Syariah-Based Contract Farming as a Socio-Business Model: Experience of Local Phenomena

Hamidah, Hendrarini and Soemartono, Soemartono (2017) Syariah-Based Contract Farming as a Socio-Business Model: Experience of Local Phenomena. Advanced Science Letters, 23 (12).

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    The theoretical problem dealing with the concept of contract farming and syariah financing is still said to be a partial concept. It is due to the fact that contract farming is not only enhancing the income, but also creating the dependency [among the farmers]. On the other hand, syariah financing in agricultural sector is not quite popular yet due to its high risk. If both of them are synergized with local wisdom, it is expected that their weakness of both aspects might be eliminated and capable of strengthening a positive empowerment. The objective of this research is to (a) explore the implementation of contract farming and syariah financing in a local level; (b) find out the position and farmer’s interest and capital owners of those two systems; (c) the benefit relationship between contract farming and syariah system for the sake of farmers and capital owner’s; and (d) develop syariah contract farming as socio-business model. The research was conducted through some survey, in-depth interview, structured interview, and Focus Group Discussion with farmers, businessmen, small and medium enterprises (UKM), such as Koppontren and sugar mill/factory, and local government. The reason was due to the fact that those people and institution knew the real problem very well and how to overcome that problem in accordance with their own needs. The research result showed that contract farming had been known very well in agricultural sector, livestock and some other non-agricultural business. The reason for the development of contract farming was due to the fact that the farmers needed land and capital for their business. However, the capital owners were actually the ones who really needed the farmers for their business sustainability. Furthermore, contract farming system was capable of increasing some business productivity and income although the farmers became dependant to the capital owners. Hence, both the farmer’s interests, and capital owners had already been accomodated by the system. The new syariah system had been developed in non-agricultural sector. Meanwhile, in agricultural sector, Syariah-based contract farming had not been developed well because the capital owners did not want to bear the risk(s). The development of this system in sugar cane business was due to the fact that the capital owners could organize and control the market so that it could reduce the risk burden. This was the factor to become the syariah-based contract farming system of a certain commodity (sugar cane business) could finally develop well. There was a tendency of shariah contract farming which not only for an economic purpose but also social missions. However, this had to be beneficial. This was then called as social business model. Keywords: Contract Farming, Shariah, Social Business.

    Item Type: Article
    Subjects: H Social Sciences > HD Industries. Land use. Labor > HD1401 Agriculture--Economic aspects
    Divisions: UNSPECIFIED
    Depositing User: Fatchullah ZA
    Date Deposited: 22 May 2018 08:13
    Last Modified: 22 May 2018 08:14

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