ISLAMIC MARKETING: STRATEGY FOR MARKETING ISLAMIC AGRO PRODUCTS IN ISLAMIC BANKING INSTITUTIONS IN...

7/27/2019 ISLAMIC MARKETING: STRATEGY FOR MARKETING ISLAMIC AGRO PRODUCTS IN ISLAMIC BANKING INSTITUTIONS IN MALAYSIA

1/25


2/25

1. INTRODUCTION.

Islamic marketing concept combines the principle of value maximization with the principles of

equity and justice for the welfare of the society. In a rapidly changing marketing environment the need to

be costumer-focused has never been as important as it is today. At present where customers are becoming

more demanding and increasingly mobile between competing financial providers, being customer-focused

is not enough. Islamic banks need to be perceived by their customers as being Islamic.

It is clear that agricultural projects seem less viable than any initiative in other sectors. It is also

admitted that the risks in agricultural investment are higher due to various factors in respect to the effect

weather and natural disasters on the production of primary produces. Nevertheless, with the appropriate

strategies in marketing from the perspective of Islam these risks could be minimized. Proper channel in

marketing also may place Islamic agro products at par with other financial products and services providedby the Islamic banks.

As such, there are a number of questions need to be solved such as what is marketing concept in

Islam and how marketing strategies can be used in order to secure profitable outcomes to Islamic banks and

agro entrepreneurs in pursuing their agro projects. This paper will be divided into three topics namely

Islamic marketing, Islamic agro products in Islamic banks and strategy for marketing Islamic agro

products.

2. ISLAMIC MARKETING.

The basic difference between Islamic and conventional banks lies in the fact that the former

operate on an equity participation system in which a predetermined rate of return is not guaranteed,

whereas the latters operations are based on both equity and debt systems that are mainly driven by interest

(riba)1. The essential difference, resulting from the implementation of Shariah principles, provides the

incentives for Islamic banks to search for different products and services to offer2.

Although the idea of Islamic banking is relatively new, it has nevertheless attracted the attention

of many investors around the world. From a strategic point of view, this newness is both advantageous and

disadvantageous at the same time. On the positive side, Islamic banking has the potential for attracting new

1Sudin Haron et. al. (2009),Islamic Finance and Banking System: Philosophies, Principles & Practices,Shah Alam: McGraw-Hill (Malaysia) Sdn. Bhd., pp.128-129; Kamal Khiret.al. (2008),Islamic Banking:

A Practical Perspective, Petaling Jaya: Pearson, p.10.2 Kamal Khiret.al. (2008), op.cit., pp.196-197.

2


3/25

customers and consequently, enhancing a banks market share. On the negative side, a high potential for

expansion motivates new entrants to the industry and indeed, provokes more competition3.

As a result of this development, an Islamic bank can be expected to face competition not only

from the Islamic windows of conventional commercial banks, but also from other Islamic banks. Hence,

the marketing strategy of an Islamic bank must be concerned with its ability to gain a competitive

advantage and establish a strong competitive position. The Islamic marketing principles combine a value-

maximization concept with the principle of justice for the wider welfare of the society. These principles

offer a means to create value and elevate the standard of living of people in general through commercial

pursuits4.

The Islamic marketing guidelines ensure respect for, and the individual freedom of, both bankers

and customers. Islamic ethics dictate that under no circumstances should marketers exploit their customers

or in any way involve themselves in dishonesty, fraud or deceit. Any unethical marketing practice does aninjustice, which, by definition, negates the concepts of brotherhood and equality of humanity that form the

core of the Islamic vision. Thus, adopting the Islamic marketing principles ensures that the seeds of

harmony are planted and a proper order in society is provided, thereby enhancing the dignity of, and

upholding the rights of human beings5.

The need to be customer-focused in the rapidly changing marketing environment has never been

more important for Islamic banks and financial services institutions than it is nowadays. Islamic banks and

more specifically their contact employees (customer relation advisors) need to be perceived by their

customers as ethically Islamic. The issue of marketing ethics and strategies in Islamic banking perspective

is an under researched area. There is a lack of published literature from the Islamic perspective on

marketing ethics and strategies applicable to banking system6.

The Five Ps of the Marketing-Mix from the Islamic Perspective in defining Islamic Marketing

principles state that Islamic marketing is based on the principles of justice and equity in Islam, which

differs from secular marketing principles in many ways. They discussed the three characteristics of market

ethics from the Islamic perspective. Firstly, Islamic marketing principles are based on Quranic

3 Ataul Huq Pramanik (2009),Islamic Banking: How Far Have We Gone, Gombak: IIUM Press, p.108;

Kamal Khir et. al. (2008), Islamic Banking: A Practical Perspective, Petaling Jaya: Pearson MalaysiaSdn. Bhd., pp.310-311.4 Muhammad Nasri et. al. (2006),Etika Perniagaan: Pendekatan Perspektif Islam, Petaling Jaya: Prentice

Hall, pp.98-99.5Ibid.6Dr. Mohd. Daud Bakar (2008),Essential Readings in Islamic Finance, Kuala Lumpur: CERT

Publications, pp.101-103.

3


4/25

commandments and leave no room for ambiguous interpretation by marketing executives to suit their

individual whims and desires.

Secondly, the main difference is their transcendental aspect of absoluteness and non-malleable

nature. Thirdly, the Islamic approach emphasizes value-maximization in view of the greater good of the

society rather than the selfish pursuit of profit maximization. Such properties grant Islamic marketing a

tremendous capacity to penetrate human conscience and are capable of influencing the behaviour of

marketing executives from within. Banking or commercial activity from an Islamic perspective is governed

by two principles: (i) submission to the moral order of God and (ii) empathy and mercy to Gods creations

which implies refraining from doing harm to others and thus, preventing the spread of unethical practices 7.

The five Islamic marketing Ps are: product, price, promotion, place and people.

Product/ Production Process.

The development of Islamic banking products should be visualized quite differently as compared

to Western thinking. The Islamic perspective incorporates moral and transcendental elements within the

production decision-making process in product development and is guided by the principles of Islamic

business ethics. These principles dictate firstly, the product should be lawful and not to cause dullness of

mind in Islamic Marketing ethics and its impact on customer satisfaction. Secondly, the product must be

asset backed. Thirdly, the product must be deliverable since the sale of a product is not valid if it cannot be

delivered (the existence of element ofgharar). Fourthly, there is a need of identification of extra cost-

added features that might materially change the product or impact on the buyers purchase decisions.

Fifthly, all parties intend to discharge their obligations, financial and otherwise, in good faith; and should

be based on principle of the justice, fairness and equity8.

