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Thursday, 7 February 2013

Islamic finance a boost for USAID's Afghan farm fund

SYDNEY, Feb 7 (Reuters) - Economic instability and legal
obstacles have slowed the introduction of modern forms of
Islamic finance in Afghanistan. But sharia-compliant loans are
Islamic finance in Afghanistan. But sharia-compliant loans are
beginning to play a role in the farm sector through a
U.S.-funded aid programme.

The Afghan government is using Islamic financial contracts
to extend credit to farmers in areas where conventional banking
has not fully satisfied demand for funds.

The Agricultural Development Fund (ADF), set up in 2010
through a $100 million grant from the U.S. Agency for
International Development (USAID), offers both conventional
credit and Islamic financing.

About $11 million of its loans approved between May 2011 and
April 2012, or 70 percent of them, were sharia-compliant, the
ADF says. Islamic finance obeys a religious ban on payment of
interest and instead pays lenders with returns on real assets.

Demand for such financing has been particularly strong in
rural communities because people there tend to be conservative,

(Chicago Tribune / 07 Feb 2013)

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