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IN The Name of Allah The Most Beneficent and The Most Merciful

This document provides an overview of agriculture in Pakistan. It discusses the importance of agriculture to Pakistan's economy, noting that agriculture accounts for 21% of GDP and 44% of employment. It also lists the major crops grown in Pakistan including wheat, rice, cotton, sugarcane, and maize. Tables are included showing land usage, area under major crops, and yields for various crops from 2003-2008. The document then discusses Islamic agri finance concepts, specifically Salam, including its purpose, conditions, benefits, and how parallel Salam agreements work.

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Asad Mazhar
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70 views27 pages

IN The Name of Allah The Most Beneficent and The Most Merciful

This document provides an overview of agriculture in Pakistan. It discusses the importance of agriculture to Pakistan's economy, noting that agriculture accounts for 21% of GDP and 44% of employment. It also lists the major crops grown in Pakistan including wheat, rice, cotton, sugarcane, and maize. Tables are included showing land usage, area under major crops, and yields for various crops from 2003-2008. The document then discusses Islamic agri finance concepts, specifically Salam, including its purpose, conditions, benefits, and how parallel Salam agreements work.

Uploaded by

Asad Mazhar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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“IN the Name of Allah The Most

Beneficent and the Most Merciful”

Asad Mazhaer
ISLAMIC AGRI FINANCE

INSTITUTE OF BUSINESS & TECHNOLOGY


(BIZTEK)
GULSHAN CAMPUS

Asad Mazhaer
INTRODUCTION
ISLAMIC REPUBLIC OF PAKISTAN

 Area= 795,096 sq.km


 Population = 180 million
 Capital city: Islamabad
 Religion:97% Muslims, 3%Christians and Hindus
 Government: Federal Republic
 Head of State: Asif Ali Zardari
 Head of Government: Prime Minister Yousaf Raza Gillani
 Real GDP Growth Rate: 5.8%
 Annual Per Capita Income:US$1,085
 Legal System: Common Law
 Major Industries: Textile, Sugar, Vegetable Oils, Agricultural Products,
Cement, Fertilizers, Steel, Chemicals, Sporting Goods, Carpets.
 Major Trading Partners: USA, China, Japan, UK, Germany, Saudi
Arabia,UAE.
Asad Mazhaer
Climate
 Pakistan enjoys a considerable measure
of variety of Climate North and north
western high mountainous ranges are
extremely cold in winter while months of
April to September are very pleasant.
The plains of the Indus valley are
extremely hot in summer with a cold and
dry weather inwinter.The coastal strip in
the South has a moderate climate
Asad Mazhaer
 The Backbone of Pakistan’s Economy.

 Agriculture is the mainstay of Pakistan's


economy.

 Nearly 21% of total output (GDP)

 44 percent of total employment is


generated in agriculture.

 It also contributes substantially to


Pakistan's exports.

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MAJOR CROPS

Cotton Wheat

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Land Utilization (Million hectare)
S.NO AREA 2004-05 2005-06 2006-07 2007-08
1. Geographical Area 79.61 79.61 79.61 79.61
2. Reported Area 57.06 57.22 57.25 57.25
3. Not available for 22.81 22.88 22.70 22.70
cultivation
4. Agricultural Land 34.25 31.08 31.03 31.03
5. Forest Area 4.01 4.03 4.20 4.20
6. Arable Land 30.24 22.05 22.03 22.03
7. Cultivable Waste 8.17 8.12 8.32 8.32
8. Total cultivated area 22.07 29.6 29.4 29.4
9. Current Fallow 6.43 6.47 6.44 6.44
10 Net Area Sown 15.64 15.58 15.59 15.59
11 Area Sown More 7.00 7.55 7.92 7.92
than Once
12 Total Cropped Area 22.64 23.13 23.51 23.51

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Area Under Major Crops (000
Hectares)
CROPS 2003-04 2004-05 2005-06 2006-07 2007-08

Wheat 19,500 21,612 20,486 21,295 21,749


Rice 4,848 5,025 5,547 5,588 5,563
Sugarcane 53,419 47,244 44,665 54,742 63,920

Cotton(00 1,709 2,426 2,107 2,197 1,982


0Tonnes)
(000 Bales 10,048 14,265 12,388 12,858 11,655
Maize 1,897 2,797 3,562 3,088 3,317
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Yield Per Hectare of Major Crops
(Kg/Hectare)
CROPS 2003-04 2004-05 2005-06 2006-07 2007-08

Wheat 2,373 2,586 2,466 2,716 2,585


Rice 1,970 1,994 2,116 2,107 2,212
Maize 2,003 2,848 3,286 3,036 3,264

SUGAR 49.7 48.9 49.2 53,199 51,077


CANE
COTTON 572 760 679 711 649

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Salam

•This mode of financing can be used by the modern banks


and financial institutions especially to finance the
agricultural sector .

•In SALAM, the seller undertakes to supply specific goods


to the buyer at a future date in exchange of an advanced
price fully paid at spot.

•The price is in cash but the supply of purchased goods is


deferred.

Asad Mazhaer
Purpose of Salam
 To meet the need of small farmers who need
money to grow their crops

 Salam is beneficial to the seller because he


received the price in advance and it was
beneficial to the buyer also because normally
the price in Salam is lower than the price in
spot sales.

Asad Mazhaer
Conditions of Salam
1. Only those goods can be sold through a Salam contract in
which the quantity and quality can be exactly specified
e.g. precious stones cannot be sold on the basis of Salam
because each stone differ in quality, size, weight and their
exact specification is not possible.

2. Salam cannot be effected on a particular commodity or on a


product of a particular field or farm
e.g. Supply of wheat of a particular field or the fruit of a
particular tree since there is a possibility that the crop is
destroyed before delivery and given such possibility, the
delivery remains uncertain.
Asad Mazhaer
Conditions Of Salam
cont….
3. The exact date and place of delivery must be specified
in the contract

4. The commodity for Salam contract should remain in


the market right from the day of contract up to the date
of delivery or at least till the date of delivery.

5. A security in the form of a guarantee, mortgage or


hypothecation may be required for a Salam in order to
ensure that the seller delivers.

6. Since price in Salam is generally lower than the price


in spot sale; the difference in the two prices may be a
valid profit for the Bank.
Asad Mazhaer
Benefits of Salam
 Benefits:

 There are two ways of benefiting from the contract of Salam:

 After purchasing a commodity by way of Salam, the financial


institution can sell it through a parallel contract of Salam for the
same date of delivery. The period of Salam in the second parallel
contract is shorter and the price is higher than the first contract. The
difference between the two prices shall be the profit earned by the
institution. The shorter the period of Salam, the higher the price and
the greater the profit. In this way institutions can manage their short
term financing portfolios.

 The institution can obtain a promise to purchase from a third party.


This promise should be unilateral from the expected buyer. The
buyer does not have to pay the price in advance. When the
institution receives the commodity, it can sell it at a pre-determined
price to a third party according to the terms of the promise.

Asad Mazhaer
Parallel Salam
 In an arrangement of parallel Salam there must be two
different and independent contracts; one where the bank
is a buyer and the other in which it is a seller. The two
contracts cannot be tied up and performance of one
should not be contingent on the other.

 A Salam arrangement cannot be used as a buy back


facility where the seller in the first contract is also the
purchaser in the second. Even if the purchaser in the
second contract is a separate legal entity, but owned by
the seller in the first contract; it would not tantamount to
a valid parallel Salam agreement.
Asad Mazhaer
THANK YOU

Asad Mazhaer

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