Islamic Economic System and The Anchor Borrowing Programme of The Federal Government of Nigeria

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ISLAMIC ECONOMIC SYSTEM AND THE ANCHOR BORROWING PROGRAMME OF
THE FEDERAL GOVERNMENT OF NIGERIA
SANI, MUSA MUHAMMAD
SEPTEMBER, 2019
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ISLAMIC ECONOMIC SYSTEM AND THE ANCHOR BORROWING PROGRAMME OF
THE FEDERAL GOVERNMENT OF NIGERIA
MUSA MUHAMMAD SANI

B. A. (Ed) Islamic Studies (ABU, ZARIA)
U11/FI/2008
A Thesis in the Department of RELIGION AND PHILOSOPHY, Faculty of Arts

Submitted to the School of Postgraduate Studies, University of Jos, in partial fulfilment of the
requirements for the award of degree of M. A. ISLAMIC STUDIES of the
UNIVERSITY OF JOS
SEPTEMBER, 2019
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DECLARATION
I hereby declare that this work is the product of my own research efforts, undertaken under the
supervision of Professor Ibrahim Haruna Hassana al-Wasewi and that it has not been presented
elsewhere for the award of a degree or certificate. All sources have been duly distinguished and
appropriately acknowledged.
…………………………………………………………………………………………………........
MUSA MUHAMMAD SANI
UJ/2017/PGAR/0137
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CERTIFICATION
This is to certify that the research work for this thesis and the subsequent preparation of this
thesis by Musa Muhammad SaniUJ/2017/PGAR/0137 were carried out under my supervision.
____________________________________ ____________________
Professor Ibrahim Haruna Hassan Al-wasewi Date
Supervisor
____________________________________ _____________________
Dr. Abdulhameed Muhammad Naseer Date
Co-supervisor
____________________________________ _____________________
Professor Pic Onwochei Date
Head of Department
____________________________________ _____________________
Professor Sati U. Fwatshak Date
Dean, Faculty of Arts
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DEDICATION
This research work has been dedicated to my late father (Muhammad Sani Ibrahim), May Allah
SWT continue togrant him eternal rest.
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ACKNOWLEDGEMENTS
All praises and appreciation are due to Allah, the willer, the controller, the able, the omniscient
and the omnipotent, He who made this research work as well as the study in general possible for
me. O’ Allah make it beneficial to me and community in general both here and in the hereafter.
Endless gratitude goes to his sealed prophet Muhammad bn Abdullahi SAW, his household,
companions and those on Allah’s cause, who without his guidance our life will have remained in
darkness. At this juncture, I will like to register my appreciation to my noble parents, who
without their persistence and insistence, encouragement and re-awakening, my studies would
have remained a mere bed dream O’ Allah have mercy on them and reward them with ‘Jannatul
Firdaus’. I am most indebted to my supervisor, Professor Ibrahim Haruna Hassan al-Wasewi
who not only worked tirelessly in guiding me through this work, but also gave me the
encouragement to never give up. May Almighty Allah continue to guide and protect him and his
household, and uplift his status. I have no word to appreciate him rather than to say ‘Jazakallahu
bil-khyr’. Muchso, my co-supervisor, Dr. Nasir Muhammad Abdulhamid, may Allah reward him
too. Let me also appreciate all the lecturers in the Unit: Asso. Professor Modibbo, Mal. Bappah
Kabiru, Asso. Professor Huud Shitu and Dr. Khalid Abubakar, may Allah reward them
abundantly.
My immeasurable appreciation goes to my Head of Department/Principal Hajia Binta
Hassan Gangua who encouraged and motherly advised me on my studies. I also appreciate her
lieutenants particularly, the Vice Principal Academics, Mal. Abdullahi Musa George, Vice
Principal,Students’ Affairs, Hajia Binta Ibrahim Duguri and Vice Principal Administration, Mal.
Muhammad Sani Bello, as well as the Federal Ministry of Education, Abuja for releasing and
sponsoring me during this programme. I thank them very sincerely.

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Also, I wish to appreciate my study mates, colleagues in the office, friends, well-wishers
and relatives for the encouragement and support they gave me throughout the programme.
To the following, I am most grateful for being ever supportive: Mr. Dankyes Hasheem
who has taken his time to correct the grammatical structure of the work. Hussaina Aliyu
Abubakar, for always taken care of my children whenever am busy on my work.

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TABLE OF CONTENTS
CONTENT PAGE
TITLE PAGE ------------------------------------------------------------------------------------------ i
DECLARATION ------------------------------------------------------------------------------------- ii
CERTIFICATION ----------------------------------------------------------------------- ------------ iii
DEDICATION ---------------------------------------------------------------------------------------- iv
ACKNOWLEDGEMENTS ------------------------------------------------------------------------- v
TABLE OF CONTENTS ---------------------------------------------------------------------------- vi
ABSTRACT ------------------------------------------------------------------------------------------- vii
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY ----------------------------------------------------------- 1- 4
1.2 STATEMENT OF THE PROBLEM ---------------------------------------------------------- 4 – 5
1.3 RESEARCH QUESTIONS --------------------------------------------------------------------- 5
1.4 AIMS AND OBJECTIVE OF THE STUDY ------------------------------------------------- 5
1.5 SIGNIFICANCE OF THE STUDY ----------------------------------------------------------- 5 – 6
1.6 SCOPE AND DELIMITATION OF THE STUDY ----------------------------------------- 6
1.7 CONCEPTUAL FRAME WORK ------------------------------------------------------------- 6
1.7.1 Islamic Economic System -------------------------------------------------------------------- 6 – 7
1.7.2 Anchor Borrowing Programme -------------------------------------------------------------- 7 – 8
1.7.3 Targetted Beneficiaries ------------------------------------------------------------------------ 8
1.7.4 Identified Agricultural Commodities ------------------------------------------------------- 8 – 9
1.7.5 Eligible Participating Financial Institutions ----------------------------------------------- 9
1.7.6 The Loan Amount ----------------------------------------------------------------------------- 9

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1.7.7 Interest Rate ------------------------------------------------------------------------------------ 9
1.7.8 Repayment -------------------------------------------------------------------------------------- 9
1.7.9 Charging of Interest Rates Higher Than Prescribed --------------------------------------- 9
1.7.10 Capacity Building For The Farmers --------------------------------------------------------10
CHAPTER TWO
THEORETICAL FRAMEWORK ANDLITERATURE REVIEW
2.1 THEORETICAL FRAMEWORK ------------------------------------------------------------ 11 - 15
2.2. MUDARABAH OR QIRAD -------------------------------------------------------------------- 15 - 16
2.2.1Subject Of Qirad------------------------------------------------------------------------------ 16 - 17
2.2.2Qirad Under The Present Banking System-------------------------------------------------- 17 - 19
2.2.3 Qirad And Interest ----------------------------------------------------------------------------- 19 - 20
2.2.4 Profit Sharing (Mudarabah Or Qirad) ------------------------------------------------------ 20
2.3 MODERN THEORY OF INTEREST -------------------------------------------------------- 21 – 23
2.4 SALES (BAY’I) --------------------------------------------------------------------------------- 23 – 24
2.4.1 The Form And Results For An Agreement For Sales (Bay’i) --------------------------- 24 – 25
2.5 BAUCHI STATE AGRICULTURAL DEVELOPMENT PROJECT LOAN
(1981- UNI) ---------------------------------------------------------------------------------- 25
2.5.1 Objectives --------------------------------------------------------------------------------------- 25 - 26
2.5.2 Implementation Experience ------------------------------------------------------------------- 26 - 28
2.5.3 Sustainability ----------------------------------------------------------------------------------- 28 - 29
2.5.4 Financial Lessons Learned ------------------------------------------------------------------- 29
2.5.5 Bank Performance ----------------------------------------------------------------------------- 30
2.5.6 Borrower’s Performance ---------------------------------------------------------------------- 30

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2.6 LITERATURE REVIEW ---------------------------------------------------------------------- 30
2.6.1 Loan And Debt --------------------------------------------------------------------------------- 31 - 33
2.6.2 Responsibilities Of Debtors And Creditors ------------------------------------------------- 33 - 35
2.7 BORROWING FROM BANKS --------------------------------------------------------------- 35 - 37
2.8. PUBLIC BORROWING BY THE PROPHET (SAW) ------------------------------------ 38 - 45
2.8.1Public Borrowing In The Period After The Prophet (Saw) ------------------------------- 46 - 48
2.8.2 Public Borrowing In The Early Fourth Century Ah --------------------------------------- 48 - 53
2.9 USURY/INTEREST (RIBA) ------------------------------------------------------------------ 53 - 54
2.9.1 Types Of Riba ---------------------------------------------------------------------------------- 54 - 56
2.9.2 Usury In Exchange ---------------------------------------------------------------------------- 56 - 57
2.10.0 ADDRESSING SOME MISCONCEPTIONS ABOUT RIBA------------------------ 57
2.10.1.1 Modern Day Interest Is Not Riba ---------------------------------------------------------57
2.10.1.2 Addressing The Misconception --------------------------------------------------------- 57
2.10.2.1 There Is No Difference Between Interest And Profit ---------------------------------- 57
2.10.2.2 Addressing Misconception---------------------------------------------------------------- 58
2.10.3.1 Riba Is Only Relevant To Consumption Loans, Not Commercial Loans ----------- 59
2.10.3.2 Addressing Misconception --------------------------------------------------------------- 59
2.10.4.1 Inflation Justifies Interest ----------------------------------------------------------------- 60
2.10.4.2 Addressing Misconception --------------------------------------------------------------- 60 - 61
2.10.5.1 If It Is Not Excessive, It Is Not Riba ----------------------------------------------------- 62
2.10.5.2 Addressing Misconception ---------------------------------------------------------------- 62
2.10.6.1 Riba Is Allowed Under Necessity (Dharura) ------------------------------------------ 62
2.10.6.2 Addressing Misconception --------------------------------------------------------------- 62 - 63

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2.10.7.1 Interest Represents Oppurtunity Cost Which Cannot Be Denied -------------------- 63
2.10.8.1 Interest As A Compensation For Risk Element ---------------------------------------- 63
2.10.9.1 Interest Is A Reward For Money As A Commodity ----------------------------------- 64
2.10.9.2 Addressing Misconception--------------------------------------------------------------- 64 - 65
2.10.10.1 Time Value For Money ------------------------------------------------------------------ 65
2.10.10.2Addressing Misconception -------------------------------------------------------------- 65 – 66
2.11 PARTNERSHIP (MUSHARAKA) ----------------------------------------------------------- 66 - 67
2.11.1 Limited Partnership (Musharaka Al-Inan) ------------------------------------------------ 67
2.11.2 Musharakah Al-Abdan ----------------------------------------------------------------------- 67
2.11.3 Dormant Partnership ------------------------------------------------------------------------- 68
2.11.4 Capital In Qirad Partnership ---------------------------------------------------------------- 68 - 69
2.11.5 Co-Partnership --------------------------------------------------------------------------------69
2.11.6 The Nature of Partnership ------------------------------------------------------------------- 69 - 70
2.12 SUMMARY OF THE LITERATURE REVIEW ------------------------------------------ 70 - 71
CHAPTER THREE
RESEARCH METHODOLOGY
3. 1 CONTEXT OF RESEARCH ------------------------------------------------------------------ 72
3. 1.1 A HISTORY OF JIGAWA STATE -------------------------------------------------------- 72 - 76
3. 1.2 A HISTORY OF BAUCHI STATE -------------------------------------------------------- 76 - 77
3. 2 METHODS OF THE RESEARCH ---------------------------------------------------------- 77 - 78
3. 3 INSTRUMENTS -------------------------------------------------------------------------------- 78 - 79
3. 4 PROCEDURE OF DATA COLLECTION -------------------------------------------------- 79