Under the Islamic approach, the production process has to be guided by the criteria of the value

and the impact of the product upon the whole society. This is due to the highest importance given to the

actualization of the optimum welfare of a human being and society. The primary objective of the

development of suitable banking product is to deliver, elevate and satisfy basic human needs, whereby

Islamic marketing encourages a societal and welfare approach rather than decisions based on the profit

maximization.

7 Ahmad Zaini Othman (2003), Pemasaran Produk Perbankan Islam: Satu Analisa,Prosiding SeminarKewangan Islam, Kuala Lumpur: Akademi Pengajian Islam, Universiti Malaya, p.145.8 Muhammad Nasri et. al. (2006), op.cit., pp.100-101.

4


5/25

Product Pricing.

Pricing policies are, in the main, formulated to exploit and manipulate human psychology as

witnessed by common practice, whereby the recommended retail price printed on a product is often

substantially higher than what retailers actually charge. The aim of such pricing policies is to give

customers a false impression that they are in fact getting a bargain. This type of practice is banned under

Islamic law. Islam prohibits getting something too easily without hard labour, or receiving a profit without

working for it9.

Furthermore, it is not allowed to change a price without altering the quality or quantity of the

product because this is cheating the easy-going customer for illicit gain. Islam also prohibits false

propaganda or publicity on the part of marketers regarding the position of demand and supply through the

media. It should be pointed out that Islam does not prohibit price controls and manipulations to meet the

needs of the market. It means that the Islamic ethics allows some time in which to charge higher prices as aresult of natural scarcity of supply of a given commodity or setting price ceilings to curb opportunistic

tendencies among merchants10.

As narrated by Anas Bin Malik, during the life time of the Prophet Muhammad (s.a.w.) price

levels went up. They (people) said: Prophet (s.a.w.)! Fix the prices for us. In this regard, the Prophet

(s.a.w.) said: Prices are fixed by Allah. He (s.w.t.) contracts and expands the sources of livelihood and I

hope to meet my sustainer in a state that no one may raise a claim of injustice against me in respect of

blood or money (Reported by Tirmidhi and Abu Daud).

From the tradition of Prophet Muhammad (s.a.w.) above, we can conclude that self-operating

mechanism of price adjustments and healthy competition are to be encouraged. Allah (s.w.t.) says in the

Quran: The seal thereof will be musk: and for this let those aspire, who have aspirations . (Mutaffifin,

83:26). However, the essential conditions for the successful operation of such a mechanism dictate that

there should be no corner market, no hoarding, no unjustified price manipulation, and no restriction on

trade. Once the second Caliph Umar Ibn al-Khattab passed by Hatib ibn Abi Balta'ah and found him selling

raisins at a much lower price with the intention of putting his competitors to loss. Caliph Umar Ibn al-

Khattab told him: Either enhance your rate or get away from our market.

The hoarding of any product is strictly prohibited in Islam. But the system offers flexibility if

competing marketers sell at one price amounts to coercion and distortion of the free market or if it means

very high product prices. Under these circumstances, officials of the Islamic government can bring together

9 Hifzur Rab (2006),Economic Justice in Islam, Kuala Lumpur: A.S. Noordeen, p.43.10Yusuf al-Qaradawi (1995), The Lawful and The Prohibited in Islam, Kuala Lumpur: Islamic Book Trust,p.260.

5


6/25

market leaders representing a particular region or a particular commodity, in the presence of others. The

purpose is to reach a consensus on price level that would not be unjust to the consumer and at the same

time reap reasonable profits to the marketers. The key impetus to intervene on such an ad-hoc basis is to

prevent black-marketing and concealment of essential foodstuffs11.

All unethical lapses in pricing are tantamount to injustice and are sinful. Hence, all profits earned

through such unjustified prices are not only unethical, but they infringe upon the unique status of

man/woman and his/her role and responsibilities as viewed under the Islamic framework. In order to

eliminate this type of injustice, the marketer and customer must acknowledge that they have higher moral

responsibilities on earth rather than be preoccupied with profit maximization alone.

Product Promotion Rules.

There is no room in Islam to justify any cover up of deceptive promotional behavior. Al-Qurancondemns all forms and shapes of false assertion, unfounded accusation, concoction and false testimony.

Allah (s.w.t.) says: And they make into females Angels who themselves serve Allah. Did they witness their

creation? Their evidence will be recorded, and they will b called to account! (Zukhruf, 43:19).

In terms of Islamic marketing ethics, it is unethical for the salesman or customer relation advisor

(CRA) to over-praise his products and attribute to them qualities which they do not possess. Furthermore,

giving a false impression of any kind to promote or sell a product is strictly prohibited within the Islamic

ethical framework of international marketing practices. Therefore, in the area of product promotions,

Islamic marketing ethics will follow the following rules:

(i) avoidance of false and misleading advertising;

(ii) rejection of high pressure manipulations, or misleading sales tactics;

(iii) avoidance of sales promotions that use deception or manipulation.

According to Islamic ethics, a seller is a person who feels accountable to God. He should be

honest and fair in his marketing activities. Only true documents which reveal accurate specifications in

terms of quality, contents, etc. will exchange hands. To practice otherwise constitutes disgraceful,

dishonourable and shameful gain through pandering, deceit, treachery, theft or injustice. According to

Islamic principles, marketers are required to disclose all faults in their goods, whether obvious or hidden;

to do otherwise is to act fraudulently12.

11Ibid., p.256.12 Joni Tamkin B. Borhan (1999), The Ethical Principles in Islamic Commercial Transactions,JurnalUsuluddin, Kuala Lumpur: Akademi Pengajian Islam, Universiti Malaya, Vol.9, July 1999, pp.101-105.

6


7/25

It is obligatory for the seller to reveal all known defects which cannot be seen on the surface and

cannot be found out by the cursory glance to the purchaser. In addition, it is dictated that A sale

without any stipulation makes it necessary that the thing sold should be free from defect. Marketing

disclosure is manifested either by assurance which will be given by word of mouth or in writing, or in some

cases silence will mean assurance.

The Prophet Muhammad (s.a.w.) expressly condemned all manipulative promotional behavior that

may give bad consequences to the buyer or customers. Once, when passing by a grain merchant, the

Prophets curiosity was aroused. He (s.a.w.) thrust his hand into the heap of grain and found it wet. He

(s.a.w.) asked: What is this, O merchant?. The merchant replied: It is because of rain. The Prophet

(s.a.w.) then said to him: Why did you not put it on top so that the people could see it? He who deceives us

is not of us (Reported by Muslim).

In Islamic ethics, promotional techniques must not use sexual appeal, emotional appeal, fearappeal, false testimonies and pseudo research appeal, or contribute to the dullness of the mind or encourage

extravagance. Within the Islamic framework, these methods are unethical since they are utilized purely to

exploit the basic instinct of consumers worldwide with a view to gain profits and greater market share.

