Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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3.2.5 Banking & Finance (Indirect Market Participants)
Direct financial support – either in the form of grants or loans – can be the critical piece to help
a nascent agricultural and food sector progress and become a sustaining feature of the national
economy. Such support may be complementary to some state-owned agricultural banks as
presented in Appendix A. Sharia-compliant banking requirements can limit the number and
means of financial products available. Apart from state-owned agricultural banks, sources of
finance can be found through traditional commercial banks, agricultural companies, and
international development agencies.
 Often the lack of development in some developing OIC countries carries with it an
implied amount of risk that increases the borrowing cost of financing through
traditional commercial banks. Still, in countries such as Pakistan and Turkey, such
financing is possible. For instance, Faysal Bank and Allied Bank, both large commercial
banks in Pakistan, provide agriculture financing.
 Microfinance, aimed at the alleviation of poverty, is often used to help poor farmers.
Given that smallholder farmers are the majority of the globe’s poorest people,
agriculture has become a central focus of microfinance institutions. Grameen Bank in
Bangladesh has become a model of microfinance. The Grameen Foundation was then
established to help provide technical support and extend microfinance internationally
to poor areas in Africa, Asia, and the Middle East.
 Thanks to Turkey’s efforts to align its agricultural policy more towards that of the EU’s
Common Agricultural Policy (CAP), it is able to benefit from long term loans from the
European Bank for Reconstruction and Development (EBRD) through the EBRD
Turkey MSME Lending Programme. This program helps Micro-Small and Medium
Sized Enterprises (MESMEs) obtain financing in rural areas.
 Turkey is home to large agricultural equipment manufacturers, such as Agrimir and
Alpler. It is unclear whether these companies provide financing services for customers,
but it could represent an opportunity. John Deere, a leading agricultural equipment
manufacturer in the United States, provides extensive financing to attract and retain
customers. In return, it helps lower the up-front costs of farmers and agribusinesses
that may need new equipment but lack the capital to purchase it outright.
In addition to traditional financing methods, multiple Sharia-compliant banking tools are
available across the region either on a national or multi-national basis. The International Trade
Finance Corporation is one such example. We are unable to determine how much of the market
utilized Sharia-compliant methods as a component of all lending. However, the point is that
tools are generally available, whatever the lender’s requirements.