Farm produce serves as a sustainable way of livelihood in terms of food security, employment, income, industries and market among others.This paper is a conceptual paper that seeks to explore the viability of Murabahah finance on the relationship between farm credit and farm produce. This is a cross-sectional research design.Method of data collection is questionnaire; a total of 760 individual farmers will be the target respondent in this study.And structural equation model (Smart- PLS 2.0) statistical application will be used for data analysis.It was found that the problems of high interest rate, insufficient and timely farm credit, poor modern farm equipment such as: tractors, harvesters, planters, storage facilities, fertilizer, herbicide, insecticide, transportation and communications among others. Based on these findings appropriate recommendations were suggested that will tackle the affirmation problems

Aziz, Ahmad Bashir

Mohammed, Ahmed Ibrahim

Ogunbado, Ahamad Faosiy

UUM Repository

ISSN: 2454-2415   Vol. 3, Issue 3, March 2017 41 International Journal of Innovative Knowledge Concepts, 3(1) March, 2017         The Effect on Farm Credit and Farm Produce in Kano State, Nigeria   Ahmed Ibrahim Mohammed, Ahmad Bashir  B. Aziz and Ahamad Faosiy Ogunbado (Islamic Business School, University Utara Malaysia (IBS-UUM)) Islamic Business School, University Utara Malaysia, 06010 UUM Sintok. Kedah Darul      Aman, Malaysia      E-mail: ahmad.ibrahimmuhammad@yahoo.com, Tel 1116625014  Abstract Farm produce serves as a sustainable way of livelihood in terms of food security, employment, income, industries and market among others. This paper is a conceptual paper that seeks to explore the viability of Murabahah finance on the relationship between farm credit and farm produce. This is a cross-sectional research design. Method of data collection is questionnaire; a total of 760 individual farmers will be the target respondent in this study. And structural equation model (Smart- PLS 2.0) statistical application will be used for data analysis. It was found that the problems of high interest rate, insufficient and timely farm credit, poor modern farm equipment such as: tractors, harvesters, planters, storage facilities, fertilizer, herbicide, insecticide, transportation and communications among others. Based on these findings appropriate recommendations were suggested that will tackle the affirmation problems. Key Words: Farm Credit, Farm Produce, Murabahah Finance 1.0 Introduction Agriculture is the backbone of the global food security, animal rearing and supplier of raw material to the industries for poverty reduction and socio-economic advancement            (Anthony, 2010; Ogunbado and Ahmed, 2015). It is also seen as an act of soil cultivation for the purpose of food supply and raw materials as an agricultural output or farm produce to the man and industries for sustainable living and economic growth (Akoum, 2008). The access to agricultural credit, which is popularly known as farm credit is an important factor for accelerating farm produce in a given economy as well as a channel of income generation for the rural farmers. The availability of farm credit to rural farmers is significant to the socio-economic growth and development. Likewise, the obstacles encountered by these rural farmers in agricultural banks and other financial institutions (Phillips, 2009; Ammani, 2012 & 2013; Awe, 2013; Chisasa, 2014a). The obstacles encountered by the agricultural banks and other conventional financial institutions in serving the rural farmers are leading to high cost of transaction and socioeconomic risk at its peak. These difficulties lead Kano state government to distributed 10,000 Naira among 17,600 women farmers. Similarly, poultry, Rabbits and chickens among others that amounted 2.44, billion Naira were distributed in order to tackle the existing problems of farm credit in the state. Till date, the government is looking forward for less risk and less interest financial products to boost agricultural sector of the state (Kano state budget, 2012).  On the other hand, Murabahah finance is an Islamic financial product that has features of free interest and less risk or gambling, free manipulation and exploitations among others. This means, Murabahah finance is one among a several Shariah oriented public policies used to boost farm produce. This is done through the provision of farm credit and trading farm input and output, base on the situation of the economy (Khan, 1996; Saddiqi, 2006; Ayub, 2007). In addition, the Shariah mode of finance through Murabahah was set to encourage needy farmers and agribusiness that needed less risk and free interest for the purchase of their farm input and sells of farm output (Khaleequzzamzn & Shirazi, 2012). As, it pronounces, Murabahah finance (mark-up) has covers buying and selling of  commodities (agricultural inputs) at a price which includes an agreed profit margin by both parties. In addition, in Murababah finance, both buyer and seller most know the actual cost of the commodity or farm input and the profit margin during the sale agreement (Ahanger, Padder & Ganie, 2013). Based on the above view this seek for the present study that is the influence of Murabahah finance on the relationship between farm credit and farm produce in Kano state, Nigeria. Objective of the study 1- To explain the concept of farm produce 2- To explain the concept of Murabahah finance 3- To explore the socio-economic role of Murabahah finance on the relationship between farm credit and farm produce in Kano state, Nigeria.  