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3. 5 PROCEDURE OF DATA ANALYSIS ----------------------------------------------------- 79
CHAPTER FOUR
RESULT AND DISCUSSION I
4.1 RESULTS I --------------------------------------------------------------------------------------- 80 - 84
4.2 DISCUSSION I --------------------------------------------------------------------------------- 84 – 85
CHAPTER FIVE
RESULTS AND DISCUSSION II
5.1 RESULTS II-------------------------------------------------------------------------------------- 86 – 94
5.2 DISCUSSION II ------------------------------------------------------------------------------- 95 – 97
CHAPTER SIX
SUMMARY OF FINDINGS, CONCLUSION, AND RECOMMENDATIONS.
6.1 SUMMARY OF THE FINDINGS ------------------------------------------------------------ 98 - 99
6.2 CONCLUSION ---------------------------------------------------------------------------------- 99-100
6.3 RECOMMENDATIONS -----------------------------------------------------------------------100-101
6.4 LIMITATION OF THE STUDY ------------------------------------------------------------- 101
6.5 SUGGESTION FOR FURTHER RESEARCH -------------------------------------------- 102
6.6 CONTRIBUTION TO KNOWLEDGE ----------------------------------------------------- 102
WORKS CITED --------------------------------------------------------------------------------103-105
APPENDIXES ---------------------------------------------------------------------------------- 106

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ABSTRACT
In order to reduce the high level of poverty, and unemployment in the country, the Federal
Government of Nigeria in collaboration with the Central Bank of Nigeria(CBN) introduced some
Social Investment Programmes (SIP), one of which is Anchor Borrowing Programme (ABP). It
is designed to give small holder farmers the oppurtunity to boost their production capacity and to
motivate non-farmers to join farming. This research seeks to find out whether or not Muslims are
participating in the programme as they should. The research further seeks to analyse the Islamic
teachings encouraging or otherwise inhibiting Muslims from participation in the programme.
Employing qualitative and quantitative methods, the research founds that nine percent (9%)
interest rate, five percent (5%) equity contribution, and some forms of cheating and fraud
associated with the implementation of the programme are inhibiting Muslims from participation.
The research at first recommended the renaming the nine percent (9%) interest rate with
Utility/Services charges which still leave the interest as prohibited. However, the research
recommended solution better than renaming the nine percent (9%) is that offered by Bauchi State
Government to paying off the interest charges and allowing the beneficiaries paying off the only
capital.
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CHAPTER ONE
INTRODUCTION
1. 1 BACKGROUND OF THE STUDY
While Nigeria is described as one of the fastest growing economy , it is equally identified as one
of the most poverty-stricken nations around the globe (IMF); the menace of which is most
critical in its northern part, despite bestowed unquantifiable human and natural resources in the
region. The land of the northern part of Nigeria, is very fertile for agriculture which is also the
traditional occupation of the people, yet production is very low due largely to low capital that
would booost production.
The current adminstration as one of its policies of improving agriculture and eradicating
povery and hunger, it introduces Anchor Borrowing Programme for small holder farmers (SHF).
The programme was inititiated to increase Agricultural production and to address poverty and
unemployment. However, there are claims and suggestions that Muslims, in particular, may not
or are actually not participating as they should. For example Khan (9) claimed that “the Muslim
societies have placed a low value on wage-labour. Instead, they have always enclouraged self –
employment or such forms of business as musharakah or mudarabah. It was the capitalist mode
of production which, for the first time in human history, made large chunks of population
dependent on capitalists for their livelihood”. A more possible inhibiting factor to Muslim
participation is the issue of bank interest charges since they ABP is financed by the Central and
Commercial Banks.
There are a number of stuides and academic writings on Muslims and bank interest
however, particular programmes charging interest have not been analysed to see how the issue of
interest inhibits Muslim participation , as intended in this study.

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1. 2 STATEMENT OF THE PROBLEM
The Federal Government of Nigeria introduced Social Investment Programmes one of which is
Anchorm Borrowers’ Programme with the aim of creating employment, reduce the level of
poverty among small holder farmers, and boost the economy of the state. But Some Muslims are
not participating in the programme. Choosing to remain in difficult life. As a result of their
failure to participate in the programme, the funds released goes back to government account
without being used, and rendered the aim of the programme defeated. Therefore this research
examines the Anchor Borrowing Programme in an Islamic perspective, and to find out why
Muslims refused to participate in the programme.
1. 3 RESEARCH QUESTIONS
The research question is an attempt to answer the following questions:-
i. Are Muslims in the research area aware of the Nigerian Government’s Anchor Borrowing
Programme (ABP)?
ii. Do Muslims participate in the programme as they should?
iii. Do Muslims have religious reason for refusal to participate in the programme (ABP)?
iv. What are the religious reasons limiting Muslims from participating in the Anchor
programme?
1. 4 AIM AND OBJECTIVES OF THE STUDY
The aim of this study is to examine the philosophy, principles and requirements for Anchor
Borrowers Programme of Federal Government of Nigeria in Islam.
The Objective of the study is:
i. To study the Anchor Borrowers Programme in the Islamic perspective.
ii. To find out the participation of the Muslims in the anchor borrowing programme
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iii. To find out what limited the participation of the Muslims in anchor borrowing
programme
iv. To find out whether their reasons for not fully participating in the programme are valid in
the light of the teaching of Islam.
1. 5 SIGNIFICANCE OF THE STUDY
Anchor Borrowing Programme (ABP) is an important programme that designed to assist in
poverty eradication, reduce agricultural commodity importation and conserve external reserves,
create new generation of farmers/entrepreneurs and employment, reduce the level of poverty
among small holder farmers, assist rural small holder farmers to grow from subsistence to
commercial production levels. This study will be beneficial to Islamic scholars and researchers
who are interested in the relevance of Anchor Borrower's Program in the Muslim Society. The
research will inform government in formulating policy that involves borrowing and Muslims are
stakeholders. It will also inform the lending banks in creating lending policies. Among Muslim
population.
1. 6 SCOPE AND DELIMITATION OF THE STUDY
This study will be limited to the Islamic economic system especially the issues of
borrowing/lending, Musharakah and Mudarabah and the Anchor Borrowers Programme of the
Federal Government of Nigeria. The study will cover Bauchi in the North -East and Jigawa in
the North – West of the country. Participant shall be limited to farmers and Bank officials.
1. 7. 0 CONCEPTUAL FRAMEWORK
The major variables as contained in the title of this work were carefully defined and reflected the
true meaning of this study. Conceptual meaning of each variable was discussed under a separate
sub-heading and each sub-heading and each sub-heading is linked to subsequent heading.
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1. 7 . 1. Islamic Economic System
Al-Sadr define Islamic economic as “the way Islam prefers to follow in the pursuit of its
economic life and in the solution of its practical economic problems in line with its concept of
justice.” (6). Hasanuzzaman 49 - 50 says “Islamic economics is the knowledge and application of
injunctions and rules of the sharia’ ah (Divine Islamic law) that prevents injustice in the
acquisition and disposal of material resources in order to provide satisfaction of human beings
and enable them to perform their obligations to Allah and the society” al-Arabi is of the opinion
that “Islamic economics is a set of principles derived from the Qur’an and Sunnah and constructs
the economics based on those principles according to times and places. Taskhiri “Islamic
economics is a way which Islam prescribes for individual and social behavior in the economic
field and examines Islam’s rules in this area.” (120). Hasan 40 asserted that “Islamic economics
is that aspect of Islam’s social doctrine which deals with problems of choice in the face of
uncertainty and resource scarcity to promote falāh in a holistic framework.” Attia 224 “Islamic
economics is an economy that governs a society which is ordered in accordance with Islamic
teachings; the institutions of such a society operate based on true Islamic principles, while its
individual members believe in Islamic values and, in their daily lives, tread the straight Islamic
path”. Khan define Islamic economic as "aims at the study of human falah achieved by
organizing the resources of the earth on the basis of cooperation and participation". (33)
1. 7. 2 The Anchor Borrower Programme
This refers to large-scale integrated processors who have entered into an agreement with the
Small Holder Farmers to off-take the harvested produce at the agreed prices or as may be
reviewed by the Project Monitoring Team (PTM). State Governments may act as Anchor upon
meeting the prescribed conditions.

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The Central Bank of Nigeria (CBN) in line with its developmental function established
the Anchor Borrowers’ Programme (ABP). The Programme which was launched by President
Muhammadu Buhari (GCFR) on November 17, 2015 is intended to create a linkage between
anchor companies involved in the processing and small holder farmers (SHFs) of the required
key agricultural commodities. The programme thrust of the ABP is provision of farm inputs in
kind and cash (for farm labor) to small holder farmers to boost production of these commodities,
stabilize inputs supply to agro processors and address the country’s negative balance of
payments on food. At harvest, the SHF supplies his/her produce to the Agro-processor (Anchor)
who pays the cash equivalent to the farmer’s account.
The Programme evolved from the consultations with stakeholders comprising Federal
Ministry of Agriculture & Rural Development, State Governors, millers of agricultural produce,
and smallholder farmers to boost agricultural production and non-oil exports in the face of
unpredictable crude oil prices and its resultant effect on the revenue profile of Nigeria.
Anchor 2, stated that the broad objective of the ABP is to create economic linkage between
small holder farmers and reputable large-scale processors with a view to increasing agricultural
output and significantly improving capacity utilization of processors. Other objectives include:
i. Increase banks’ financing to the agricultural sector
ii. Reduce agricultural commodity importation and conserve external reserves
iii.Increase capacity utilization of agricultural firms
iv. Create new generation of farmers/entrepreneurs and employment
v. Deepen the cashless policy and financial inclusion
vi. Reduce the level of poverty among smallholder farmers

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vii. Assist rural small holder farmers to grow from subsistence to commercial
production levels.
1. 7. 3 Targeted Beneficiaries
Anchor 2 says “The loan shall be targeted at small holder farmers engaged in the production of
identified commodities across the country. The Farmers should be in groups/cooperative(s) of
between 5 and 20 for ease of administration.”
7. 7. 4 Identified Agricultural Commodities
The targeted commodities of comparative advantage to the State shall include but not limited to:
Cereals (Rice, Maize, wheat etc.), Cotton, Roots and Tubers (Cassava, Potatoes, Yam, Ginger
etc.), Sugarcane, Tree crops (Oil palm, Cocoa, Rubber etc.), Legumes (Soybean, Sesame seed,
Cowpea etc.), Tomato, Livestock (Fish, Poultry, Ruminants etc.) Any other commodity that will
be introduced by the CBN from time to time.
1. 7. 5 Eligible Participating Financial Institutions (PFIs)
The loan shall be disbursed through any of; Deposit Money Banks (DMBs) Development
Finance Institutions (DFIs), and Microfinance Banks (MFBs).
1. 7. 6 The Loan Amount
The Fund shall be provided from the N220 billion Micro, Small and Medium Enterprises
Development Fund (MSMEDF). Loan amount for each SHF shall be arrived upon from the
economics of production agreed with stakeholders.
1. 7. 7 Interest Rate
Interest rate under the ABP shall be guided by the rate on the N220 billion MSMEDF, which is
currently at 9% p.a (all inclusive, pre and post disbursement). The PFIs shall access at 2% from
the CBN and lend at a maximum of 9% p.a.

