Murabaha as an Islamic Financial Instrument for Agriculture.

This study aims to explore the application of Murabaha contracts in agricultural sector. The study was conducted at Islamic microfinance institution namely Islamic Financial Services Cooperative (IFSC) Al-Hikmah located in Paleran Village, Umbulsari 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. This paper found four important points: Firstly, there are three models of the application of Murabaha, namely goods-based Murabaha; cash-based Murabaha; and business capital-based Murabaha. 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 wakalah 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 Murabaha financing. [ABSTRACT FROM AUTHOR]