Furthermore, Islamic ethics strictly prohibits stereotyping of women in advertising, and excessive use of

fantasy. The use of suggestive language and behaviour, and the use of women as objects to lure and attract

customers are also not allowed13.

Place: Distribution Channels.

The ethical dimensions of decision-making pertaining to distribution are of great significance in

the area of marketing. Physical distribution can be viewed as an integrated collection of information,

people, equipment, and organization. In respect of distribution of product, therefore, Islamic financial

institutions will follow the following principles:

(i) Not manipulating the availability of a product for purpose of exploitation;

(ii) Not using coercion in the marketing channel;

(iii) Not exerting undue influence over the re-sellers choice to handle a product.

It is not surprising to note that decisions made on the profit maximization principle are not

necessarily the most appropriate for a societys welfare. Other cases of unethical practices in distribution

include the usage of packaging designs without adequate security and protection for the product,

inappropriate packaging, and dangerous and toxic products transported through public highways. From an

Islamic perspective, such treatment of customers is unforgivable and equates to unjust marketing practices.

13Ibid.

7


8/25

According to Islamic principles, distribution channels are not supposed to create a burden for the final

customer, in terms of higher prices and delays14.

People.

Islam emphasizes the importance of free and independent judgment on the part of the

customer. The ability to think rationally while making any decision relating to global marketing activities is

a prerequisite in Islamic law. The society at large should not be deprived of honest, free from coercion

marketing information. A customers right to acquire such information is his right and is indicative of the

status given to him by Islam, as well as of the ingrained rights of his wealth which he spends in purchasing

products and services15.

It is the responsibility of the marketers not to resort to any form of coercion and they must, under

all circumstances, have a regard for the intellectual integrity and a higher degree of consciousness of theconsumers to ensure that the hard earned money of customers is not wasted. The Prophet Muhammad

(s.a.w.) prohibited a transaction concluded under constraints. According to Islamic principles, sexual

appeal, emotional appeal, fear appeal, subliminal advertising and pseudo scientific claims all have elements

of coercion which cause them to be categorized as unethical as a means of marketing. An ethically sound

marketing-mix, therefore, dictates that customers decision-making freedom must be protected from all

elements of coercion16.

3. ISLAMIC AGRO PRODUCTS IN ISLAMIC BANKS.

In Malaysia, out of 17 Islamic banks and 9 Islamic banking schemes 17offering Islamic banking

products and services, only three Islamic Banks offer Islamic financing in agriculture namely Agro Bank,

Bank Kerjasama Rakyat Malaysia Berhad and Maybank Islamic Berhad. For the purpose of this paper, not

all of the products and services offered by these Islamic banks will be discussed comprehensively, rather a

few selected of them only.

i. Agro Bank18.

14 Yusuf al-Qaradawi (1995), op.cit., p.260.15Ibid., pp.253-258.16 Muhammad Nasri et. al. (2006), op.cit., pp.100-103.17 Suhaimi Mohd. Yusof (2010), Isu-isu Perundangan Dalam Kewangan Islam, Convention of IslamicBanking & Finance 2010, Masjid Sultan Salahuddin Abdul Aziz Shah, Shah Alam, 13 th March 2010.18 Agro Bank was incorporated under the Company Act 1965 and had been registered as Bank PertanianMalaysia Berhad. Agro Bank is an entity owned by Malaysia government and started its operation on 1 st

April 2008. This bank originally known as Bank Pertanian Malaysia (BPM), which has been established

8


9/25

The facilities available for financing in agriculture sector, provided by Agro Bank can be

classified into two categories which are commercial funds and special funds established by government to

provide funds for agriculture sector (that are channeled through Agro Bank). The objective of providing

these financing facilities is to give working capital for a new agriculture initiatives and expanding existing

agro project19.

a) Commercial Funds.

Financing under these funds are basically market and profit driven, hence the terms and conditions

of these facilities are based on commercial considerations. The source of fund is the normal deposits by the

depositors of the Agro Bank, and therefore usually regulated by market forces. The Agro Bank is keen to

finance all activities related to the agriculture sector, with the scope of financing is expanded to production,

processing and marketing of agriculture produces20.

Table 1.1

under Parliament Act, but has been operated as incorporated institution since 1970. Based on BPM Act1969, the objective of BPM formation are to stimulate the development of agriculture sector in Malaysia, tosupervise credit assistants for the purpose of agriculture projects as well as to provide loan facilities,deposits and credits for the development of agriculture sector including for the production and marketing ofproduces of agriculture. The main mission of Agro Bank is to provide comprehensive financial servicesbased on market and customer demands to the target group namely agro entrepreneur, small and mediumscale businessmen and also individuals. When the New Economic Policy was introduced in 1970, BPM

took an attempt and responsibility to abolish poverty and re-arrange the society particularly among theMalays, who most of them are paddy cultivator, tobacco planter and fishermen. At that time, BPM hadestablished credit scheme for paddy production, credit scheme for tobacco, scheme for crop loan, creditscheme for vehicle as well as scheme for fishery in order to support the target group in obtaining creditsource at minimum cost. Agro Bank is a bank owned by government (GLC) under the supervision ofMinistry of Finance and all financing policies for the agriculture sector is based on the requirement set byMinistry of Agriculture and Agro-Based Industry. See Dato Mohd. Rosli Abd Aziz (2000), Peranan BankPertanian Dalam Memajukan Sektor Pertanian Negara. http://banktani.tripod.com/gm1.htm. 9th November2010; Agro Bank. http://www.agrobank.com.my/history.aspx. 15th December 2010; Agro Bank.http://www.agrobank.com.my/content.aspx?v=vissionmission. 15th December 2010; Agro Bank.http://www.agrobank.com.my/content.aspx?v=aboutus. 15th December 2010. Agro Bank has been chosenfor the sampling purpose of this research since this bank is a major contributor for financing agricultureprojects and for promoting sound agricultural development in Malaysia since its establishment. Agro Bank

is being the only bank in this country specializing in agriculture and has 39 years of experiences andexcellent record in assisting agro entrepreneurs. See for instance, Financing of Agriculture.http://banktani.tripod.com.gm5.htm. 9th November 2010.19 Abd. Rahaman Rasid. Peluang Pembiayaan Dalam Sektor Makanan.http://banktani.tripod.com/arar.htm. 9th November 2008; Financing of Agriculture.http://banktani.tripod.com/gm5.htm. 9th November 2008; Agro Bank.http://www.agrobank.com.my. 15thJune 2010;Agro Bank Pamphlet. 2008. Financing Facilities.20 Abd. Rahaman Rasid. Peluang Pembiayaan Dalam Sektor Makanan.http://banktani.tripod.com/arar.htm. 9th November 2008.