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1. 7. 8 Repayment
Loans granted to the SHFs shall be repaid with the harvested produce that shall be mandatorily
delivered to the Anchor at designated collection center in line with the provisions of the
Agreement signed. The produce to be delivered must cover the loan principal and interest.
1. 7. 9 Charging of interest rates higher than prescribed
(a) Reversal of excess interest charged.
(b) Penal charge at the maximum lending rate of the PFI
(c) Issuance of warning letter to the PFI
1. 7. 10 Capacity Building for the Farmers
A mandatory training programme shall apply for farmers that will participate under the ABP
covering; Farming as a business, improved agricultural practices, and Group management
dynamics. The cost of such training shall be borne by the participating anchor. However,
partnerships with Development Partners are encouraged on the training of the farmers.
Certificates issued at the end of the training shall constitute a requirement for farmers to access
credit facility in kind and cash under the programme.

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CHAPTER TWO
THEORETICAL FRAMEWORK AND LITERATURE REVIEW
This chapter is concerned with setting the theoretical frame work for the study as well as review
of related and relevant literature to the research.
2. 1 THEORETICAL FRAMEWORK
Allah the Almighty says:
O ye who believe! When ye deal with each other, in transactions involving future
obligations in a fixed period of time, reduced them in writing Let a scribe write down
faithfully as between the parties: let not the scribe refuse to write: as God Has taught him,
so let him write. Let him who incurs the liability dictate, but let him fear His Lord God,
And not diminish aught of what he owes. If the party liable in mentally deficient, or
weak, or unable Himself to dictate, let his guardian dictate faithfully. And get two
witnesses, out of your own men, and if there are not two men, then a man and two
women, such ye choose, for witnesses so that if one of them errs, the other can remind
her, the witnesses should not refuse when they are called on (for evidence). Disdain not
to reduce to writing (your contract) for a future period, whether it be small or big: it is
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juster in thre sight of God, more suitable as evidence, and more convenience to prevent
doubts among yourselves but if it be a transaction which ye carry out on the spot among
yourselves, there is no blame on you if ye reduce it not to writing. But take witnesses
whenever ye make a commercial contract; and let neither scribe nor witness suffer harm.
If ye do (such harm), it would be wickedness in you. So fear God; for it is God that
teaches you. And God is well acquainted with all things. Qur’an 2: 282.
“If ye are on a journey, and cannot find a scribe, a pledge with possession (may serve the
purpose) and if one of you deposits a thing on trust with another, let the trustee
(faithfully) discharge his trust, and let him fear his Lord. Conceal not evidence; for
whoever, conceals it his heartis tainted with sin. And God knoweth all that ye do” Qur’an
2:283
In light of the above verses, Imam Qurtubi has given the following assertions. Sa'Id
ibn al-Musayyab said, "I heard that the closest ayat in time in relation to the Ayat al-Kursl was
the Ayat of the Debt." Ibn 'Abbas said, "This ayat was revealed specifically about the salam
sale," meaning the fact that the people of Madina used the salam sale was the reason for the
revelation of the ayat. Our scholars define the salam sale as being a known sale on credit for
goods which are present for a known term. It must be known and anything unknown must be
avoided. For instance, in Madina at the time the Prophet came to them they used to give credit
and make a loan on the basis of the expected fruits of the date-palms, and the Prophet forbade
them to do that because of the uncertainty inherent in it, since the trees might not produce
anything. Salaf and Salam have the same meaning, however the term salaf be used for a loan
(qard). But it is agreed that the ayat applies to all debts.

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Ibn Khuwayzimandad said, "The ayat contains thirty rulings." Some of our scholars use
it as evidence for the permission to put a term on loans according to what Malik said, since there
is no difference between a loan and any other contract which involves debts. The Shafi'Is
disagree with that and say that the ayat does not contain permission for delay on all debts. The
command is for there to be witnesses if the debt has a set term.
The word "dayn" is the correct term for any transaction in which one person is owed
cash and the other is granted a delay. The word 'ayn refers to what is immediate and dayn refers
to what is absent.
Ibn al-Mundhir said that this indicates that a salam sale without a known term is not
permitted. The Sunna of the Messenger of Allah, may Allah bless him and grant him peace,
indicates something similar to the Book of Allah. It is confirmed that when the Messenger of
Allah came to Madina they used to give advances against fruit for two or three years ahead. The
Messenger of Allah, may Allah bless him and grant him peace, said, "Whoever gives an advance
on dates, should give an advance for a known measure and known weight for a known term."
(Ibn 'Abbas in al-Bukhari and Muslim)
Ibn 'Umar said, "The people of the Jahiliyya used to sale meat to one another for the
offspring of a pregnant camel (habal al-habala). The Messenger of Allah, may Allah bless him
and grant him peace, forbade them to do that. All scholars agree that the permitted salam is when
a man gives an advance to his companion of known defined food with a known measure for a
known term in known dinars or dirhams and the transaction is made before they leave the place."
Our scholars say that the date set for when a salam becomes due can be the harvest, cutting of
the fruit, or the festivals of Nayruz or Mihrajan [New Year or the autumn equinox] since that is a
particular time.
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at-Tabari says that this means that you should call witnesses to both small and large
transactions. People disagree about whether that is obligatory or recommended. Abu Musa al-
Ash'ari, Ibn 'Umar, ad-Dahhak, Sa'id ibn al-Musayyab, Jabir ibn Zayd, Mujahid, Da'ud ibn 'Ali
and his son Abu Bakr say that it is obligatory. One of the strongest in respect of that position was
'Ata'. He said, "I call witnesses when I sale and buy for a dirham, or half a dirham, or a third or
less. Allah says, 'Call witnesses when you trade. ' " Ibrahim said, "I call witnesses when I sale
and buy, even for a bunch of onions. One of those who believed it to be obligatory and preferred
that was at-Tabari. He said, "It is not lawful for a Muslim to buy and sale without calling
witnesses. Otherwise he opposes the Book of Allah. If it is on credit, he must write it down and
have witnesses if a scribe is at hand."
ash-Sha'bl and al-Hasan believe that the ayat (verse) is just recommendation and
guidance and not a definite injunction. That is reported to be the position of Malik, ash-Shafi'i,
and the People of opinion. Ibn al-'Arabi claimed that this is the position of all and he said that it
is sound. No one related that it is mandatory except ad-Dahhak. He said, "The Prophet, may
Allah bless him and grant him peace, bought a slave and wrote: In the Name of Allah, the All-
Merciful, Most Merciful. This is what Muhammad, Messenger of Allah, has purchased from
al-'Adda' ibn Khalid, a sale from one Muslim to another, with no hidden defect, no taint and no
wickedness (ghar ila) [i.e. in the slave sold.].'" He also bought without witnesses and left his
armor in pawn to a Jew without witnesses being present. If having witnesses had been
mandatory, it would have been obligatory when leaving a pledge out of fear of dispute.
We mentioned the view of it being obligatory from other than ad-Dahhak, namely the
hadith of al-'Adda' in ad-Daraqutm and Abu Dawud. He became Muslim after the Conquest of
Makka and Hunayn. Al-Mahdawi, an-Nahhas and Makki report that some people say that "Call
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witnesses when you trade "was abrogated by" If you leave things on trust with one another.” He
reported from Abu Sa'id al-Khudri that the second ayat abrogated the one before it. An-Nahhas
said that this is the position of al-Hasan, al-Hakam, and 'Abdu'r-Rahman ibn Zayd. At-Tabari
disagrees and says that the second ayat refers to someone who cannot find a scribe. Neither
writer nor witness should be put under pressure. One meaning of this is that a scribe should not
write anything other than what has been dictated to him nor should the witness add to his
testimony nor decrease it. Al-Hasan, Qatada, Tawus, Ibn Zayd and others said that. It is related
from Ibn 'Abbas, Mujahid and 'Ata' that the ayat means that the scribe should not be prevented
from writing nor the witness from testifying.
Mujahid, ad-Dahhak, Tawus, and as-Suddi said - and the same thing is also related
from Ibn 'Abbas - that the ayat means that the witness should not be summoned to testify or the
scribe to write when they are busy and they should not be made to come when they have an
excuse nor should they be abused. They should not be told, "You have disobeyed Allah's
command!" or similar things so as to put them under pressure. Allah forbade this because, if it
was applied, it would distract them from their din and livelihood. If you do that, it is deviancy on
your part, If you do put them under pressure it is disobedience to Allah, as Sufyan ath-Thawri
said. The scribe and witness disobey by adding or decreasing. That is a type of prevarication
which harms property and people and invalidates their rights. Forcing the witness or scribe when
they are busy is also disobedience and incorrect behaviour since it is disobeying Allah's
command. Be fearful of Allah and Allah will give you knowledge.
2. 2 MUDARABAH OR QIRAD
Linguistically, both words, Mudarabah or Qirad are used to signify the same idea: Ahmad (66)
define the terms as:

26
to give somebody out of your capital a part to trade in, provided that the profit is shared
between both of you, or that an apportioned share of profit is allocated to him …
accordingly, the active partner is called Darib, because he is the one who travels and
trades. It is also possible that both capitalist and active partner are called Mudarib or
Muqarib as both share the profits with each other.
According to Islamic jurisprudence, Qirad is related that many companions of the
Prophet practice Qirad. Even the prophet acted as Muqarid before revelation.
“Despite the unanimity on the legitimacy of Qirad, there is nothing ascribed directly
(Marfu) to the prophet himself except what ibn Majah related on the authority of Suhaib who
said that the Prophet (SAW) said “three are blessed: differed sales, Muqaradah and mixing
wheat with barley for home use and not for sale.” In its lineage there are Nasr Ibn al-Qasim on
the authority of Abdal-Rahim ibn Dawud, both of them are unknown. Ibn Hazm stated in his
book ‘Maratib al-ijma’ that all chapters of fiqh have basis from the Holy Qur’an and the Sunnah,
except Qirad, for which we have found no similar basis whatsoever. Nevertheless, there is
genuine solid unanimity on it, and one can categorically say that it was practiced during the days
of the Prophet, who was aware of it and who approved it, otherwise it would not have been
legitimate.” (Ahmad 67).
2. 2.1 Subject of Qirad
According to “Zahiriyah, Qirad must comprise a contribution of cash money, which is the
capital. If the capitalist wants to give the active partner (Al-muqarid) goods instead of cash
money, he must specifically ask him to first sale these goods, and utilize the proceeds of sale in
his Qirad. Ibn Hazm claims that there is unanimity on this view. (Ahmad 67)
27
As a matter of fact, “all Hannafis do agree that the participation of the capitalist must be
in coins, while they disagree about the validity of the contract if this participation is in non-
minted silver and gold. As for giving goods as participation, they claim that this vitiates the
Qirad and makes it void”. (Ahmad 67)
Hambali and Shafi’I are of the opinion that participation must be by means of a definite
amount of minted coins, while the contract is vitiated if participation takes the shape of either
non-minted gold and silver or any other goods. Maliki are divided among themselves about the
validity of goods as capital for Qirad. Some agree and some object.
Ibn Qudamah, an eminent exponent, states that “Mudarabah is valid if the subscribed
capital is determined, whether it is in coined or precious metals or goods”. He supports his view
by the views of Abu-Bakr, Abu al-Khattab, Malik, ibn Abi Layla, Tawus, al-Azwa’I and Ibn Abi
Sulaiman. Those justify their opinion on the plea that “the main objective of Mudarabah which
is a sort of association, is that both parties dispose of both capital and labour and participate in
the profit earned by the partnership. Such profit-sharing takes place whether the capital is in
money or in goods”. (Ahmad 68)
2. 2. 2 Qirad Under The Present Banking System.
Let us assume that this experimental trial will take place in a modern Muslim country whose
money in circulation is the usual currency notes issued by its central bank, and that it has
commercial and other banks functioning in the manner habitually known in a free competitive
economy. Assuming that ‘A’ is a businessman who realized some profit which he decided not to
spend (either in consumption or investment) at the time as his plan is to use the money, say three
month later, to meet a certain liability. ‘A’ would then go to the bank (which would not
supposedly be allowed deal in interest either way) and ask what would the bank give him against
28
a deposit of his dinars for three months. The answer of the bank manager would probably be, ‘I
don’t know’ why don’t you come back next week and I will try to find somebody who would be
interested in getting this money to invest in his business and pay you a proportion of the profit”
I suppose that ‘A’ would not be very happy with such an answer. If ‘A’ inquires why
does not the bank invest it on its own risk, the answer would be: because commercial banks are
not allowed to go into business other than purely monetary operations. (we are assuming the
present banking system). Now, let us suppose that the bank has found an entrepreneur (B) who is
in need of 1000 dinars for three months and who is ready to pay “something” for getting the
money now. The problem would immediately reveal itself in something like the following:
i) If Qirad has to be applied, would the bank be a part of the contract or not? In other words,
would the bank accept the money and take the risk of Mudarabah? If yes, then the bank is
violating the banking law. If no, then the capitalist is supposed to negotiate directly with the
entrepreneur and the role of the bank is confined to introducing both parties to each other – a
non-banking function.
ii) if the bank is selling some investment certificates (and there are many capitalistic countries
who allow such activity) then it would advise ‘A’ to buy certificates today at the current price on
the market and liquidate the after three months at ‘A’s risk and peril.
Generally speaking, these certificates represents a portfolio which under the assumed
conditions- would bear no fixed interest and would be entirely invested in shares. It is extremely
rare to see companies distributing profits to shareholders every three months, and thus ‘A’ would
not really be entitled to any profit by buying the said certificates … on the other hand, he may
collect some capital gain when liquidating his position at the due date, but he may also suffer a
loss on his principal.

