THE INFLUENCE OF ISLAMIC BANKING ON AGRICULTURAL DEVELOPMENT IN SUDAN

Muhammad Ali Alula Al-Hashimi

No 10994, Graduate Research Master's Degree Plan B Papers from Michigan State University, Department of Agricultural, Food, and Resource Economics

Abstract: Islamic banking is a relatively new and rapidly growing phenomenon, particularly in the Muslim world. Islamic banking prohibits all kinds of financial transactions based on interest. Its primary approach to financing is the mudaraba profit-loss contract, where the financing partner, the bank, and the entrepreneurial partner, the individual seeking investment capital, share profit as mutually agreed upon. In the case of loss from the business venture, the loss is absorbed by the bank. Because there is no collateral or interest involved in the mudaraba contract and because loss is absorbed by the financing partner, the bank, the mudaraba contract is becoming increasingly popular among poor rural agriculturalists in Sudan who seek capital to finance their agricultural activities. Consequently, the mudaraba contract is more accessible than conventional loans and is not exploitive as loans originating from traditional village money lenders of Sudan who charge exorbitant amounts of interest. The Islamic banking movement in Sudan represents a revolution in banking methodology and a major departure from conventionally accepted banking. It represents the foundation for a potential transformation of Sudan to a healthy, agriculturally-based, Islamic economy.

Keywords: Financial Economics; International Development (search for similar items in EconPapers)
Pages: 98
Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:ags:midagr:10994

DOI: 10.22004/ag.econ.10994

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