9
http://banktani.tripod.com/gm1.htmhttp://www.agrobank.com.my/history.aspxhttp://www.agrobank.com.my/history.aspxhttp://www.agrobank.com.my/history.aspxhttp://www.agrobank.com.my/content.aspx?v=vissionmissionhttp://www.agrobank.com.my/content.aspx?v=aboutushttp://www.agrobank.com.my/content.aspx?v=aboutushttp://banktani.tripod.com.gm5.htm/http://banktani.tripod.com/arar.htmhttp://banktani.tripod.com/gm5.htmhttp://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://banktani.tripod.com/arar.htmhttp://banktani.tripod.com/gm1.htmhttp://www.agrobank.com.my/history.aspxhttp://www.agrobank.com.my/content.aspx?v=vissionmissionhttp://www.agrobank.com.my/content.aspx?v=aboutushttp://banktani.tripod.com.gm5.htm/http://banktani.tripod.com/arar.htmhttp://banktani.tripod.com/gm5.htmhttp://www.agrobank.com.my/http://banktani.tripod.com/arar.htm


10/25

Agro Bank: Agro Cash-i

Features: Description:

Objective: To provide financing facility for consumption

needs related to agricultural and agro-based

activities.

Eligibility: Government servant (permanent or contract).

Private servant.

Age between 18 to 58 years old.

Financing Limit: Up to RM150,000.

Up to 15 years.

Category: Terms Financing.

Shariah Concept Applied: Bay al-Innah.

Collateral: No collateral, only one guarantor.Projects Eligible for Financing: All activities relates to agriculture.

Source: Suhaimi Bin Yacob, Executive 2, Financing Division, Agro Bank, Jalan Padang Garong, Kota

Bharu, Kelantan. Interview carried out on 14th December 2008 at 11.15 a.m. to 11.50 a.m.;Agro Bank

Pamphlet(2008), Financing Facilities; Agro Bank, http://www.agrobank.com.my, 15th December 2010.

Table 1.2

Agro Bank: Agro Contract.


Objective: To provide revolving credit facility to finance

contract works.

Eligibility: Malaysian citizens between 18 to 58 years old.Financing Limit: Annual and renewable.

Category: Revolving financing.

Shariah Concept Applied: Bay Bithaman Ajil.

Collateral: Case by case.

Projects Eligible for Financing: All agriculture indentures awarded by the

agricultural body.




Table 1.3

Agro Bank: Agro Business.


Objective: To provide agro entrepreneurs a continuous

working capital via overdraft facility.

Eligibility: Malaysian citizens age between 18 to 58 years old.

Financing Limit: Annual and renewable.

10
http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/


11/25

Category: Revolving financing.

Shariah Concept Applied: Bay al-Innah.

Collateral: Case by case.Projects Eligible for Financing: Agriculture contract, working capital, raw

materials and salary for workers.




b) Special Funds.

From time to time, the Malaysia government has established schemes and provided funds for

financing agriculture sector. These funds can be considered as incentives to promote investments and give

priority to agricultural sector. These incentives usually are taken in the form of low cost of financing,

longer duration of financing period and higher margin of financing, with these schemes open to all

institutions and companies incorporated in Malaysia (as long as the ownership by Malaysians is more than

50%), as well as to all Malaysian citizens21.

Through these special funds, Agro Bank will continue its social responsibility to finance

agriculture sector, as has been assigned by the government through Ministry of Agriculture and Agro-

Based Industry in achieving the related policies under Nineth Malaysia Plan (RMK-9)22.

Table 1.4

Agro Bank: Fund for Food (3F Loan).


Objective: To promote investment in the food production

activities at the reasonable cost.

To promote primary food production (including

sea-food, animal husbandry, vegetables and fruits).

To promote the efficient distribution of food andfood products.

21 Dato Mohd. Rosli Abd. Aziz. Financing of Food and Agricultural Production.http://banktani.tripod.com/gm3.htm. 9th November 2008; Dato Mohd. Rosli Abd. Aziz. Peranan BankPertanian Dalam Memajukan Sektor Pertanian Negara. http://banktani.tripod.com/gm1.htm. 9th November2008; Financing of Agriculture. http://banktani.tripod.com/gm5.htm. 9th November 2008; Agro Bank.http://www.agrobank.com.my. 15th December 2010.22 Habsah Dinin. Skim Pembiayaan dipelbagai.Berita Harian. August 8, 2008, p.30.

11
http://www.agrobank.com.my/http://www.agrobank.com.my/http://banktani.tripod.com/gm3.htmhttp://banktani.tripod.com/gm1.htmhttp://banktani.tripod.com/gm5.htmhttp://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://banktani.tripod.com/gm3.htmhttp://banktani.tripod.com/gm1.htmhttp://banktani.tripod.com/gm5.htmhttp://www.agrobank.com.my/


12/25

Eligibility: Malaysia citizens residing in Malaysia.

Malaysian owned institutions and companies (at

least with 51% ownership).

Financing Limit: RM10,000-RM10 million.

Maximum Financing: 90% of project cost.

Financing Period: Up to 10 years.Shariah Concept Applied: Bay Bithaman Ajil.

Collateral: Fully secured.

Projects Eligible for Financing: Food production, processing and marketing (crops,

livestocks and fishery).

Eligible items for crops are vegetables, tea, paddy,

roselle, maize, tapioca, production of seeds and

planting equipment for food crops and fruits such

as banana, mango, guava, watermelon, papaya,

pineapple, sugar cane, coffee, cocoa and etc.

Source: Suhaimi Bin Yacob, Executive 2, Financing Division, Agro Bank, Jalan Padang Garong, KotaBharu, Kelantan. Interview carried out on 14th December 2008 at 11.15 a.m. to 11.50 a.m.;Agro Bank


Table 1.5

Agro Bank: Food Production Credit Scheme (SKPM).


Objective: To increase the national food production.

To provide fixed capital and working capital for

the purpose of financing food production project.

Eligibility: Malaysia citizens residing in Malaysia.

Malaysian owned institutions and companies (at

least with 50% ownership).

Financing Limit: Not exceeding RM500,000.Maximum Financing: 90% of project cost.

Financing Period: Up to 8 years or up to 10th September 2018.


Collateral: Fully secured.Projects Eligible for Financing: All upstream and downstream food production

activities.




Table 1.6

Agro Bank: Paddy Credit Scheme (SKP).


12
http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/http://www.agrobank.com.my/


13/25

Objective: To increase production of paddy in the National

Rice Bowl areas.

To provide revolving credit for the production of

paddy in eight Rice Bowl areas.Eligibility: Malaysia citizens residing in Malaysia.

