.

Source: Norhidayu Binti Mohamed Nawai, Executive, Agro Bank, Leboh Pasar Besar, Kuala

Lumpur. Interview carried out on 9th April 2012 at 11.15 a.m. to 11.50 a.m.; Agro Bank,

http://www.agrobank.com.my, 23rd

July 2012.

7. Analysis of Islamic Banking Products between 2008 and 2012

From the above table, we can conclude that most of the contracts used in the financing

scheme is based on Bay’ Bithaman Ajil concept. Bay’ refers to “an opposite word for buying

namely selling”13

. Al-Bay’ from the fiqh terminology can be defined as “the exchanging of

property with property based on definite way”14

. Thaman means “price or the value of certain

goods in a transaction”15

. Furthermore, Ajil refers to “defer or delay”16

. Therefore, Bay’ Bithaman

Ajil (BBA) can be defined in many ways. It can be defined as the sale of goods on a deferred

payment basis at a price which includes a profit margin agreed by both parties17

. BBA also refers

to a sale agreement between the owner of the goods and the buyer, whereby the buyer will defer

the payment of the goods to a specific period of time or will pay by installment18

.

According to Dr. Ma’sum Billah, BBA refers to the delivery of a product taken on the spot

but the delivery of the payment is delayed for an agreed period, whereby payment can be made in

a lump sum or in installments, provided there is no extra charge for the delay19

. In terms of mode

of financing, BBA operates when the bank initially determines the requirements of the customer

in relation to the duration and manner of repayment. The bank then purchases the asset and

subsequently sells the relevant asset to the customer at the agreed price, which comprises the

13

Ibn Manzur (2003), Lisan al-Arab, Riyad: Dar al-Alim al-Kutub, Vol.5, p.371. 14

This view was given by Hanafi Scholars. See al-Kasani (1998), Bada’i’ al-Sana’i’, Beirut: Dar Ihya’ al-

Turath al-Arabi, Vol.5, p.133; Ibn al-Hummam (1995), Fath al-Qadir, Beirut: Dar al-Kutub al-Ilmiyyah,

Vol.5, p.73. 15

Ibn Manzur, op.cit., Vol.8, p.233. 16

Ibid., Vol.7, p.10. 17

Bank Kerjasama Rakyat Malaysia Berhad, http://bankrakyat.skali.my/web/guest/syariahbankingconcept,

21st December 2008; Meezan Bank, http://www.meezanbank.com/glossaryB.aspx, 21

st December 2008.

18Sobri Salamon (1989), Ekonomi Islam: Pengenalan, Sistem dan Kemungkinan, Selangor: Ar-Rahmaniah,

p.38. See also Nor Mohamed Yakcop (1996), Teori, Amalan Dan Prospek Sistem Kewangan Islam Di

Malaysia, Kuala Lumpur: Utusan Publications & Distributors Sdn. Bhd., p.80. 19

Dr. Ma’sum Billah, http://www.applied-islamicfinance.com/sp_finance_3.htm, 21st December 2008.


http://bankrakyat.skali.my/web/guest/syariahbankingconcept

http://www.meezanbank.com/glossaryB.aspx

http://www.applied-islamicfinance.com/sp_finance_3.htm



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actual cost of the asset to the bank and the bank’s margin of profit that varies according to the

value and type of the project20

.

Based on the explanation above, the contract of BBA is a form of Islamic financing with

respect of selling and delivery of asset or property to the buyer at the time of contract (on the

spot), whereas the payment for the price plus the profit margin will be delivered in the future time

by installments21

. The validity of BBA contract is obvious since it uses the sale concept as

mentioned in the fiqh mu’amalat. Through this kind of contract, the customer will not borrow any

money from the bank, instead the bank will buy the desired asset by the customer and the bank

will sell it back to the customer at a mark-up sale price. The relationship between customer and

bank is similar to the relationship between buyer and seller in the sale contract and not as in a

loan contract, whereby the connection is between borrower and lender as being practiced by the

conventional bank22

.

According to Associate Profesor Dr. Noor Naemah Bt. Abdul Rahman, the contract of BBA

and Bay’ al-Innah is lawful since there is a current need to the society as a mode of Islamic

financing in order to avoid the prohibition of riba in Islam as a temporary means before a better

alternative of financing is found23

. This view is also shared by Associate Professor Datin Dr.

