Agricultural financing risk and ib agricultural financing: A long relationship

Muhammad Alan Nur (1) , Honesty Nur Firdaus (2) , Andre Armanto (3) , Sri Herianingrum (4)
(1) Sharia Economics Department, Faculty of Economics and Business, Airlangga University, Indonesia, Indonesia ,
(2) Strategic Public Relation, Faculty of Arts and Social Science, University of Sydney, Australia, Australia ,
(3) Islamic Banking Department, Faculty of Islamic Economics and Business, State of Islamic University Raden Mas Said, Indonesia, Indonesia ,
(4) Sharia Economics Department, Faculty of Economics and Business, Airlangga University, Indonesia, Indonesia


Indonesia is destined to be an agrarian country because of its location on the equator, unfortunately not all farmers are able to access capital for their agricultural businesses while the contribution of the agricultural sector to employment is very high. It is also important to consider that Indonesia is also a country with the largest Muslim population in the world, so there should be a financing scheme in the agricultural sector that is in accordance with sharia compliance. Therefore, Islamic banking should be present to provide capital to farmers who need agricultural financing without violating sharia provisions. Identifying variables that affect Islamic bank financing in the agricultural sector in the long run is the aim of this study so that our findings can be one of the considerations for policy makers for future policies. To reveal the purpose of our research, we consider the factors affecting the agricultural financing of Islamic banks which consist of the risk of agricultural financing, farmer welfare, inflation and economic growth with observations for a decade from 2012 to 2021 on a quarterly basis. By using ARDL estimation, our findings find that in the long run relationship the welfare of farmers has no effect, while the other remaining variables have a significant effect. This study offers valuable implications indicating that the presence of Islamic banking can be considered as a viable financial solution within the agricultural sector.

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Muhammad Alan Nur
[email protected] (Primary Contact)
Honesty Nur Firdaus
Andre Armanto
Sri Herianingrum
Author Biography

Honesty Nur Firdaus, Strategic Public Relation, Faculty of Arts and Social Science, University of Sydney, Australia

Strategic Public Relation, Faculty of Arts and Social Science, University of Sydney, Australia

Alan Nur, M., Honesty Nur Firdaus, Armanto, A. ., & Herianingrum, S. . (2023). Agricultural financing risk and ib agricultural financing: A long relationship. JIFA (Journal of Islamic Finance and Accounting), 5(2), 75–88.

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