Malaysian age between 18 to 58 years old.

Financing Limit: Not exceeding maximum financing of RM15,000

per season.

Maximum Financing: 100% of project cost.

Financing period: Up to 6 months (1 season).


Collateral: Case by case.

Projects Eligible for Financing: All paddy planting production activities.




ii. Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat)23.

Facility offered by Bank Rakyat with regards of agriculture financing can be divided by three

types namely Financing Scheme of Land-i Ardhi, Term-i and Property-i as follows:

Financing Scheme of Land-i Ardhi is offered for developing idle land with respect of agriculture

project by customer. The facility for financing under the scheme of Land-i Ardhi uses the contract of sales

based on Bay Bithaman Ajil(BBA) principle. Under this principle, the bank will buy property from the

customer on cash basis and the bank will sell the property back to the customer based on deferred payment

basis. Based on normal procedure, the bank initially will determine the owner of the land. If the land is

owned by the customer, bank will act as a buyer for that property with cash basis purchase.

The contract of selling will be undertaken after the contract of buying completed under the

concept of BBA. If the land is not owned by the customer, the bank will ask for the letter of permission

23 Bank Rakyat was established in September 1954 under the Cooperative Ordinance 1948, following anexpansion of the cooperative movement in Peninsular Malaysia. To facilitate the expansion of the

cooperative movement, the co-operatives set up their respective union banks provide financial needs totheir members. On 28th September 1954, 11 of these union banks decided to merge and form Bank Agong(Apex Bank). In 1967, Bank Kerjasama Malaysia Berhad replaced Bank Agong with its membershipopened not only to the cooperatives, but also to individuals. Subsequent changes in the by-laws alsoresulted in the creation of its subsidiary companies and opening of branches to serve customers as well asmembers. On 6th January 1973, the name was changed to Bank Kerjasama Rakyat Malaysia Berhad orbetter known as Bank Rakyat. Bank Rakyat is governed by its by laws and Bank Kerjasama Rakyat (M)Berhad Act 1978 (Special Provision 202), which allows Bank Rakyat to provide financing to non-members.In 1989, Bank Rakyat was placed under the Ministry of Land and Co-operative Development and theMinistry of Finance. See Bank Rakyat.http://bankrakyat.skali.my/web/guest/sejarah. 21st December 2010.

13
http://www.agrobank.com.my/http://www.agrobank.com.my/http://bankrakyat.skali.my/web/guest/sejarahhttp://bankrakyat.skali.my/web/guest/sejarahhttp://www.agrobank.com.my/http://bankrakyat.skali.my/web/guest/sejarah


14/25

from the actual owner in order to utilize and develop the land. The bank will use the concept of al-Wakalah

in completing this contract. Both buying and selling contracts can be done between bank and customer

using the concept of al-Wakalah. The contract of selling between bank and customer will be based on

deferred payment basis under the concept of BBA24. The specific features and terms of this scheme are as

below:

Table 1.7

Bank Rakyat: Financing Scheme of Land-i Ardhi.


Eligibility: Malaysia citizens.

Malaysian aged between 18 to 65 years old.

Not in the state of bankruptcy.

Category: Developing agriculture land.


Margin and Quantum of Financing: 90% of project cost for the member of the bank.

80% of project cost for non-member of the bank.Repayment Period: Up to 7 years.

Grace period is allowed until 2 years whereby

within this period, customer is still not obliged to

pay for the financing.

Collateral: Fully secured on the land of the project.Insurance: Optional- normally Mortgage Takaful Plan.

Deposit for Security: 3 months of the financing will be deducted

automatically from the total of financing.Accredited Land Reviewer: Only required for financing above than

RM30,000.

Report from the external land reviewer will be

validated until 6 months.

For financing below RM30,000, the bank will

make own valuation.

Process and Service Fees: Not applicable.Documents required: Agriculture Financing Form, Photocopy of I/C,

24 Mohd. Jozy Bin Mohd. Ghani, Executive, Financing Unit, Bank Kerjasama Rakyat Malaysia Berhad,Jalan Raja Perempuan Zainab 2, Bandar Baru Kubang Kerian, Kota Bharu, Kelantan. Interview carried outon 10th December 2008 at 3.30 p.m. to 4.15 p.m.

14


15/25

salary slip and grant, Financial Statement of

company or Current Account Statement.Source: Mohd. Jozy Bin Mohd. Ghani, Executive, Financing Unit, Bank Kerjasama Rakyat Malaysia

Berhad, Jalan Raja Perempuan Zainab 2, Bandar Baru Kubang Kerian, Kota Bharu, Kelantan. Interview

carried out on 10th December 2008 at 3.30 p.m. to 4.15 p.m.; Bank Rakyat,http://www.bankrakyat.com.my,

15th December 2010.

Table 1.8

Bank Rakyat: Term-i.


Objective: To finance the working capital requirement for

business expansion in various types of economic

sectors.

Eligibility: Private Limited Companies.

Public Limited Companies.

Cooperatives.

Category: All types of economic sector.Margin and Quantum of Financing: Financing of up to 80% of the working capital

requirement.

Repayment Period: Maximum 10 years.

Shariah Concept Applied: Bay Bithaman Ajil/ Bay al-Innah.

Collateral: Fully secured.Deposit for Security: 3 months of the total financing.

Process and Service Fees: Not applicable.

Source: Mohd. Jozy Bin Mohd. Ghani, Executive, Financing Unit, Bank Kerjasama Rakyat Malaysia

Berhad, Jalan Raja Perempuan Zainab 2, Bandar Baru Kubang Kerian, Kota Bharu, Kelantan. Interviewcarried out on 10th December 2008 at 3.30 p.m. to 4.15 p.m.; Bank Rakyat,

http://bankrakyat.skali.my/web/guest/term, 21st December 2010.

Table 1.9

Bank Rakyat: Property-i.


Objective: To purchase land and building.Eligibility: Private Limited Companies.

Public Limited Companies.

Cooperatives.

Margin and Quantum of Financing: Financing of up to 80% from the purchase price or

100% on the force sale value (whichever is lower).Repayment Period: Maximum 20 years.

15
http://www.bankrakyat.com.my/http://www.bankrakyat.com.my/http://bankrakyat.skali.my/web/guest/termhttp://bankrakyat.skali.my/web/guest/termhttp://www.bankrakyat.com.my/http://bankrakyat.skali.my/web/guest/term


16/25


Collateral: Fully secured.

Deposit for Security: 3 months of the total financing.Process and Service Fees: Not applicable.

