Study shows 97.8% of Maguindanaon farmers, entrepreneurs prefer Shariah-base microfinance

A study conducted by a Moro Non-Government Organization (NGO) revealed that 97.8% of Maguindanaon farmers and entrepreneurs prefer Shariah-based micro-financing (SMF) over the conventional financing.

The research entitled “The Feasibility and Acceptability of Shariah-based Microfinance (SMF) in Maguindanao” was undertaken by Katabanga Development Foundation for Peace and Development Advocates, Inc. (Kadtabanga) and Peace and Equity Foundation (PEF) from October 2015 to January 2016.

“This study investigates how the Islamic microfinance would work in Maguindanao setting, particularly on its acceptability and viability,” said Prof. Nasruddin Buisan, the lead researcher of the study.

The study result was presented to different SMF practitioners during a planning workshop on May 17-18, 2016 at Lake Sebu, South Cotabato under the auspices of the PEF. 

Buisan said although SMF is new to the province of Maguindanao, there is very high preference of the said financing system wherein only 2.2% of the respondents said they prefer the conventional or interest-based financing scheme. 

The study also revealed that the 2.2% do not have clear understanding on Islamic financing.

In terms of acceptability, 41.9% said SMF is very acceptable, 47.3% said it is acceptable while 10.8% said it is fairly acceptable.

Fifty-three (53) farmers and 41 entrepreneurs from Alamada and Tuka in Sultan Kudarat, Kauran in Ampatuan and Manungkaling in Mamasapano all part of Maguindanao province were the respondents of the said study.

The respondents said their sources of loans are cooperatives (46%), local traders (30%), local moneylenders (12%), family and relatives (12%), friends (2%), and land owners (2%).

Farmers who avail loan through “Bonega system” wherein local traders provide loan in the form of farm inputs or consumer goods are required to sell the farmers’ produce to their lenders. These traders buy the agri-products of the borrowers at lower price and sell their goods at higher prices.

Another system of loan practiced in Maguindanao is called Angkat Financing System usually for rice farmers wherein for every P1,000 cash availed by the borrower, he will pay same amount to the lender plus additional three sacks of rice for every P1,000 borrowed.

According to Ustadz Akman Abtahi, a lecturer on Islamic Financing, the two systems manifest unjust dealing to the borrowers and clearly those do not conform with Shariah. 

SMF or commonly called Islamic Financing is anchored on the conditions that transactions should be interest-free, profit and loss sharing, free from ambiguity or uncertainties and no Haram (forbidden) items in the trading.

Kadtabanga is one of the dew organizations offering SMF targeting poor households in Maguindanao with the support of the PEF.