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iii) If an arrangement-somehow-can be made through the bank by means of which ‘A’ can invest
his 1000 dinars in an active enterprise, there would be the difficulty of knowing the equitable
share of this additional temporary capital. To my mind, it is almost impossible to find a
satisfactory answer to this question, especially when the participation is for a short term. ‘A’ is
naturally interested to invest his money with a big reputable firm so as to minimize his risks and
inflate his profits. But such firms cannot calculate their profits every day as the production
procedures take longer periods than the time allowed by ‘A’. There is always a time lag between
the date a capital good is purchased and the date the final output is sold out. Over the above, it is
almost impossible that every time an investor contributes a certain sum to designate the fair share
of profits that sum has added to the net profits (if ever these profits can be ascertained in the
short term).
From the above, one can see that it is not practical – if ever possible – to marry Qirad
with the present banking system. Banks are not allowed to directly engage in commercial or
industrial operations or in any speculative transactions, while Qirad is based on engaging in all
such risky operations.
2. 2. 3 Qirad and Interest.
Let say that Qirad can take place whether banks are charging interest or not. Another clearly
important point is that Qirad by itself does not abrogate or interfere with the actual banking
system, nor is it an element that if encouraged to the extreme would by itself put an end to
interest dealings. “We have to bear in mind that Qirad is nothing more than a partnership which
cannot be instituted except by the free-will of the partners. Those who are advocating Qirad
proposed legal intervention to prohibit dealing in interest. The question is whether such legal
30
interdiction would really lead to the abolition of interest, even when banks are nationalized and
are prohibited to charge or pay interest?” (Ahmad 73)
According to Ahmad (73), I personnel very much doubt that for many obvious reasons.
First, let us presumed that, we are going to apply the prohibition of interest in the usual economic
system prevailing at present in the free competitive countries. In other ward, interest would be
prohibited while “other things being equal”. Money holders would most probably seek a “black
market” in which they would be able to lend money for a price or hidden interest built into the
repayment of the principal.
Secondly, let us presume that interest is legally prohibited, that savers of money find it
difficult to charge interest in defiance of the law, and that banks are provided with enough funds
to meet the demand for money. In such a hypothetical case, money holders would either spend
their ‘sterile’ liquid money on consumption or investment. In either case, Qirad would play an
insignificant role, or at the most, its role would not exceed by far what it was before introducing
the new system. Actually, there are increasing numbers of people who are going to the stock
exchange and shares as an investment instrument. ‘A’ share thus obtained is a participation by
capital in an enterprise where others undertake the productive work itself; it is a kind of
Mudarabah.
2. 2. 4 Profit Sharing (Mudarabah) or (Qirad)
Siddiqi (250) “Profit share is the percentage share of the supplier of capital in the profits of the
entrepreneur, or the working partner, in the mudarabah contract is compared and contrasted with
the rate of interest in its function and role in the economy. The rate of profit-sharing is also being
explored as a tool of analysis and a possible instrument of fiscal policy”.

31
Kahf defines Qirad (mudarabah) as “the act of transforming money assets into factors of
production as a result of a joint action between the two parties”. Two crucial differences between
profit-share and interest are stated. Firstly, “the profit-sharer has direct interest and real concern
in the activity of the firm”; second, “profit-share is a long run phenomenon in which the
preference for liquid assets is almost neglected, whereas interest is a dual phenomenon, short and
long run, for which the economic thought could not provide any serious theory to provide the
term structure. … in profit-share the short run changes do not interfere in the finance of
investment unless through their effect on the rate of return expectations only, so that one source
of long run fluantuations is eliminated, namely variation in short run interest rate” (612:62-63).
2. 3 MODERN THEORY OF INTEREST
While the main targets of attack have been the absolute conception of individual ownership
rights and the unrestrained nature of freedom of enterprise in capitalism and the cut-throat
competition, the inevitable rise of monopoly capitalism, exploitation of labour and emergency of
imperialism, the most criticism institution is interest which is regarded as the source of many
evils in the system. Siddiqi (237) note the criticism and rejection of the various theories which
seek to explain and justify interest. As follows:
Maududi (521) and Qureshi (526) are the earliest contributors in this field in which Mahmud
Ahmad (168), Abdouh (504; 505), Abu Saud and Nasser (154: 71-75) have also contributed.
Abstinence and waiting cannot entitle the capitalist to a reward unless it is proved that the
use of borrowed capital necessarily results in profits. In the same manner merely taking a risk
does not ensure augmentation of the capital risked. Productivity theory is without any proof as
value productivity of capital is subject to the uncertainty conditions of demand and supply.
Maududi finds Time Preference and Liquidity theories as partly valid in so far as an explanation
32
of interest in the modern economy is concerned. But an explanation does not amount to a
justification. An institution can be justified only with reference to its role in society and its useful
for mankind. Mawdudi examines this role and finds interest to be the cause of many ills in
society; economic and political as well as moral and spiritual.
Qureshi (526: 10 – 43) notes that there is no agreed theory of interest – a point
emphasized by several writers on the subject. He criticizes the classical theory of interest along
familiar lines. Rejecting the productivity theory as circular in its reasoning and the Time
Preference Theory as based on false psychological assumptions he finds the Monetary Theories
of interest in their neo-classical and Keynesian versions as less concerned with causes of
existence of interest than with how its rate is determined.
He quotes Keynes to establish the possibility and desirability of a zero rate of interest.
Mahmud (168) and Farid (514) cite Harrods to establish the same point. Siddiqi (158: 113-114)
quotes shackle to belittle the role of interest and underline its “paradoxical nature”.
In his brilliant essay on ‘Semantics of the Theory of interest’ Mahmud (628) notes the
confusion that is found in economic literature between the terms profit and interest. He gives
numerous excerpts from Smith, Ricardo, Say, Malthus, Sismondi, Marshall, Fisher and even
Bhom Bawerk in this context. He distinguishes between the entirely different economics roles
played by loan capital and risk capital. Defining capital as “that part of wealth which is used to
create further wealth” he notes that “risk capital is that variety of capital which agrees to relate
its reward for its service of participation in the productive process to the measure of value that its
participation creates” (628: 179) but “loan capital dictates its price of participation in the shape
of a fixed rate of interest. Its charge i.e. interest, is the first charge to be met out of the value of
our product…” (628:176). Loan capital for this reason imparts a peculiar rigidity to the entire
33
range of economic consideration, risk capital, on the other hand, projects a peculiar flexibility to
the enterprises concerned.
Loan capital by virtue of its interest, sets a limit to the marginal efficiency of productive
effort, risk capital imposes no such limit and leaves it free to exploit all natural resources and
employ all available manpower” 628: 176). He regards interest to be the “primary cause, with
certain secondary causes which are themselves, reflex projection of this primary cause, which
virtually perpetuates underemployment equilibrium”. Interest raises prices, profits and rents
(628: 182-187). Mahmud examines the arguments in justification of interest by analogy with rent
and hire and finds them faulty. As to rent he notes that land is essentially productive whereas
money capital is not: “Money without labour will not produce anything at all … . land even
without labour will produce something, it may be only grass to graze cattle on or bushes to
provide fuel” (628:185).
In case of hire: “when there is loss by mischance or miscalculation, in the case of a hired
item, it is the lender who suffers the loss; whereas in the case of money loan, every loss, whether
by mischance, miscalculation or any other reason has to be borne by the borrower”. He castigates
Marshall for having invoked this false analogy between hire price and interest.
He concludes that interest is neither of the nature of profit nor of the nature of rent and
hire. Mahmud discusses the nature and purpose of savings and finds the claim that advancing
savings as loan is equivalent to foregoing a need or that it involves a sacrifice, to be a false claim
with no basis in reality (628: 191 - 192).
2. 4 SALES (BAY’ I)
Arfa defined sale as a “contract by which one party transfers to the other proprietary rights in a
thing for a price; these proprietary rights being other than mere use or enjoyment.” (157)
34
In a more strict sense, According to Khan (65) “a sale is a commutative contract, of
which one equivalent consists in ready money and the other in some certain object which is not
currency.” A sale (Bay’i) necessarily involves three elements: an agreement; the parties to the
agreement; the object of sale, that is, the thing sold and the price.
Doi viewed sale (Bay’i) as the “delivery of a definite object which possesses legal value
in exchange for something equivalent in value (called the price).” The concept of sale also
includes barter (i.e. exchange of one thing for the other of equivalent value) although there are a
number of limitations on this. Price may be paid immediately on delivery of goods sold, or it
may be paid after delivery of goods bought has been made, or goods may be delivered
immediately and the price as well as delivery of goods. (358)
The seller (Mushtari) and the buyer (bay’i) are referred to by one generic name al-‘aqid. The
Aqid must possess the following qualifications:
1. He must be a mumayyiz, i.e. he must be able to understand the implications of the
contract of sale. Thus an insane person or a minor who does not understand the
implications of the contract of sale will not be a mumayyiz. However, according to all the
schools (except Shafi’i) of Islamic jurisprudence if a minor is mumayyiz the contract is
valid.
2. He must be capable of disposing of his property.
3. He must be free to use his own discretion (mukhtar) i.e. he must not be working under
coercion, undue influence, misrepresentation, fraud or mistake. (Doi 358)
2. 4. 1 The Form and Results of an Agreement for Sale (Bay’i)
According to Maliki School of Law there are three basic forms and results of an agreement for
sales which includes:

35
1. A sale (Bay’i) is made perfect by the mere consent of the parties, even though such
consent is tacit; as well as by the reciprocal delivery of the thing and the price. It may be
concluded either by a positive stipulation, ‘will you sell that to me?’ followed by an
affirmative answer, or by the acceptance of an offer of purchase or sale.
2. If one of the parties has used a conditional or future expression, such as ‘I will sell you
this’ or ‘I will buy this from you at so much,’ and then maintains that he did not intend to
bind himself, his sworn statement shall be resorted to; if he refuses to make oath the
contract remains obligatory.
3. The same distinction is to be made with regard to offers of sale or purchase made in a
public market. (Ruxton 157)
2. 5 BAUCHI STATE AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1981-UNI)
2. 5. 1 Objectives
1. The Bauchi State Agricultural Development Project (BSADP) was the third of the four State
wide agricultural development projects financed by the World Bank between 1981 and 1984 to
support food production in northern Nigeria, many parts of which have low and unreliable
rainfall.
2. BSADP had two primary objectives: (a) to increase food production and farm incomes of
some 280,000 farm families; and (b) to alleviate the State's shortage of trained and experienced
personnel for agricultural development.
3. The project included several components targeted at increasing agricultural and livestock
production; improving economic and social infrastructure and enhancing institutional capacity.
4. The agricultural production component included activities to increase the production of cereals
(millet, sorghum, maize and rice), groundnut and cowpea, a pilot sub-project in the Northern
36
Zone to improve 'fadama' small-scale irrigation agriculture, and a livestock scheme for cattle
fattening and training of draft animals. Activities designed to achieve output increases included
an applied research program; dissemination of technical packages for improved cultivation
practices through a Training and Visit (T&V) system of extension; establishment of Bauchi State
Agricultural Services Company (BASAC) for timely and adequate supply of inputs;
strengthening of the Cooperative Financing Agency (CFA) to facilitate adequate crop production
credit; ana the establishment of a farm management advisory service to assist the more advanced
farmers.
5. The major activities intended for improving the economic and social infrastructure were the
establishment of a network of rural feeder roads and the provision of village water supplies.
Other activities included improved land-use planning/soil conservation measures, establishment
of farm development centers and facilities for staff training, staff housing, offices and
workshops.
6. Strengthening of institutional capacity was to be achieved through activities that included the
establishment of BASAC, support to CFA, integration of local governments into project activity
and proving of technical assistance for improving managerial and training components of the
project.
2. 5. 2 Implementation Experience
The delayed and slow implementation of the project resulted in the extension of the project by
three years. In spite of the extension of project life, total real expenditures amounted to only
US$235.6 million while the planned total cost was US$350.6 million. The Bank disbursed
US$130.7 million (99 percent of its commitment), representing 55 percent of the actual total
cost, although the Bank's planned share was 37 percent.

37
While the total contributions by FGN and BSG were close to or exceeded the targeted
amounts in naira terms, these were we short of the expected levels in dollar values. The major
factor contributing to the lower level of total expenditures relative to the expected dollar
equivalent amount was the sharp decline in the Naira value (from US$1.00 - Naira 0.55 in 1981
to US$1.00 - Naira 8.00 in 1990). FGN and BSG counterpart funding was consequently much
lower reflecting an inability to enlarge their revenue base and/or trim low-priority expenditures.
The growth in the public expenditures in the agricultural sector was also slow during this period
reflecting, perhaps, a lower commitment to the sector.
Project implementation was also adversely affected by FGN fertilizer policy which allowed
monopoly distribution rights to the public sector. Fertilizer supplies were marked by scarcities
and other inefficiencies. The observed performance on the demand side indicates that larger
agricultural production benefits could have been derived if fertilizer supplies had been orderly
and adequate.
The key implementation agencies required for the project were established but unfortunately
the associated main policy-making bodies BSARDC and BSADDTC - were not very effective.
The integration of the ADP into BASIRDA, led to conflicts of interest over priorities and use of
resources since BASIRDA undertook a very wide range of activities.
Project implementation was most successful in the area of infrastructure development. The
project did not implement the component related to livestock development as it was expected
that the newly formed National Livestock Project Department would undertake that activity.
Project Results
The project was able to reach the expected proportion of the total farm families through its
extension activities using a lower-than expected number of agricultural extension personnel.

38
According to project data on crop production, the output of all the crops except sorghum
registered an upward trend during the project period. The impact of new technology and the
extension service on crop yields cannot, however, be accurately ascertained because of data
problems.
The project reached or exceeded the SAR targets for fadama small-scale irrigation
development (reaching 400 percent of t3rget), construction of rural f5eder road and the
establishment of village water supplies. In the area of institutional development, an efficient
project organization was put in place, as envisaged in the project design, but this later was
integrated with by an over-ambitious program managed by, BASIRDA, a new parastatal. The
CPA was successful in extending production credit and had a good loan recovery record.
The economic rate of return (ERR) estimated for: the agricultural components at appraisal
were 18 percent. At project completion, data available is insufficient to carry out a meaningful
assessment of project impact on the financial returns for producers.
2. 5. 3 Sustainability
BSADP is now an established institution in the agriculture sector; it has been accepted by the
Bauchi State Government as the implementing arm of the State Ministry of Agriculture, an
endorsement that enhances sustainability. The following actions taken by the ADP augur well for
project sustainability:
(a) the establishment of a program of on-farm adaptive research with strong linkages between the
national research institutes and the extension services emphasizing farming systems research;
(b) the unification and strengthening of agricultural extension services for more effective
coverage of smallholders and to improve cost effectiveness;

39
(c) the increased dependence on the private sector for retail sales of inputs through
encouragement of private traders and farmers' cooperatives and on progressive withdrawal of
BASAC; and
(d) the assistance of BSADP to local governments to develop the capacity for routine
maintenance of rural infrastructure while emphasizing increased use of private sector capacity
for rehabilitation, new construction and periodic major maintenance.
The State Government has made BSADP a part of BASIRDA, which, although a more
permanent institution, has too wide a span of activities which could strain both managerial and
financial resources. BASIRDA should review whether it should continue to be involved in rural
electrification, community development and construction of health facilities.
The sustainability of the maintenance of infrastructural facilities--feeder roads and water
supply--will continue to depend on the availability of adequate maintenance funds which can
hardly be guaranteed un0er the present financial situation of FGN and BSG. There is a need to
seriously explore the introduction of user fees to at least meet part of the expense.
2. 5. 4 Findings and Lessons Learned
The main lessons which could be relevant to the Bank and the Borrower are:
(a) experience has shown that complex multi-component projects are difficult to implement and
it may be desirable to have projects with fewer components;
(b) risks of insufficient counterpart funding need to be assessed more carefully at time of project
preparation or at least at appraisal;
(c) public sector participation in input distribution, particularly in fertilizer distribution, should
be avoided; the Bank, thus, should not finance state-owned commercial companies and should
instead emphasize the role of the private sector;

40
(d) strategies for technology development and dissemination need to give serious consideration
to on-going farming practices, farmer objectives and agro-ecological conditions; additionally, the
scale and scope of projects involving technology development and dissemination need to make
allowance for the relatively long time and resources required to yield results; further, technology
promotion cannot function independently of pricing policies as demonstrated in the case of
maize where cheap fertilizers favored production at the expense of the less fertilizer-responsive
sorghum - a result not envisaged in the SAR; and
(e) as a measure of progress evaluation and control, project documents such as SAR should
include key indicators and targets to be achieved not only at project completion but also at
different stages of project implementation
2. 5. 5 Bank Performance
The Bank had an intensive involvement throughout the project cycle. The Bank monitoring was
extended over the project period, with a total staff input of 241 man-days in the field for a total
of 13 supervision missions. In addition, after 1988 key components such as On-Farm Adaptive
Research, Extension, Rural Infrastructure and Commercial Services were each supervised by a
specialist group visiting for an intensive review of each component of the ongoing ADPs.
2. 5. 6 Borrower's Performance
Borrower's performance, though satisfactory in general, was marked by frequent delays in the
fulfillment of the conditions stipulated in the loan agreement, particularly in the areas of
providing adequate counterpart funding and recruitment of personnel. Part of the inadequacies
was the impact of, initially, falling petroleum prices and, subsequently, economic reforms on the
Federal and State government budgets. However, the Borrower was supportive of supervision
missions and open to suggestions for improvement.

41
2. 6 LITERATURE REVIEW
The research employs thematic method of literature review. This form of literature review allows
the researcher to discuss authors’ ideas round themes which are broken down into topics.
This chapter is review of some available literature on the Loan and Debt, borrowing and
Interest in Islam.
2. 6. 1 Loan and Debts
Anonymous discussed different ways through which funds could be raised to meet
individuals and organizations needs and funding requirements. Raising loans is one of the
various ways these requirements can be fulfilled. In the terminology of Islamic framework,
Qard and Dayn relate to the giving or taking of loans. However, the word Dayn has a
broader connotation than the word Qard.
“Dayn incurs in any way which leaves a debt as a liability to another party to be paid
later without any profit over the principal amounts” (Humayoun 2). Whereas, “ Qard could
be defined as an interest-free loan for needy borrowers extended on a goodwill basis; in
particular Qard al Hasan provides funds for humanitarian and welfare purposes without any
profit accruing to the lender. In fact, Qard consists on giving ownership of anything having
value for the benefit of another by way of virtue”. (Ahmad 84)
The ownership of the loaned objects is transferred to the borrower who can use, buy,
sell, or donate them as the borrower wishes. Qard is only applied when one gets obliged to
return the equivalent of the thing taken and repayment is for the same amount as the amount
lent. Goods of the same kind will be paid back on demand or at the settled time. Qard
42
should not bring any return or addition to the lender because that would be equivalent to
taking Riba.
However, a borrower can pay more than the amount borrowed, but it must not be
stipulated in the contract. Further, the date of payment of the loan may or may not be
included in the Qard contract as the lender can demand repayment at any time. And the loan
should not be conditional upon any other contract, such as Bay´ and vice-versa.
Ariyya is another structure of borrowing goods in a virtuous act. However, in the
case of Ariyya, the exact borrowed commodity has to be returned to its owner, not any
replacement. While in Qard, the same kind of the loaned commodity with essentially the
same nature or character could be paid back.
On the other hand, a Dayn is the result of any contract or credit transaction. The
created debts ought to be returned without any profit over their principal amounts. Salaf is a
form of Dayn that is similar to Salam. It is used for a loan of fixed tenure and in that sense it
is closer to Dayn; Salaf includes loans for short, intermediate and long term loans and the
price of the commodity is paid in advance, while it is delivered at a future date. The amount
given as Salaf cannot be called back before its due date. Therefore, this creates a liability for
the seller to supply the commodity in the future.
In addition, in all credit transactions, Islam recommends witnesses and
documentation. This provides safeguards against disputes and allows credit transactions for
a fixed or known time period. And since Islamic banks can neither pay interest nor charge
any return on loans, they have the right to ask for collateral to ensure recovery of the loan
amount. In fact, the client cannot refuse to repay the loan or debt in case he has incurred
loss in the business conducted with the bank’s loan. Also, The Shariáh puts a great deal of
43
emphasis on repayment of loans/debts and the borrower also has a moral obligation to repay
a loan. For that reason, banks can include, with mutual consent of the clients, a penalty
clause in the credit contract to mitigate the risk of default, but the penalty charged on any
default has to go to charity.
With regard to a possible rebate that could be given to the debtor for repaying the
loan earlier than the due date, the Shariáh considers that as a reduction of interest in the
financing costs arising from prepayment of the amount that would be stipulated in a
contract. And, there is unanimity about the illegality of remitting a part of the debt payable
by anyone and getting the remaining part. However, Muslim jurists have differentiated
between loans or debts that have become due or can be called back at any time ( Duyoon
Haalah), and loans where time of payment settled between the creditor and the debtor and
the debt is not yet due (Duyun Mu’ajjalah). Duyoon Haalah is allowed by almost all Muslim
jurists on the rationale that in such loans, delay is not the right of the debtor. In fact, rebate
should neither be provided in the agreement nor be made a condition in the loan contract. In
opposition, remission of a part of a debt not yet due involves Riba.
2. 6. 2 Responsibilities of Debtors and Creditors
The fulfillment of one's obligation under all contracts is a religious duty in Islam.
Therefore, the Shari’ah defines specific rights and responsibilities of debtors and creditors.
The most important duty of the debtor is to repay the loan in fulfillment of the promise or
contract made with the creditor” (Ruxton 34). God’s punishment will be severe to the
borrower whose intention is to blemish or to usurp the loan. And the main duty of the
creditor is not charge interest on the principal amount of the loan because those who charge
Riba are compared in Qur’an to those controlled by the devil's influence.