ISSN: 2454-2415   Vol. 3, Issue 3, March 2017 42 International Journal of Innovative Knowledge Concepts, 3(1) March, 2017           2.0 Proposed Frame Works In this study farm credit is an Independent variable, Murabahah finance is a moderating variable and farm produce is the dependent variable.                                                                                                        MURABAHAH FINANCE Figure 1.1 Proposed Frameworks 2.1 Farm Produce Agriculture can be defined as a science or act of land uses and supply of raw materials for production of goods leading to the services, processing and marketing of the farm output (Chisasa, 2014a). Also, agriculture deals with utilization of soil to support crop grows and animals rearing for human food and other satisfactions including supply of raw material to the industries (Akoum, 2008). Agricultural science means farming discipline that encompasses many approaches include: soil science; animal production and veterinary among others (Phillips, 2009). Equally, farm output can also be seen a agricultural produce after strategically combined the available factors of production to create a marketable and valuable farm produce (Anthony, 2010). Furthermore, farm produce serves as a farm produce that lead to sustainable living in terms of food security, income, market, employment, industries as well as a way and manner for poverty eradication (Chisasa, 2014b).  2.2   Farm Credit The term farm credit can be defined as an instrument for propelling production and eradication of poverty in a given economy (Onyechanya and Ukoha, (2007). Also, Phillips (2009), defined farm credit as any of the available credit instruments employed to finance farming enrolment which including loans from formal and informal institutions with the intention of making repayment. Similarly, it can be seen as certain amount of money, which formal and informal financial institutions ready to lend out to the needy farmer with the agreed conditions in relations to receive and payment of the loan (Saibel, 2010; Awe, 2013).  Equally, farm credit can be described as a financial outflow under the condition of repayment with additional money for the fund uses over a given period of time (Nwosu et al., 2010).  Therefore, farm Credit is regarded as an aggregate amount of certain money available to under custody of formal or informal financial institutions to lend out to the individual or group of farmers based on repayment conditions over a period of specific future time (Anthony, 2010). More so, farm credit can be a procedure of acquiring power over control of a certain amount of money either directly or indirectly as well as services for farm output under repayment conditions (Simtowe, Zeller & Diagne 2009).  2.3 Farm Credit and Farm Produce The relationship between farm credit and farm produce is regarded as a major requirement and factor in terms of agricultural growth and development (Ahiakpor & Asmah, 2012). Farm credit remains a backbone of agricultural development as it positively influences farmers to use modern technologies for improving livelihood of farmers as well as agricultural advancement meet (Yunus, 2014). According to Onyechanya and Ukoha (2007) agricultural credit can be seen as financial intervention and effort toward improving farm produce for socio-economic growth. Moreover, the availability of farm credit to the needy farmers remains a significant factor for increasing farm produce and economic growth and development of a given economy. Chasisa (2014a) reported a positive relationship between farm credit and farm produce in his study on bank lending and farm produce conducted in South Africa. Data were collected from Mpumalanga province and North West region by using a survey of three hundred and sixty two respondents from Mpumalanga and North West FARM CREDIT FARM PRODUCE ISSN: 2454-2415   Vol. 3, Issue 3, March 2017 43 International Journal of Innovative Knowledge Concepts, 3(1) March, 2017        region and Mpumalanga provinces. The research considered ordinary least squares to analyst the Cobb-Douglas function in relation to farm produce that serves as an endogenous variable. Bank credit and other factors served as independent variables. In a different research Chisasa (2014b) revealed a positive relationship between farm credit and farm produce in South Africa. The research employed ordinary leased square multiple regression technique and multi-stage sampling method was used to analyse 300 respondents from small scale farmers. Ammani (2012) established a positive relationship between formal farm credit supply and farm produce in Nigeria. Theory of production functions was use of time series data technique from 1981-2009 period with SPSS 16.0. Also, three simple regression models were considered to explain the variables. Similarly, Onyechanya and Ukoha (2007) reported mix findings. Additionally, Eyo (2008) reported the existence a mix result on the relationship between farm credit and farm produce in the Nigerian agricultural sector. The research data were gathered from 244 micro finance enterprises.  