Source: Mohd. Jozy Bin Mohd. Ghani, Executive, Financing Unit, Bank Kerjasama Rakyat Malaysia

Berhad, Jalan Raja Perempuan Zainab 2, Bandar Baru Kubang Kerian, Kota Bharu, Kelantan. Interview

carried out on 10th December 2008 at 3.30 p.m. to 4.15 p.m.; Bank Rakyat,

http://bankrakyat.skali.my/web/guest/property, 21st December 2010.

iii. Maybank Islamic Berhad (MIB)25.

For the time being, Maybank Islamic Berhad offers four types of Islamic financing facility with

regards of agriculture sector, as follows:

a) Short Term Revolving Credit (STRC-i).

STRC-i is ashariah-compliant short term revolving credit facility granted to corporate and middle

market customers. This facility can be offered under the Islamic contract of eitherBay al-Innah (sale with

immediate repurchase) orMurabahah (cost plus profit sale). The salient features and general terms for

STRC-i are as below:

Table 2.0

Maybank Islamic Berhad: Short Term Revolving Credit (STRC-i).


Concept: Based on theMurabahah concept. As such, an

underlying asset is required for the sale and

purchase transactions.

25 In Malaysia, the enactment of the Islamic Banking Act that came into effect on 7 th April 1983 marked itsofficial introduction into the banking arena. On 1st July 2002, Takaful business was launched by MaybankTakaful Berhad, which is licensed under the Takaful Act 1984. Maybank group is proud to play animportant role in the development and promotion of Islamic Banking & Takaful in Malaysia and beyond.On January 1st 2008, Maybanks Islamic Banking began to operate under a new subsidiary of Maybankknown as Maybank Islamic Berhad (MIB). By moving into MIB, customers will enjoy a better range ofIslamic products and services. The aims of MIB are to continue to be market leader in the provision ofIslamic products and services, to introduce financing facilities based on Musyarakah Mutanaqisah (MM)concept in order to improve the concept of BBA, introducing new facilities based on Ijarah Muntahiah

Bittamleek (IMB), establishing International Currency Business Unit (ICBU) and actively involved incommodity Murabahah products. Yet, Maybank is the largest Islamic financial services provider in theAsia Pacific region and is set to further reinforce its leadership with the creation of its Islamic subsidiary.Maybank began offering Islamic financing in 1993 through the Islamic windows operations. To date,Maybank has 12 full fledged Islamic banking branches in addition to 376 branches and 20 private bankingcenters locally offering Islamic banking products and services. See Maybank Islamic Berhad.http://www.maybank2u.com.my/maybankislamic/corporate_info/index.shtml. 21st December 2008; DatukAmirsham A. Aziz. 2007. Maybank Launches Maybank Islamic Berhad.http://www.maybank2u.com.my/maybankislamic/corporate_info/press_release/index. 21st December 2010.

16
http://bankrakyat.skali.my/web/guest/propertyhttp://www.maybank2u.com.my/maybankislamic/corporate_info/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/corporate_info/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/corporate_info/press_release/indexhttp://bankrakyat.skali.my/web/guest/propertyhttp://www.maybank2u.com.my/maybankislamic/corporate_info/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/corporate_info/press_release/index


17/25

Or based onBay al-Innah, whereby the identified

underlying asset required for the sale and purchase

transactions belongs to bank.

Eligibility: All corporate customers.

Middle market customer.

Tenor: 1 month, 2,3,6, 9 and 12 months.Rate: Variable rate i.e. Selling Price:

BLR + 4 or 10% whichever is higher.

Effective rate:

To be pegged to cost funds i.e. KLIBOR +

(liquidity/reserve cost) + margin.

Source: Aizatul Akma Binti Arifin, Consumer Sales Executive, Financing Unit, Maybank Islamic Berhad,

Jalan Sultan Yahya Petra, Kota Bharu, Kelantan. Interview carried out on 14 th December 2008 at 2.35 p.m.

to 3.15 p.m.; Maybank Islamic Berhad,

http://www.maybank2u.com.my/maybankislamic/products_services/index.shtml, 21st December 2010.

b) BBA Term Financing-i.

MIB offers two types of BBA term financing facilities. Firstly, Fixed Rate Term Financing-i. This

facility offers a fixed financing cost throughout agreed tenure of financing. This enable customer to protect

themselves against risk of rising cost of financing. Secondly, Variable Rate Term Financing-i. Under VRF,

the selling price is fixed upfront based on a selling price rate while the effective rate levied on the account

will vary based on charges in the Base Financing Rate (BFR), provided it does not exceed the fixed selling

price rate26

.

If the BFR moves up to the extent that the effective rate exceeds the fixed selling price rate, the

system will only compute profit based on the selling price. Customer will enjoy very competitive rate based

on ongoing good market condition and yet protected by a fixed ceiling rate against adverse market

condition27.

BBA term financing is granted under the principle of al-Bay Bithaman Ajil (BBA) or deferred

payment sale. The requirement for the presence of sale and purchase elements is compulsory under BBA

financing. Under this facility, MIB will assist the customer to identify suitable asset for the purpose. The

bank shall purchase the asset concerned and simultaneously sell it to the customer at an agreed price.

26 Aizatul Akma Binti Arifin, Consumer Sales Executive, Financing Unit, Maybank Islamic Berhad, JalanSultan Yahya Petra, Kota Bharu, Kelantan. Interview carried out on 14th December 2008 at 2.35 p.m. to3.15 p.m.; Maybank Islamic Berhad,http://www.maybank2u.com.my/maybankislamic/products_services/index.shtml. 21st December 2010.27Ibid.

17
http://www.maybank2u.com.my/maybankislamic/products_services/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/products_services/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/products_services/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/products_services/index.shtml


18/25

Payment of selling price can be paid by installment over an agreed period. The salient features of this

facility are as below:

Table 2.1

Maybank Islamic Berhad: BBA Term Financing-i.

Features: Fixed Rate Financing: Variable Rate Financing:Eligibility: Individuals.

Joint account holders.

Firms and corporate customer i.e. companies incorporated under the

Companies Act.

Purpose: Purchase of assets such as landed properties, plants and machineries,

share and etc.

Investment portfolio.

Business working capital.

Refinancing of assets.

Tenure: Up to 10 years. Up to 20 years.Profit Rate: Fixed at 1% over and above the

conventional lending rate.

At par with conventional rate at

the time of application.





c) New Entrepreneurs Fund 2 (NEF2).

Central Bank of Malaysia has approved the granting of NEF2 under Islamic banking. NEF2-i is

offered by MIB and available at all Business Center of Maybank. The NEF2 funding is administered by

Central Bank Of Malaysia and part of the governments continuous effort to promote the growth of small

and medium sized Bumiputera enterprises by ensuring that they have access to financing at reasonable cost.