Paizah Binti Ismail24

. She regards that the contract of BBA and Bay’ al-Innah is an alternative to

conventional loan system which is based on interest or riba. This concept should be accepted in

order to avoid the element of riba, which is clearly against the Shariah law. She also added that

Agro Bank uses the contract of BBA and Bay’ al-Innah intensively for financing agro projects

based on the public interest or general good of the society in this country on the basis of current

20

Bank Islam Malaysia Berhad (1994), Islamic Banking Practice from the Practitioners’ Perspective,

Kuala Lumpur: BIMB, p.72. 21

Muhammad Uqlah Ibrahim (1987), Hukm Bay’ al-Taqsit fi al-Shari’ah wa al-Qanun, Jordan: Maktabah

al-Risalah al-Hadithah, pp.12-13. 22

Mustafa al-Khinn et.al.,op.cit., Vol.3, pp.37-38; Mohammad Hashim Kamali (2002), Islamic

Commercial Law: An Analysis of Futures and Options, Petaling Jaya: Ilmiah Publishers, pp.132-133;

Norazlina Abd. Wahab (2005), “Al-Bay’ Bithaman Ajil: Suatu Alternatif KepadaPinjaman Berasaskan

Riba”, in Abdullah Alwi Hj. Hassan et.al. (eds.), Teori dan Aplikasi Kontemporari Sistem Ekonomi Islam

di Malaysia, Kuala Lumpur: Utusan Publications & Distributors Sdn. Bhd., pp.90-91. 23

Associate Professor Dr. Noor Naemah Bt. Abdul Rahman is a lecturer at Department of Fiqh and Usul,

Academy of Islamic Studies, University of Malaya, Kuala Lumpur. Her expertise is in principles of Islamic

jurisprudence, fatwa and also in contemporary fiqh. She is also a member of Shariah Committee for

AMBANK Berhad since 2007. This interview was conducted on 12th

March 2009 at 11.00 a.m. to 11.35

a.m. at her office. 24

Associate Professor Datin Dr. Paizah Binti Ismail is currently teaches at Department of Islamic Law,

Ahmad Ibrahim Kulliyyah of Laws, International Islamic University Malaysia, Gombak. Her expertise is in

the field of fiqh and usul as well as in Islamic transactions. She is also a Shariah Advisor for Agro Bank

since 2005.



257


reality (Waqi’). Shariah experts cannot be too rigid in validated a shariah contract in the rapid

growing and expanding of financial sector nowadays25

.

In terms of products offered by the Agro bank, in comparison between 2008 and 2012, the

products are mainly the same expect in some aspects which have been adjusted in order to attract

the customers such as the current profit rate for Fund for Food (3 F) financing is 3.75%, whereby

previously was at 4%. To date, no new or latest product offered by the Agro Bank to expand the

agriculture initiatives by the local Malaysian farmers and agro entrepreneurs.

8. Conclusion

This article has covered aspects relating to the financing facilities provided by Agro Bank in

Malaysia in assisting agro entrepreneurs in their pursuit of agro projects. In the being of this

article, there was a discussion of various financing facilities offered by Agro Bank for the

agricultural initiatives. It can be concluded that there are various aspects that need to be altered in

order to show the attractiveness of financing facilities for agriculture in Islam. Agro Bank for

instance, needs to introduce different concept of Shariah contracts in the bank’s future products

rather than only focuses on Bay’ Bithaman Ajil and Bay’ al-Innah concepts as well as try to

introduce more attractive products for the young agro entrepreneurs . It is suggested that in the

future research, more comprehensive products introduced by the bank are explored.

References

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25

Interviewed with Associate Professor Datin Dr. Paizah Binti Ismail on 26th

March 2009 at 10.10 a.m. to

10.45 a.m. at her office in Gombak.



258


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Interviews

Associate Professor Datin Dr. Paizah Binti Ismail on 26th March 2009 at 10.10 a.m. to 10.45 a.m.

Associate Professor Dr. Noor Naemah Bt. Abdul Rahman on 12th

March 2009 at 11.00 a.m. to

11.35 a.m.



259


Norhidayu Binti Mohamed Nawai, Executive, Agro Bank, Leboh Pasar Besar, Kuala Lumpur.

Interview carried out on 9th April 2012 at 11.15 a.m. to 11.50 a.m.

Suhaimi Bin Yacob, Executive 2, Financing Division, Agro Bank, Jalan Padang Garong, Kota

Bharu, Kelantan. Interview carried out on 14th December 2008 at 11.15 a.m. to 11.50 a.m.

A Review of Islamic Banking Products Offered by Agro Bank ...

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