Proposing Islamic Blended Agriculture Financing For Sub-Saharan African Countries: Case Of Senegal Groundnut Sector

Abstract

The objective of this paper is to propose Islamic blended agriculture financing for Sub-Saharan African Countries by focusing on the Senegal groundnut sector to meet the financing need of the groundnut sector in post and pre harvesting activities. The study uses a qualitative approach to analyze the financing instrument provided by International Islamic Trade Finance Corporation (ITFC) to finance the groundnut sector in the case of Senegal. This research utilizes document analysis techniques for two ITFC reports on Agri-base programs and one Organization for Economic Cooperation and Development (OECD) document. It also deploys thematic analysis to evaluate ITFC financing modes and propose Islamic blended financing to meet the financial need of the Senegal Groundnut Sector. There are some bottlenecks, which hindered the productivity and competitiveness of the groundnut sector in Senegal. ITFC financing that consists of Murabah contract and grants do not tackle the key issues in the ground sector such as limited certified seed availability. These issues will negatively affect the quality of seed as well as the incentive of farmers to produce groundnut. As a result, there will be disruption in the supply chain. Thus, the findings of this study reveal that Islamic blended financing is an alternative instrument to address the issues of the Senegal groundnut sector by providing full value chain financing from the input market to the export market. The case study is limited to the Senegal groundnut sector and there is no interview or survey to assess the practicability of Islamic blended financing. This could be examined in subsequent research. Islamic financing offers a wide range of instruments to accommodate the financing needs of the agricultural sector. Hence, by combining these instruments, it is viable to structure Islamic blended financing to cater the need of the key players in the groundnut sector. The proposed model can extend to other agriculture sector. This research provides a new insight on financing the agricultural sector based on Islamic financing instruments. It suggested blended Islamic financing instruments to address the existing financial gap in Senegal groundnut sector.