The salient features and terms of this facility are as follows:

Table 2.2

Maybank Islamic Berhad: New Entrepreneurs Fund 2.Features: Description:

Eligibility: Bumiputera entrepreneurs who fulfill the

following criteria:

a) Shareholders funds of not exceeding

RM10 million.

b) Wholly-owned Bumiputera institutions

18
http://www.maybank2u.com.my/maybankislamic/products_services/index.shtmlhttp://www.maybank2u.com.my/maybankislamic/products_services/index.shtml


19/25

incorporated under the Companies Act

1965, the Cooperative Societies Act

1993, the Societies Act 1996 or

Bumiputera citizens residing in

Malaysia.c) Bumiputera entrepreneurs registered

under the Registrar of Business or any

other authoritative bodies.


Tenure of Financing: Maximum of 5 years from the first drawdown date

by Central Bank of Malaysia.Purpose of Financing: For expansion in productive capacity and/or

working capital for eligible Bumiputera

entrepreneurs.

Financing Amount: No minimum amount of financing.

Maximum financing of RM5 million per customer

including financing approved under the earlier NEF

scheme and financing approved for any other

related companies that have similar shareholders.

Profit Rate: Presently at 4.00%-6.00% p.a. based on credit

rating exercised by the Business Unit of MIB.

Penalty/Commitment Fee: Not applicable.

Processing Fee: Not applicable.

Projects Eligible for Financing: All projects which are viable under the sector of

manufacturing, agriculture, services, commerce,

tourism, construction, engineering, transportation,

furniture, printing, film and quarrying.

The small and medium sized Bumiputera

industries participating under the vendor

development programs of the Ministry of

Entrepreneur Development or Ministry of Finance

with at least 70% Bumiputera equity and

management control.





d) Musharakah Mutanaqisah Term Financing-i (MMTF-i).

19


20/25

MMTF-i is a shariah compliant financing facility offered for new and existing corporate and

commercial customer for asset acquisitions and refinancing such as landed properties, plant and machinery,

vessels, commercial vehicles and etc. This facility is based on Musharakah Mutanaqisah or diminishing

partnership concept where both the customer and the bank jointly acquire and co-own an asset or property.

Customers monthly installments for the financing paid to the bank will increase customers ownership of

the asset or property. The ownership of the asset or property will progressively move towards the customer

and the financing ends when the customer owns 100% of the asset or property. The product features of

MMTF-i are as follows:

Table 2.3

Maybank Islamic Berhad:Musharakah Mutanaqisah Term Financing-i.

Features: Description:Purpose: Financing purchases of asset or property such as

landed properties, plant, machinery, vessels,

commercial vehicles and etc.

Refinancing of the above assets and properties.

Shariah Concept Applied: Musharakah Mutanaqisah.Eligibility: Eligible commercial and corporate customers,

local and foreign.

Tenor: Up to 20 years.Pricing: The pricing is competitive as per the conventional

loan which could be offered under:

a) Fixed rate, or

b) Floating rate, or

c) A combination of fixed rate and floating

rate.





4. STRATEGY FOR MARKETING ISLAMIC AGRO PRODUCTS.

Marketing strategy is commonly defined as a strategy employed by a firm to attain its marketing

objectives, which in turn is related to the achievement of the firms business objectives. In other words,

20


21/25

marketing strategy refers to the marketing goals and action plans that address matters of product/ service

price, distribution, communication, and the process of new product development28.

The adaptation of any strategy depends much on factors such as management style and experience

of the top management, age of the institution, economic environment, and regulations. Generally, we can

safely identify whether a particular bank is a market leader, challenger, follower and nicher by identifying

its vision, mission, objectives, and marketing strategies. The market leader strategy is for those banks that

occupy a dominating position in the market and have established their reputation as a leader. By virtue of

having a leadership in the market, it is natural that the market share of the concerned bank is the biggest.

Banks belonging to the challenger group are those occupying second, third and lower rank and are always

formulating and pursuing strategies to expand their market share by targeting the territory of the market

leader29.

Whereas, strategies adopted by the followers would normally be to maintain its current customersbase and win a fair share of new customers by bringing distinctive advantageous to their target market. The

market nicher is for the smaller banks, which have limited resources and generally focused on selected

customers. Banks that falls under this category often concentrates on only one market segment of the

market. Usually, only one marketing strategy, which is well, tailored to meet the needs of a specific target-

market group is developed. Hence, Islamic banks in Malaysia need to focus on specific strategies in order

to market Islamic agro products in their banks by using effective marketing mix strategies as follows:

Product Strategy.

As a service oriented business, image is a central factor in a banks effort to differentiate itself

from competitors. Goods can be viewed in terms of their physical attributes, but services are intangible.

This creates two problems for the customer. First, it is often difficult to understand the service that is being

offered. Second, because customer cannot check out a service in advance, they do not know in detail what

they are going to receive and how they are going to receive it. The result is higher perceived risk.

Fortunately, most services do employ some tangibles- facilities, people, equipments and advertising

materials- alongside their core services. The most effective approach to generating confidence is usually to

emphasize tangibles that customers can understand30.

Generally, the way products or services are made available to customers helps to create the image

of the particular institution in the mind of the customers. This image is reflected in the customers

perceptions and feelings about the products or services offered. This is important because customers

28 Philip Kotleret.al. (1996),Principles of Marketing, New Jersey: Prentice Hall, p.54.29 Peter Doyle (1998),Marketing Management and Strategy, Great Britain: Prentice Hall Europe, pp.17-20.30Ibid.

21


22/25

experience with a particular product or services will affect their attitude towards the bank and other product

and services as well even if they had never used the other products. Under product strategy, customer must

also be able to link a specific image with a specific need since customers purchase products and services to

satisfy their needs and wants, Islamic banks have to understand the nature of these needs and want in order

to appreciate the kind benefits customers expect to receive.

Among the different kinds of benefits that people expect to get when buying goods and services

includes good value for money, novelty, availability, and ease of use. Benefits enter into the equation when

a customer decides to use one product in preference to another. It is the benefits received, which makes a

product or services attractive to a customer. In view of this, banks should give more attention to the

benefits it creates for the users when marketing a product or a service31.

Relating this to Islamic banks, they have to be able to communicate these benefits convincingly to

public, either directly or indirectly, in order to persuade the public to use the facilities and products beingoffered. Since Islamic banking is an alternative to conventional banking, Islamic banks needs to innovative

in terms of products and services. Only through innovation in products and services can Islamic banks

sustain their competitive advantage against other conventional or foreign banks that offer similar Shariah

compliance facilities.

One of the innovations that can be introduced for Islamic agro product is through Shariah-based

products by applyingBay al-Salam oral-Muzaraah as a mode of financing. These valid contracts if apply

according to the rules set by Islamic commercial law (Muamalat), will assure great advantages not only to

the Islamic banks, but also to the agro entrepreneurs as well as to the increasing of food production and

supply of a particular country.