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In fact, Islamic teachings stress that a borrower, when accepting loans, must be
firmly determined to make repayment. “The debtor should not only pay the debt in time, but
also express gratitude to the creditor while repaying the borrowed amount. And if the debtor
refuses to pay even though he has the means, he would be a perpetrator of injustice who
exposes himself to possible punishment. In fact, in Shariáh, if a debtor default willfully, he
can be arrested, punished and dealt with harshly”. (Ruxton 37)
In addition, Islam condemns the person who delays the payment of his debts without
a valid cause. He could be admonished, disgraced or even jailed and if necessary could be
disposed of his asset to pay the debt. A monetary fine, on the other hand, wouldn’t be a
lawful option, since this would amount to a monetary penalty for delayed payment, which is
Riba. However, Islam makes a distinction between debtors who default by procrastination
and those who default by necessity. The Qur'an recommends that the latter deserves
compassion and is to be given respite until he is able to pay. In extreme circumstances,
creditors are exhorted to forgive the debt, which can be counted towards obligatory Zakat or
as a donation.
However, Islamic jurists see no harm if it is agreed between the parties that some
indirect benefits do not involve any cost for the borrower. For example, debt could be paid
in the form of cheques and drafts or in some other currencies if it is in the interest of both
the parties.
In the case of a debt with a settlement date, the creditor is not entitled to ask for
earlier repayment, so long as the debtor does not transgress the terms and conditions. But, if
the creditor is not disposed to give more time for repayment, he cannot be compelled to do
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so and the debtor would then be liable to repay the debt at the falling due from whatever he
has beyond his basic needs.
In addition, Shariáh allows creditors to ask for collateral to ensure recovery of the
amount in the case of failure by borrowers to fulfill their obligation for the repayment of the
debt. The subject of the sale could be the subject of a pledge made to the extent of the debt.
In fact, a pledge is permissible in the Shariáh, whether a person is on a journey or at home
and even between a Muslim and a non-Muslim. The ownership of the pledged goods
remains with the pledger, who takes on the risk of losing the pledged commodity while the
pledgee holds the goods on trust. Hence, if the pledged goods are lost without any fault of
the pledgee, the loss would be that of the debtor. And if the due debt is not paid, the pledgee
can apply to the court to have the pledged good sold and the debt recovered out of the sale.
2. 7 BORROWING FROM BANKS
Elgari stated that:
Human societies consist, always, of two categories of people. Those who own resources
in excess of their immediate needs, and those who need more than they possess now.
They realized, very early in the history of mankind, that an arrangement to transfer
resources form the first to the second will make society more efficient and enhance the
welfare of every one. With the invention of money, this fact became more obvious. (16).
At certain point’s temples and the clergy played an important role in the management of
such activity. “With the advent of the age of specialization and division of labor, this exercise
was institutionalized into an organization for financial intermediation i.e. banking establishment.
Being a private enterprise, this firm had to make money, therefore it adopted the form of
borrower-lender relationship, it borrows money from the first category (and pays interest) and
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lends to the latter (receives interest)” (Elgari, 16). Islamic civilization reached its highest point in
the late middle age. Clearly commercial banking did not appear in Muslim societies although it
was known in some parts of Europe since the 13thCentury. Reason is twofold:
(a) On the one hand, the prohibition of riba meant that no borrower-lender relationship can be
used as an income generating activity, which meant the European model of banking is
conceivable in an Islamic society.
(b) Conventional banking superior aspect is the fact that lender-borrower relationship reduces
moral hazard, because it mitigates agency problems by separating the reward of the financier and
repayment of his principal from the actual performance of the investor and his moral learning.
(c) On the other hand, Muslim did not have different arrangements procuring the same objective,
financial intermediation based on the tenets of Islamic shariah and this is where the ethical and
moral aspects are most visible. One can, generally, say that money in the Islamic economic
system can move from one individual to another for the purpose of charity and altruistic
purposes, or for profit and gain in trade.
What is interesting here is that borrowing and lending relationships can only be allowed
as part of the first category. Investment and profit generating activities can only be financed via
partnership and profit-loss sharing arrangements. Sharia provides many forms of contractual
relationships that meet the standard requirements of the market. They cover cases where one
party provides finance only and the other provides management and labor, or where many
partners participate in capital, etc. for temporary one deal or long term arrangement. Sharia
presents very refined orders and elaborates system of profit and loss sharing, rules of
establishment, work ethics, management and termination of such contracts.

47
This resulted in an important attribute of the economy in Muslim societies that there is no
dichotomy between real and financial activities, no two-sector economy but only one. Important
consequences and ethical characteristic grew from this feature:
(a) Most important is a more equitable income distribution because economic activities
are not financed by “borrowing” capital, but by participation of owners of capital in profit and
loss. In capitalist economic system, providers of money receive a fixed return in the form of
interest. If the economy is prospering and high rates of profits are been made by investors,
owners of capital will not share in the fortunes of this investment. Income distribution will be
biased against owners of capital. In case of depression, when lower rates of profits are all the
income of investors, hence an inequitable income distribution. No such thing will take place if
profits and losses are shared by all participants in investment.
(b) Not only that more equitable distribution will take place in the short run, a more
stable economy will be the result in the long run. Because loss is being shared by providers of
finance and not of entrepreneurs, the real sector will be able to resist recession and lower
employment rates and get out of them quickly. This is because a lower rate of profit will not
wipe out all the income of the enterprise nor discourage new entrepreneurs from entering the
market. On the other hand, high rates of profit not mean inflation because a larger portion of
which (and not only a fixed rate) will be channeled to providers of finance (savers) away from
investment and into consumption.
(c) May be the most important of the inequitable distribution which results from
conventional banking is the fact that banks can only lend to the rich because they always ask for
collateral and guarantees. Even if one is highly qualified, chances are that he will not get
financed by banks unless he is wealthy enough to satisfy their requirements. This clearly means
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that credit is being circulated within a narrow group in the society perpetuating the inequitable
distribution and reinforcing it. Because it is based on profit and loss sharing not ending, banks
will be more interested in those who can generate profit, because members of the middle and
lower classes of society will not be neglected or shunned just because they can’t provide
collateral, because nobody is required to do that in a participating system. The author discussed
about borrowing from the bank alone without touching anchor borrowing system which that
created a vacuum that need to be fill. This vacuum is what gives birth to this research.
2. 8 PUBLIC BORROWING BY THE PROPHET (SAW)
The Prophet (SAW) is known to be a frequent borrower in his private capacity at least in the
difficult early years in Madina, but reports relating to these borrowings do not concern in this
study. We have noted only those cases where the Prophet (SAW) borrowed as the leader of all
Muslims and the head of the state he established at Madina. “It is not at all difficult to distinguish
between the Prophet's personal borrowing and his borrowing for public purposes since the texts
themselves facilitate such a distinction” (Siddiqi 3).
Our search has so far led us to six cases of public borrowing by the Prophet (SAW) which are
reported below. A possible seventh case will also be noted in the end.
1. First is a report by Bilal, a life-long companion of the Prophet (SAW) who spent his time
mostly near him since the early Makkan period till the Prophet (SAW) breathed his last in
Madina. This report that the Prophet (SAW) used to borrow frequently in order to help needy
Muslims whenever the circumstances called for doing so. Though these borrowing would be for
comparatively small amounts, in cash or kind, the borrowing was undertaken even when no
means of repayment were in sight.

