Financial Problems among Farmers in Malaysia: Islamic Agricultural Finance as a Possible Solution

This paper attempts to look at the possibility of collaboration of Islamic agricultural finance in agricultural land development realizing the farmers’ financial problems during the case study and the government efforts in invigorating agricultural sector in Malaysia. Agricultural product and Loss Sharing (aPLS) which based on the contracts of al-muzara’a and al-musaqa from Islamic jurisprudence, partnership between the landowner and the farmer in brief, was highlighted in this paper. Agro Bank has the potential to employ Islamic agricultural finance realizing its roles in developing agricultural sector in Malaysia and its direction to be a full-fledged Islamic bank. The case study was carried out based on two methods that are interviews and questionnaire. These two methods have been used among the farmers under the one-off subsidy program by the Department of Agriculture in the selected six states in Malaysia. It was found that the farmers at the survey areas faced the financial problems during the second cycle cultivating yet the farmers have the capability in saving at the financial institutions. Thus, the main theme of this paper is that how Islamic agricultural finance can play a positive role and possible solutions to the farmers in Malaysia and eventually promoting agricultural development in Malaysia.