Murabaha as an Islamic Financial Instrument for Agriculture

Abstract

This study aims to explore the application of Murabaha contracts in agriculturul sector, The study \V-JS conducted at Islamic m.iccofi:nance institution namely Islamic Financial Services Cooperative (lFSC) Al-Hikmah located in Paleran Villagc, Urnbulsari District, Jember Regency, Indonesia. This paper employs qualitative research with a case study approach. The method used for the informant's determination is snowball method. Th.is paper found four important points: Firstly, there are three models of the application of Murabaha, namely goods-based Mnrubaha; cash-based Murabaha; and business capital-based Mu.rabaha. Goods-based Murabaha is .in accordance with sharia compliance, but the cash-based Murabaha is still not suitable because the Murabaha contract is not equipped with wa.kalah contract. Secondly, there are two risks namely goods expiring on goods-based Murabaha concept and the risk of late payment due to failed crops on cash-based Murabaha. Thirdly, the provided amount of funding is only 30% of the estimated agricultural output. Fourthly, Al-Hikmah requests collateral for Murnbahu financing.