IDEAS home Printed from https://ideas.repec.org/a/bla/jageco/v47y1996i1-4p390-402.html
   My bibliography  Save this article

Risk‐Sharing And The Supply Of Agricultural Credit: A Case Study Of Islamic Finance In Sudan

Author

Listed:
  • Adam B. Elhiraika

Abstract

The prohibition of interest‐bearing credit and its replacement with a profit and loss sharing (PLS) system that accords with Islamic injunctions has been associated with remarkable increases in formal lending to agriculture. A model is used to show that the PLS mechanisms may reduce adverse selection and moral hazard effects as returns to both lenders and borrowers are not fixed but dependent on the actual results of credit‐financed projects. Survey data is utilised to demonstrate that the instruments employed by banks in agrarian finance provide higher returns than non‐agricultural loans, and are hence attractive despite the yield and price uncertainty characteristic of agricultural production.

Suggested Citation

  • Adam B. Elhiraika, 1996. "Risk‐Sharing And The Supply Of Agricultural Credit: A Case Study Of Islamic Finance In Sudan," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1‐4), pages 390-402, January.
  • Handle: RePEc:bla:jageco:v:47:y:1996:i:1-4:p:390-402
    DOI: 10.1111/j.1477-9552.1996.tb00700.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1477-9552.1996.tb00700.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1477-9552.1996.tb00700.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Saleem, Samir Taha, 1987. "On the Determination of Interest Rates in Rural Credit Markets: A Case Study from the Sudan," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 11(2), pages 165-172, June.
    2. S. Yazdani & G. P. Hill, 1993. "Islamic Credit: The Iranian Experience," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(2), pages 301-310, May.
    3. Ingo Karsten, 1982. "Islam and Financial Intermediation (L'Islam et l'intermédiation financière) (Islamiso e intermediación financiera)," IMF Staff Papers, Palgrave Macmillan, vol. 29(1), pages 108-142, March.
    4. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    5. Carter, Michael R., 1988. "Equilibrium credit rationing of small farm agriculture," Journal of Development Economics, Elsevier, vol. 28(1), pages 83-103, February.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-927, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adam B. Elhiraika & Khalid Abu Ismail, 2004. "Financial Sector Policy and Poverty Reduction in Sudan," Working Papers 0411, Economic Research Forum, revised 05 Jun 2004.
    2. Xiaoyu Bian & Guanxin Yao & Guohong Shi, 2020. "Social and natural risk factor correlation in China's fresh agricultural product supply," PLOS ONE, Public Library of Science, vol. 15(6), pages 1-13, June.
    3. Abdul Hamid Ahmad Abu Sulayman, 1998. "The Theory Of The Economics Of Islam (Ii)," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 6(2), pages 87-113, December.
    4. Adam B. Elhiraika, 1998. "Macroeconomic Instability, Financial Repression and Islamic Banking in Sudan," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 6(2), pages 61-86, December.
    5. Geoff Bright, 1999. "Assessing the Effects of Hazards and Interventions on Farm Household Liquidity in Sudan ‐ A Preliminary Accounting Model," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 83-92, January.
    6. Rodney Wilson, 1998. "Islamic Project Finance and Private Funding Schemes," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 6(2), pages 41-60, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giovanni Trovato & Marco Alfó, 2006. "Credit rationing and the financial structure of Italian small and medium enterprises," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 167-184, May.
    2. Panicos Demetriades & David Fielding, 2012. "Information, Institutions, And Banking Sector Development In West Africa," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 739-753, July.
    3. Lionel Artige & Rosella Nicolini, 2008. "Memory in Contracts: The experience of the EBRD (1991-2003)," CREPP Working Papers 0803, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    4. Carter, Michael & Morrow, John, 2014. "The political economy of inclusive rural growth," LSE Research Online Documents on Economics 60268, London School of Economics and Political Science, LSE Library.
    5. Bieta, Volker & Broll, Udo & Siebe, Wilfried, 2014. "Collateral in banking policy: On the possibility of signaling," Mathematical Social Sciences, Elsevier, vol. 71(C), pages 137-141.
    6. Allen Blackman, 2001. "Why don't Lenders Finance High-Return Technological Change in Developing-Country Agriculture?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1024-1035.
    7. Cieply Sylvie, 2001. "The Radical Change of French Firms’ Financial Characteristics. Macroeconomic Consequences and Lessons for Political Economics / Die französische Finanzrevolution. Die Folgen für die Finanzstruktur der," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(5-6), pages 556-576, October.
    8. Choudhary, M. Ali & Jain, Anil, 2022. "Finance and inequality: The distributional impacts of bank credit rationing," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    9. Vigenina, Denotes & Kritikos, Alexander S., 2004. "The individual micro-lending contract: is it a better design than joint-liability?: Evidence from Georgia," Economic Systems, Elsevier, vol. 28(2), pages 155-176, June.
    10. Matthias Fahn & Valeria Merlo & Georg Wamser, 2019. "The Commitment Role of Equity Financing," Journal of the European Economic Association, European Economic Association, vol. 17(4), pages 1232-1260.
    11. Poitevin, Michel, 1989. "Information et marchés financiers : une revue de littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 65(4), pages 555-589, décembre.
    12. Anette Ruml & Martin C. Parlasca, 2022. "In‐kind credit provision through contract farming and formal credit markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 402-425, April.
    13. Kubin, Ingrid & Zörner, Thomas O., 2021. "Credit cycles, human capital and the distribution of income," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 954-975.
    14. Christian Picory & Bernard Geffroy, 1995. "Degré d'intégration bancaire des PME : Une approche par l'organisation industrielle," Revue Économique, Programme National Persée, vol. 46(2), pages 365-392.
    15. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
    16. Tomat, Gian Maria, 2008. "Modeling the Effects of Financial Constraints on Firm's Investment," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-26.
    17. Aivazian, Varouj & Gu, Xinhua & Qiu, Jiaping & Huang, Bihong, 2015. "Loan collateral, corporate investment, and business cycle," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 380-392.
    18. Catherine Refait-Alexandre, 1999. "Liquidation ou redressement des entreprises : décision de la banque et impact sur la probabilité de faillite," Post-Print halshs-03616715, HAL.
    19. Joseph E. Stiglitz, 1988. "Money, Credit, and Business Fluctuations," The Economic Record, The Economic Society of Australia, vol. 64(4), pages 307-322, December.
    20. Giorgio Fagiolo & Daniele Giachini & Andrea Roventini, 2020. "Innovation, finance, and economic growth: an agent-based approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(3), pages 703-736, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jageco:v:47:y:1996:i:1-4:p:390-402. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.