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Islamic Agricultural Finance and Growth

Author

Listed:
  • Kazem Sadr

    (Professor, respectively at Shahid Beheshi University)

  • Mohammad-Ali Kafaie

    (Assistant Professor, respectively at Shahid Beheshi University)

  • Bahram Haidari

    (researcher)

Abstract

The objective of this study is to model and estimate the effect of financial services in the agricultural sector of Iran on the value added of this sector. Moreover, since as of 1984, the Interest Free Banking law was implemented, the effect of this change on the value added of the sector will be studied as the second objective. The model of the study consists of three tions. The volume of real investment in the first tion. is assumed to be the function of value added, flow of finance , and last year’s capital stock. The second tion consists of a capital accumulation identity, and the third tion formulates value added as function of capital stock and labor force in the agricultural sector. The three tions are estimated simultaneously with co integration method and both long run and short run estimation of coefficients exhibit a positive and significant effect of credit on both the capital stock and output. Further, the results show application of Islamic tools of finance also contribute to the increase of agricultural sector’s value added significantly. These results reinforce the arguments of Islamic economists that Islamic finance is growth promoting.

Suggested Citation

  • Kazem Sadr & Mohammad-Ali Kafaie & Bahram Haidari, 2007. "Islamic Agricultural Finance and Growth," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 12(1), pages 143-159, winter.
    • Handle: RePEc:eut:journl:v:12:y:2007:i:1:p:143
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    References listed on IDEAS

    as
    1. Michael T. Belongia & R. Alton Gilbert, 1990. "The Effects of Federal Credit Programs on Farm Output," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 769-773.
    2. Mr. Abbas Mirakhor & Mr. Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 1991/088, International Monetary Fund.
    3. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July.
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