Pricing Strategy.

The second element in the marketing mix is pricing. Pricing strategy is another marketing

technique that can be used to improve a banks overall competitiveness. The key to success is to have a

well-planned strategy, to establish policies and to constantly monitor prices and operating costs to ensure

profits. An important part of the pricing strategy is determining how product or service is priced32.

It has been proven in many previous research that majority of customers do not use religion as the

main factor when establishing a relationship with Islamic banks. In the case of corporate customers for

example, they believe that it is the cost and benefit element that is the most important factor when selecting

31 Frank Bradley (2004), Strategic Marketing in the Customer Driven Organization, USA: John Wiley &

Son Inc., pp.88-90; Philip Kotleret.al. (1996), op.cit., pp.660-661.32Ibid., p.365.

22


23/25

financial institution. Most customers still seek the highest return and lowest charges imposed when

deciding which bank to place a deposit or obtain funding from.

With regards of Islamic financing for agribusiness, the pricing factor is one of the many important

factors that need to be emphasized by the Islamic banks since the return of any agro project is normally will

be gained in longer term. Therefore, the lowest cost of financing will be an attractive motive for customer

to apply for the financing. For example, Paddy Credit Scheme offered by Agro Bank, which provide

financing of 100% of total project cost is considered as the best Islamic financing facility for the paddy

farmer in this country.

Place/Distribution Strategy.

This component of the marketing mix is related to the distribution of services to the ultimate

customers. Services that require the customer to go to the producer must be as accessible as possible.

Hence, an important consideration in the distribution strategy for banks is location of their branches. Thetask before the management is to select the place where the actual sale is to take place and this should be in

the face of conveniences and comforts to the customers. To the extent it is possible that they should reach

to the doorsteps of the customers. Thus, it is pertinent that the branches are located at a suitable point33.

Islamic banking institutions that provide Islamic agro products should locate their branches near

the agro initiatives areas or where most of their residents involve in the agriculture projects. For instance,

Agro Bank, most of their branches are located in suburb and rural areas, and only few of them are situated

at the centre of big town in this country. Meanwhile, other aspects that need to be observed by the Islamic

banks in offering Islamic agro products are fast and efficient services, speed of transactions, friendliness of

bank personnel, confidentiality of bank and full of knowledge of banks officers regarding the needs of the

customers especially with regards of agro projects.

Promotion Strategy.

Promotion is the function of informing, persuading, and influencing the customers decision

process. Usually the banks marketing manager will respond to the goals and objectives of the bank by

formulating various elements of the promotional strategy i.e. personal selling, advertising, sales promotion,

publicity and public relations. Promotional strategy is closely related to the process of communication. A

standard definition of communication is the transmission of a message from a sender to a receiver34.

Marketing communication, then are those messages that deal with buyer-seller relationships.

Marketing communication is a broader concept than promotional strategy, because it includes word-of-

33 Peter Doyle (1998), op.cit., pp.330-33534Ibid., pp.280-285.

23


24/25

mouth advertising and other forms of unsystematic communication. A planned promotional strategy,

however, is certainly the most important part of any marketing communications.

For Islamic agro financing, promotional strategies that are focus on lowest cost of financing and

applying only valid Islamic principles of Shariah such as Bay Bithaman Ajiland Bay al-Innah are very

important since most of the agro entrepreneurs and farmers in this country are Malay and Muslim who are

traditionally low earner group of people and those who are very concerned about their religions. As in the

case ofBay Bithaman AjilandBay al-Innah, these mode of Islamic financing have been approved by the

Shariah Advisory Council of Bank Negara Malaysia, then no question about the validity of these contracts

should be disputed.

5. CONCLUSION.

This paper has discussed on the aspect of Islamic marketing, Islamic agro products in Islamic

banks and strategy for marketing Islamic agro products in Islamic banks. An Islamic bank that aims to be

morally responsible in adopting Islamic marketing policies often faces difficulties in determining how

popular their products should be. This difficulty is compounded by the fact that economic costs attach to

making products safe, at lowest price and comprehensively Shariah-compliance products. Thus, Islamic

banks should sell Islamic agro products at a comparatively reasonably price compared to the conventional

banks

In gaining more returns to Islamic banks, they should adopt more risky steps by introducing other

type of financing facility for agro entrepreneurs, which originally taken from Fiqh Muamalat for

developing land such as al-Musaqat, al-Muzaraah and Bay al-Salam in order to be applied in Islamic

financing arrangements and to attract foreign investors to our country.

6. REFERENCES.

Ahmad Zaini Othman (2003), Pemasaran Produk Perbankan Islam: Satu Analisa,Prosiding

Seminar Kewangan Islam, Kuala Lumpur: Akademi Pengajian Islam, Universiti Malaya.

Dr. Mohd. Daud Bakar (2008),Essential Readings in Islamic Finance, Kuala

Lumpur: CERT Publications.

Frank Bradley (2004), Strategic Marketing in the Customer Driven

24


25/25

Organization, USA: John Wiley & Son Inc.

Hifzur Rab (2006),Economic Justice in Islam, Kuala Lumpur: A.S. Noordeen.

Kamal Khiret. al. (2008),Islamic Banking: A Practical Perspective, Petaling

Jaya: Pearson Malaysia Sdn. Bhd.

Joni Tamkin Bin Borhan(1999), The Ethical Principles in Islamic Commercial Transactions,

Jurnal Usuluddin, Kuala Lumpur: Akademi Pengajian Islam, Universiti Malaya, Vol.9, July 1999.

Muhammad Nasri et. al. (2006),Etika Perniagaan: Pendekatan Perspektif Islam,

Petaling Jaya: Prentice Hall.

Peter Doyle (1998),Marketing Management and Strategy, Hertfordshire:Prentice Hall Europe.

Philip Kotleret. al. (1996),Principles of Marketing, New Jersey: Prentice

Hall, Inc.

Sudin Haron et. al. (2009),Islamic Finance and Banking System: Philosophies,

Principles & Practices, Shah Alam: McGraw-Hill (Malaysia) Sdn. Bhd.

Yusuf al-Qaradawi (1995), The Lawful and The Prohibited in Islam, Kuala

Lumpur: Islamic Book Trust.

25

ISLAMIC MARKETING: STRATEGY FOR MARKETING ISLAMIC AGRO PRODUCTS IN ISLAMIC BANKING INSTITUTIONS IN...

Documents

Transcript of ISLAMIC MARKETING: STRATEGY FOR MARKETING ISLAMIC AGRO PRODUCTS IN ISLAMIC BANKING INSTITUTIONS IN...