Islamic rural microfinance represents the confluence of three rapidly growing activities: microfinance, Islamic finance and agricultural development. It has the potential to not only respond to unmet demand but also to combine the Islamic social principle of caring for the less fortunate with microfinance’s power to provide financial access to the poor people involved in rural farming. This paper aims to analyze the governmental agricultural microfinance based on the Islamic principle of Murabaha, using the rural area of Hama government, Syria as case study. The qualitative approach and collected data from the microloan provider was used in this research. The main results show the success of this type of agricultural microcredit to develop the livestock production and its high likelihood of sustainability because it does not conflict with religious and social considerations of the targeted group as well as the high repayment, and it uses the participatory approach of the target group. It could play a very important role regarding the empowerment of rural women by establishing their own projects, owning shares in the village fund, obtaining annual profits, and household investment which can help to improve their family's living conditions. The risks to this type of agricultural microfinancing includes agricultural sector exposure to natural, productive, price and institutional risks.
Key words: Agricultural microcredit, microfinance, Murabaha, village funds, Syria.
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