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"It is reported of Zaid that he heard Abu Salman saying that Abdullah al-Hawzani told him
Ì met Bilal, who used to give call for prayers for the Messenger of Allah (SAW) at Halab. I
asked him to narrate about the expenditures of the Messenger of Allah (SAW). He said: `He did
not have anything (to spend). I used to look after it on his behalf ever since Allah called him to
prophet hood till his death.
It was his practice that when a man came to him as a Muslim and he saw him in need of
clothes he would order me and I would go and borrow and buy a cloak for him, clothe him and
feed him. This continued till a person from amongst the polytheists accosted me and said: Ò
Bilal, I have enough resources so you do not need to borrow from anyone other than me'. I did
accordingly. (Abu-Dawud 3055)
One day it so happened that, as I made ablution and rose to give the call for prayer, that
polytheist came along accompanied by a group of traders. When he saw me he called, O
Abyssinian! I said, yes. He presented a grim face to me and addressed me harshly, saying: `Do
you know how many days are left between you and the (end of the) month (when repayment is
due)'? Bilal says, Ì told him it is near'. He said, ìt is only four days between you and it, after
which I will capture you against what you owe and return you to grazing sheep as you used to do
before'. I felt what people feel (on hearing such a threat). When I had prayed the night prayer (i.e.
isha’i_) and the Prophet (SAW) retired to his family, I sought permission to see him. He
admitted me in. I said Ò Messenger of Allah, you are dearer to me than my father and mother,
the polytheist from whom I used to borrow has said this and that, and you do not have the means
to repay him, nor do have I. He is going to humiliate me. Please permit me to abscond to one of
these tribes (outside Madina) who have accepted Islam till such time as Allah provides to His
Messenger, from out of which provision he can pay back the loan. I came out (of the Prophet's
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place) till I reached my home and put in readiness my sword, socks, shoes and shield at the head
of my bed. When the first lights of dawn appeared on the horizon I got ready to go. Suddenly I
heard a man calling. O Bilal! you are to report (immediately) to the Messenger of Allah (SAW).
I set off till I came to him. What I saw there were four camels resting with their loads. I sought
permission to see the Prophet (SAW). The Messenger of Allah (SAW) told me `cheer up, Allah
has sent what you can pay back your loan with! Then he asked `Did you not notice the four
camels in rest'? I said, Ì did'. He said, "you have the camels as well as their loads. They are
laden with clothes and food which have been presented to me by the chieftain of Fidak. Take
possession of them and pay off your debt. I did accordingly ......." (Abu Dawud)
This incident should belong to the sixth year after the hijrah, or the period after that, since
Fidak was subdued during that period. The one important point emerging from this report is the
primary attached to need fulfillment. It was regarded by the Prophet (SAW) to be a purpose
important enough to borrow even from non-Muslims and without any definite means of
repayment in sight.
2. The second report is not explicit as to the purpose of borrowing but there are clear indications
of the loan being repaid out of public treasury. This presumes borrowing for some public
purpose. As the details in the Arabic text reveal, the report reproduced below is part of the story
of a Jewish person in Madina embracing Islam. This person to whom the Prophet (SAW) owed
(a quantity of dates, most probably) wanted to test the Prophet (SAW) for the quality of self-
control and forbearance. Hence his peculiar behaviour: "....... Zaid bin Si'na said: `when the due
date of the loan was only two or three days away, the Prophet (SAW) came to attend the funeral
procession of a man from the Ansar, accompanied by Abu Bakr, ‘Umar, Usman and some other
Companions. When, after saying the funeral prayers, he came near a wall to sit by it, I came to
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him and gave him a very hard look. I took hold of his shirt and the outer robe and said, "Pay up
to me, O Muhammad! By God what I know about default on part of your children of Bad al
Muttalib is based on my direct contacts with you people!" Then I looked towards ‘Umar whose
eyes were moving in his face like the rotation of the heavenly bodies. He looked towards me and
said, Ò Jew! you do this to the Messenger of Allah? By him Who sent him down with truth, I
would have struck your head with my sword but for what I fear to miss'. (Zaid) said, `the
Messenger of Allah (SAW) was calmly looking at ‘Umar and smiling. Then he said, `Myself and
he are in need of something else (from you), that you advise me to pay back gracefully and
advise him to ask for repayment politely. O ‘Umar go and pay back what is due to him and give
an additional twenty of dates against your threat to him. Then (Zaid, son of Si'na) n arrated how
he embraced Islam". (Baihaqi)
3. The third report is a case in which the borrowing by the Prophet (SAW) may have been for
private purposes. However, there is some likelihood of the debt having been incurred to meet
some public need. Abu Saeed al Khudhri reported that a bedouin came to the Prophet (SAW)
asking for repayment of a debt owed by him. He behaved rudely and said: "I will continue
insisting till you paid up". Thereupon the Companions scolded him and said: "woe to you, do
you know whom you are addressing". He said, "I am only claiming my rights". The Prophet
(SAW) said: "why did not you side with him who had the rightful claim"? Then he sent a
message to Khawla, daughter of Qais, that if she had some dates she should lend it to him till his
own dates arrived out of which he could pay back to her. She responded by saying: `yes, you are
dearer to me than my father, O Messenger of Allah!' (The narrator says) so she lent to him and he
paid up to the bedouin and presented some food to him. Thereupon he said: `you have fulfilled
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your obligation, may Allah repay you well'. The Prophet (pbuh) then said: "these are the best of
the people.” (Ibn Majah 3326)
A community in which the weak cannot get his due right without trouble will not be regarded
as pure". The phrase `till our dates arrive' most probably refers to the annual share from Khaibar
out of which a fifth was earmarked for family of the Prophet (SAW) and the rest for other
beneficiaries. These shares would naturally be channeled through the public treasury. That the
dates lent by Khawla were to be repaid out of the dates coming from Khaibar leaves both
possibilities open: It could be paid out of the fifth assigned to the Prophet's family in which case
the loan would have been a private loan. Equally possible, it could have been paid out of the part
earmarked for other beneficiaries in which case the original debt must have been incurred in
order to meet urgent needs of the same beneficiaries. A significant point to be noted in the above
report is the practice of obtaining a loan in order to pay back an earlier one. As distinguished
from the first two cases, in this case the lender was a Muslim. The second lender whose lending
made possible the repayment to the first lender was also a Muslim.
4. The fourth case is a case of borrowing in kind. The object being a camel of a particular age.
Repayment was made from out of the camels collected in zakat. These rules out the possibility of
the loan being in the Prophet's personal capacity since he was barred from zakat. Àbu Rafi'
reports that “the Prophet (SAW) borrowed a small camel from a man. Then some camels from
out of those collected as zakat came to him and he asked Abu Rafi' to pay back the man the
camel (owed to him). Abu Rafi' came back and said he could find only better camels (older in
age) who had their four teeth grown. He (the Prophet) said, `give it to him. The best among
people are those who are good at paying back'” (Muslim 114)
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As noted by Ibn Hajar al Asqalani while commenting upon a version of the same hadith in
Bukhari and Sahih, this debt was most probably incurred for helping somebody meet his basic
needs. The main point that emerges from this case is the propriety of borrowing for public
purposes when there is a definite source of revenue in sight. The Prophet (SAW) borrowed for
need fulfillment intending to repay from zakat to be realized in future.
5. In the fifth case to be reported the purpose of borrowing is to meet the requirements of jihad
─── war in the cause of Allah. This occurred on the eve of the battle of Hunain in the eighth
year after hijrah. "When the Messenger of Allah (SAW) decided to march up on Hawazin to
meet them (in battle) he was informed that Safwan bin Umayyad had coats of arms and other
weapons. He sent for him ─── still a polytheist ─── and said to him: "O Abu Umayyad lend us
your weapons so that we can face our enemy tomorrow with their help". Safwan asked, Ò
Muhammad do you want to confiscate them?" He said, `No I want them temporarily with their
return guaranteed till we bring them to you.' He said, there is no harm in (doing) this. So he gave
him one hundred coats of arms with the accompanying weapons. They also claim that the
Messenger of Allah (SAW) requested him to transport them too, which he did.” (Ibn His ham)
In this case the Prophet (SAW) borrows in kind from a non-Muslim. No coercion is involved
nor is any kind of compensation. There is, however, a hint that the `purpose' itself concerns the
lender also.
6. The sixth case is that of borrowing a substantial sum of money from a Muslim individual for
financing a major battle. "Ismail son of Ibrahim son of Abdullah, son of Abu Rabi'ah Makhzumi
has reported to us from his father who reported about his grandfather that when the Prophet
(SAW) was to attack Hunayn he borrowed thirty or forty thousand from him. He repaid it when
he came back. Then the Prophet (SAW) told him: `May Allah bless you with prosperity in your
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family and your property. The proper recompense for lending is repayment and gratitude'. (Ibn
Majah 3424)
In another version of this tradition recorded by Nasa'i, the amount of the loan is a definite
forty thousand. The same is true of Ahmad bin Hanbal in his Musnad. As regards the source of
payment, both versions mention money that accrued to the Prophet (SAW) subsequently. The
battle of Hunayn took place in the eighth year after hijrah immediately after the conquest of
Makkah. These were comparatively better days for state finances. The accrual of money referred
to in the tradition could have been from the spoils of war consequent to the victory at Hunayn.
The above is clear case of borrowing for defense purposes. It is also evident that the sum paid
back equaled the sum borrowed and no extra payment were involved.
7. The last case is that of Abbas, the Prophet's uncle, paying a year's zakat in advance, along with
that of the current year. Since this was presumably done at the request of the Prophet (SAW), it
has been construed as a kind of borrowing. The Prophet (SAW) significantly used the word
aslafa for the act, a word normally used for lending. Ibn Abbas is reported to have said that “the
Messenger of Allah (SAW) sent ‘Umar as collector of zakat. He (Ibn Abbas) says, Abbas was
rude to him so he came to Prophet (SAW) and informed him. He (Ibn Abbas) says, and then the
Messenger of Allah (SAW) told him: Àbbas has advanced to us their year's zakat of his wealth
as well as that of the coming year”. (al-Darulqudni)
In summary, the following can be noted. “The Prophet (SAW) borrowed both in cash and
kind, in small amounts as well as large, from Muslims as well as non-Muslims, from men as well
as women. The purpose of borrowing was need fulfillment or defense/jihad. But he also
borrowed to pay off more urgent debts. No coercion was involved in his borrowing. Nor did it
stipulate repaying more than what was received as loan.” (Siddiqi 8).
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He borrowed when he did not possess, in cash or kind, what could meet the purpose in
view. He borrowed in anticipation of future income from which repayment could be made, but
he also borrowed when no definite future income was in sight. He always repaid the debts he
incurred. To put the above in proper perspective it should be noted that the usual sources of
revenue for meeting public expenditure during Prophet's time were the following:-
a) Zakat (including ushr) which gradually grew in volume after the second year after
hijrah when it was introduced.
b) Fai, including the product share from Khaibar which was a steady source of revenue.
c) Spoils of war out of which a share accrued to the public treasury.
d) Voluntary donations, often in response to appeal from the Prophet (SAW).
The first three sources brought nothing during the first year of the Prophet (SAW) in
Madina; hence exclusive reliance must have been placed on the last. In the light of available
reports, revenue from all these sources was meager till year seven when Khaibar was subdued.
Some cases of small borrowing for need fulfillment seem to belong to this period. But, as we
have noted above, the two cases of big borrowing (case 5 and 6) belong to the post-Khaibar
period and relate to defense purposes.
These records of Prophet's borrowing for public purposes do not mention any attempt by
him to appeal for donations before resorting to borrowing, though a lack of report to this effect
does not eliminate the possibility. However, From all the above mentioned borrowing pattern of
the Prophet (SAW), Anchor borrowing programme was not discuss, which created a vacuum that
need to be filled.
2. 8. 1 Public Borrowing In The Period After The Prophet (SAW)