2.4 Murabahah Finance as a Potential Moderator Marabahah (cost-Plus financing) refers to a contract which client or farmer wishing to buy  equipment or goods request the bank to purchase the items and sell them to him at cost-plus a declared profit (Ayub, 2007). Murabahah finance is regarded as a financing for the purchase of goods (farm input) and services and resale the input of the client or customer (farmer) that allows the customer (farmer) to make purchases without having to take out a loan and pay interest (Saddiqi, 2006). Murabahah finance can be seen as an alternative to interest-based financial transactions assumes importance only when it is transacted on a deferred payment basis. This means the terms of payment in the Murabahah finance did not necessarily involve credit; they could be either cash or credit and the transaction must involve the sale of goods at a price which includes a profit margin agreed by both parties (Mohsin, 2005). 2.5 Murabahah Finance and Farm Produce Islamic banking uses Murabahah finance in financial trading and agricultural production and investment for economic growth and development (Saddiqi, 2006).  Equally, Murabahah   financing is a good product for improving trading and farm produce as well as addressing problems of farm produce (Khaleequzzaman & Shirazi, 2012). Aburaida (2014) revealed a positive relationship between Murabahah and farm credit in a study entitled rural finance as a tool for poverty reduction in Sudan. Also, the study explained that, Murabahah was successfully practiced as a suitable product for small scale farmers. This occurred after the Islamization of Sudan banking industry, in which many products including Murabahah financing were adopted by agricultural bank of Sudan.   Mohammed and Hussien (2012) their study reported a positive relationship between Murabahah and agricultural financing in the activities of Gezara irrigation in the republic of Sudan. Data were collected by using samples of poor farmer’s preferred official credits. Mohsin (2005) studied the practice of Islamic banking products in the agricultural sector of the republic of Sudan and reported that Murabahah finance has a relationship with agricultural activities.  Obaidullah (2015) revealed the existence of a positive and significant relationship between Murabahah finance and financing paddy agriculture in Sri- Lanka. The research was conducted in order to provide farm credit to the farmers that were impoverished and displaced. Equally, Putri and Dewi (2011) reported a positive relationship between Murabahah and agricultural financing from Islamic rural banks of Indonesia. In addition, Ahmad (2015) Islamic bank explained that, the concept of Murabahah finance is width because a part of provision of farm credit and short-term trade financing, it also, requires to finance other economic sectors through financing machineries and equipments among others.  3.0 Methodology This study will be a cross sectional survey, Instrument of the data collection is Questionnaire, Sample size for this study are 764. The respondents in the study are individual farmers. And SEM- PLS statistical application will be used for data analysis. 4.0 Discussion A reference to the significance of this study is highly significant to the public and private organizations by explaining the socio-economic importance of farm produce. Evenly, the outcome of this investigation will facilitate the betterment of formal and informal agricultural financial institutions and services, policies making and development strategy that can assist poor farmers toward improvement of their farm produce. Besides, the ongoing investigation will improve financial institutions, administrative skill and management, professionals and merchandised, farmers socio-economic and growth of the agricultural sector of Kano state and Nigeria general.   ISSN: 2454-2415   Vol. 3, Issue 3, March 2017 44 International Journal of Innovative Knowledge Concepts, 3(1) March, 2017        5.0 Findings It was found from the literature that, the problems of high interest rate, insufficient and timely farm credit, poor modern farm equipment such as: tractors, harvesters, planters, storage facilities, fertilizer, herbicide, insecticide, transportation and communications among others.   6.0 Recommendation 1) It’s important for the government to provide Murabahah finance to replace conventional farm credit more especially in state own Micro finance 2) Farmers should properly utilize Murabahah finance. 3) All branches of conventional financial institutions in the state should adopt Murabahah finance and other Shariah products to the farmers.  REFERENCES Aburaida, K. M. M. (2014). Rural Finance As A Mechanism For Poverty Alleviation In Sudan, With An Emphasis On „Salam “Mode. European Scientific Journal, 7(26). Ahangar, G. B., Padder, M. 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The effect of farm credit and farm produce in Kano State Nigeria

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The effect of farm credit and farm produce in Kano State Nigeria

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