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There is no clear indication that, borrowing took place during caliphs as it was said by Siddiqi
(10) “We could not find a single instance of public borrowing during the reign of the Khulafa'
Rashidun (Caliphs), i.e. years 11-40 A.H. This is not surprising as revenues from zakat including
ushr, fai including kharaj, as well as spoils of war were steadily rising throughout this period”.
These revenues would have been sufficient to meet all public expenditure including need
fulfillment and jihad/defense. Something similar applies to the next hundred years of Umayyad
rule (41-132 A.H./661-749 A.D). We could not find any instance of state borrowing at the level
of the central administration. However, there are reports from the provinces of army
commanders borrowing to equip their forces or governors borrowing to pay a salaries/pensions
on time, or in order to provide famine-relief. Four specific cases may be noted.
1. In the first case, an army commander borrows from traders to buy provisions for a twelve
thousand strong army. He pays them back after some weeks. The incident belongs, probably, to
the year 65 A.H./684 A.D. The commander concerned is a tabi'i (i.e. one who has met a
companion of the Prophet (pbuh) Muhallab bin Abu Sufra, who died in the year 83 A.H. He was
asked by the governorate to Basra to take care of the kharijji rebellion which dominated Persia
and threatened parts of Iraq. "They took stock of the public treasury and discovered that it had
only two hundred thousand dirhams. This was insufficient. Muhallab then sent for the traders and
told them: For a whole year your business is depressed because the supplies from Ahwaz and
Persia have been cut off from you. Let us have some transactions. Then you come with me and I
will, God willing, fulfill all my obligations toward you. They sold to him and he took whatever
he needed to equip his army and to provide for it .......". (ai-Mubarrad 1060).
This is a case of purchase on credit on a very large scale. Even though no extra returns
are involved the traders have a big stake in the whole thing as the success of Muhallab's mission
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would eventually restore their supplies from Persia. It is not difficult to imagine that such
`borrowing' or purchase on credit would be repeated elsewhere too, though not necessarily at the
central government level. The report underlines an important point not any less relevant to our
age than it was in the seventh century: Sometimes it is possible to meet a deficit by purchasing
what you need on credit. In the year 77 A.H., in a similar situation, “a man asked by the governor
of Khurasan to launch an attack àcross the river' on Central Asia, is reported to have borrowed
from traders and other people in the town of Sughd.” (Tabari 312 -313)
2. Another case of a provincial officer borrowing for public purposes occurred during the reign
of ‘Umar bin Abd al ‘Aziz (99-101 A.H/715-717 A.D.). The officer, Hayyan bin Shuraih
borrowed the sum of twenty thousand dinars from one Harith bin Thabita to meet a deficit in
payments to those registered (ahl alDiwan). He wrote to the Amir al Mumineen requesting him to
arrange repayment to the lender. (Maqraz 139)
3. Earlier, most probably during the years 58-59 A.H., Sa'id bin al ‘As (d. 59 A.H.) the governor
of Madina during the reign of Amir Mu'awiyah (41-60 A.H./661-680 C.E.) borrowed to feed
people during a famine, having first exhausted all the funds in the public treasury. (Ibn Manzur
135)
4. The first century of Abbasid rule, from 132 A.H. to 232 A.H. was blessed by firm central
administration and robust finances. Then started the period of weak rulers, domination of Turk
army chiefs and gross financial mismanagement. The Caliphs ruled only nominally as power was
in fact exercised by the army commanders while the finances were managed by Wazirs. The
chief interest of the Caliph lay in the huge sums of money flowing into his private treasury
(Baital-mal-al-Khas) thanks to the appropriation of lands over the past and the customary gifts
presented to the Caliph, especially by the aspirants to public offices. It was not unusual, in this
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period, for the public treasury to be empty while the royalty rolled in money. The army did not
get paid in time. Unusual delays in the payment of salaries led the infantry to protest which
sometimes culminated in riots in the capital city, Baghdad.
The first reports of public borrowing in our sources appear during the reign of the
eighteenth Abbasid Caliph Muqtadir who ruled from 295 A.H. to 320 A.H. (908 A.D. to 932
A.D.) Muqtadir ascended the throne at the young age of thirteen. Real power was wielded by his
mother and the Wazirs who were changed very frequently. As we shall see below the urgent need
to pay the army while the state coffers were empty was behind most of the public borrowing that
occurred. The nine reports relating to public borrowing given below all belong to the period 300
A.H. to 333 A.H. This period was ruled by four Abbasid Caliphs, Muqtadir (295-320 A.H.),
Qahir (320-322 A.H.), Radi (322-329 A.H.) and Muttaqi (329-333 A.H.).
The research could not cover the later period for many reasons, not the least important
among them is the fact that by then the world of Islam was divided into a dozen units having
separate rulers and independent finances. Any study covering only the nominal Abbasid
caliphate with its seat at Baghdad could no longer be credible. It also deserves mention that we
have relied on sources almost contemporary to the events being reported, e.g. Suli (d. 335 A.H.),
Tanukhi (d. 384 A.H.), Miskwaih (d. 421 A.H.) and Sabi (d. 448 A.H.). One of the greatest of
the early historians of Islam, Tabari (d. 310 A.H.) does not report any case of public borrowing.
Later historians draw upon these and other early sources. The above mention borrowing also did
not touch the area of research which that also created a vacuum that need to be filled.
2. 8. 2 Public Borrowing In Early Fourth Century A.H.
1. "Ali bin Ìsa used to borrow from traders when some payment came due and he had no other
means to make it. He borrowed on the basis of letters of credit (saftjat) coming from the
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provinces but not yet due for payment. (He borrowed) ten thousand dinars against payment of a
profit of one and a half daniq of silver for each dinar. Every month he owed two thousand and
five hundred dirhams as profit. This practice continued with Yusuf bin Finkhas and Harun bin
Imran, or their deputies, for sixteen years, and till after their death. They were not turned away
till their death. They had gained this position (of state bankers) during the wizarah of Obaidullah
bin Yahya bin Khagan. The ruler did not consider it wise to turn them away so that the
Jahbadhah retained its credibility among the traders and the traders would lend the Jahbadh in
time of need. If the bankers were to be turned away and others were given that position and the
traders refused to deal with these, the affairs of the Caliphs would collapse". (al-Tanukhi 31-32)
2. Tanukhis` above statement follows his narration of an incident which culminates in the wazir,
Ali bin Ìsa making a special arrangement with the two bankers named above. He is reported to
have told them: "Every lunar month I need a sum of money to be paid to the infantry troops
within the first six days of the month. This amounts to thirty thousand dinars which sometimes is
not available to me on the first day of the month, even on the second. I want you two to lend me
one hundred and fifty thousand dirhams which you can recover within the month out of the
revenues from Ahwaz, because the administration of Ahwaz revenue is already in your
charge.....". (al-Tanukhi 31)
Significantly, no `profits' are promised in this case, nor is there any mention of letters of
credit. The author has quoted his source in giving this report whereas the statement quoted earlier
is given on his own authority. It is also to be noted that the two bankers named above were Jews
not Muslims.
3. The two Jewish bankers were given official position by Muqtadir's second wazir, Abul Hasan
Ali bin Muhammad bin al Furat whose first round in this office lasted from 296 to 299 A.H.30
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Al-Sabi reported that once Abdullah Muhammed bin Isma‘il al-Anbari al Zinji told him about
this wazir that: "He called Yusuf bin Finkhas the Jewish jahbadh, who was the jahbadh of
Ahwaz, and told him, `This situation has arisen and our colleagues had not made the necessary
preparations to deal with it. I have assigned their emoluments to (the revenue from) Ahwaz. Now
it is very necessary that you pay them in advance for two months. He (Yusuf bin Finkhas)
mentioned the large sums already assigned for advance payment on Ahwaz account and that it
was not possible for him to take on any more demands. He (the wazir) continued to argue with
him till he agreed to release one month's pay that very day....." (al-Sabi 198)
4. Another instance of interest bearing loan is cited by Miskwaih. It relates to the wazir Kaluzani
who held office briefly in the year 319 A.H. "Ibn Qarabah used to indicate to Muqtidar and to
Mifleh al-Aswad that it was he who helped the affairs of the wazarah being performed and that
no wazir could do without him. He used to make himself continuously available at Kaluzani's
place and to lend him, on behalf of Bani-al-Baridi and others, at the profit of one dirham per
dinar. He lent him two hundred thousand dinars which helped the management of Kaluzani's
affairs......" (Miskwaih 213)
5. The same person, Ibn Qarabah, is reported to be lending to Husain bin al-Qasim, who
succeeded Kaluzani as wazir in 319 A.H. àt the rate of one dirham per dinar as was his
practice'. (Miskwaih 220)
6. Facing a very tight financial situation, Husain is also reported to have sold some public
property to raise five hundred thousand dinars and to have realized in advance half the money
due in the year 320 A.H., some months before the beginning of that year.” (Miskwaih 226)
7. After a couple of years, in 323 A.H. during the reign of Caliph Radi, we find another wazir,
Abu Ali bin Muqlah, `borrowing' from traders who used to supply flour against what was due
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from Mosul. He raised four hundred thousand dinars in this manner. Significantly, no `profits'
are involved in this `borrowing'. However, it becomes clear after a few pages that the `borrowing'
actually amounted to advance payment for grains to be collected from the region as taxes and
delivered to traders. (Miskwaih 326)
8. Yet another report about the same year, 323 A.H. This time the wazir tried to borrow from
traders in order to pay the troops, offering traders letters of credit (saftajat), the traders
disappeared and the effort did not succeed. (al-suli 76)
9. Another report by the same author, Al Suli, relates to the year 331 A.H. The then Amir al-
Umara, Nasir al Dawlah, upon learning that the money changers were dealing in interest openly,
warned them against doing so and obtained their pledges to that effect. According to al-Suli,
however, this helped restrain them only a little. (al-suli 231)
This last one is not a report of public borrowing. We have noted it, only to underline the
fact that despite the practice of interest-based lending in the market, the authorities remain
committed to its elimination till the close of the period we have studied in this paper.
It is difficult to deny, however, that interest was involved in some cases of public
borrowing also. This reflects the gross mismanagement of the financial affairs of an otherwise
prosperous regime as well as the compulsions of circumstances created by the maintenance of a
large force of mercenaries in the capital city of Baghdad. The most surprising case of borrowing
on interest relates to the wazir Ali bin Ìsa, `probably the first to obtain a loan by paying interest
according to some scholar'. (Fischel 25)Àli bin Ìsa is reputed to have been a pious Muslim,
well versed in shari'ah sciences and possessing extraordinary managerial skills. The only direct
report of this wazir borrowing from bankers is found in Tanukhi and that too does not mention
interest [case (2) above]. But the same author reports Ali bin Ìsa borrowing regularly with
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interest on the basis of letters of credit, without quoting any specific source. Even if we are to
accept this sweeping generalization, not corroborated by other historians, the question remains:
Did he, under compulsion of circumstances, deliberately violate the prohibition of interest, or did
he look differently at using letters of credit the way he did according to the second report quoted
above? On the basis of the scanty material we could obtain, we can distinguish between four
types of public borrowing in early fourth century after hijrah.
1. Advance payment realized in a salam type transaction, i.e. cash obtained against food grains to
be delivered in future (Case 7).
2. Discounting letters of credit of bills of exchange, i.e. obtaining cash by surrendering the right
to receive a larger amount of cash later. (Cases 1 and 8).
3. Cash obtained by promising to pay later with an addition of a percentage of the sum borrowed
(Cases 4 and 5).
4. Cash obtained by allowing the lender to recover the sum borrowed from revenues due in the
near future (Cases 2 and 3). As regards case 8 noted above, it is not clear from the report whether
it belongs to category 2 or to category 4.
In all the cases reported above it is not the Caliph who borrowed, but the wazir who actually ran
the administration. Most of the borrowing is done in cash to pay the army in time, but sometimes
it is done to make some other payments. Public borrowing in this period has been largely in the
nature of bridge-financing, to be repaid from sure sources of revenue in the near future. Loans
are repaid out of the kharaj revenue (or land taxes). The lenders are Jewish bankers as well as
Muslim traders. The amounts involved are large, but not out of proportion with the state
revenues in those times. One significant point to note is the absence of any reference to need
fulfillment as the purpose of public borrowing. As regards the use of coercion in borrowing we
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have no clear evidence, even though the sources abound in reports of confiscation of the
properties of high officials once they fell from favor and of all sorts of extortions from traders.
It is very difficult to opine whether there were any alternatives to public borrowing in so
far as it was resorted to. Apparently all other means were exhausted before doing so. Ali bin Ìsa
is especially reported to have curtailed public expenditure to a very great extent, side by side
with abolishing many extra-shari'ah taxes. What circumstances forced a pious man and efficient
financial manager, who curtailed public expenditure in an otherwise wasteful affluent society, to
borrow at interest, and how could he justified it to his own conscience, remains an enigma -- at
least till further details are available. This deviation from clearly defined shari'ah rules seems,
however, to be a culmination of many other deviations in the financial management of the state,
the details of which fill the pages of history books. Much so this heading did not discuss about
anchor borrowing programme which has really created a vacuum that need to be fill.
2. 9 USURY (RIBA)
The basic principle of Islamic financial system is the prohibition of usury (riba). The Arabic
word, riba, literally means growth, excess, addition, expansion, surplus or increase. Riba, from
Sharia’s perspective, refers to any predetermined and conditional extra amount, big or small, that
must be paid by the borrower to the lender above and over the principal, for the loan to be
materialized or for an extension in its maturity. Maududu asserted that “the Holy Qur’an uses the
word riba to denote interest” (160). Riba is categorically prohibited by Qur’an and Sunnah
regardless of whether the loan is taken for the purpose of consumption or for some production
activity. The prohibition of riba implies that the predetermined positive return on a loan as a
reward for waiting is not permitted by Shari’a, regardless whether the return is a fix or variable
percentage of the principal, an absolute amount to be paid in advance or on maturity, or received

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in the form of a gift or prize or a service. — The prohibition of riba applies equally to the loans
obtained from or extended to Muslims as well as non-Muslims. There is no distinction between
Muslims and non-Muslims, or between individuals and states with respect to the receipt and
payment of interest. Therefore, the prohibition of riba has universal application. This is
consistent with Islam being a universal religion that preaches the unity of mankind and the
equality of all individuals, irrespective of their sex, color, nationality or faith. — The prohibition
is explicitly mentioned in four different revelations (Surah) of Qur’an (2:275-76, 2:278-279,
3:130, 4:161 and 30:39) expressing the following ideas:
1. Riba deprives wealth from Allah’s blessings.
2. Riba is equated with wrongful appropriation of property belonging to others
3. Muslim should stay away from riba for the sake of their welfare.
4. When lending money, Muslims are asked to take only the principal and forgo even that
sum if the borrower is unable to repay.
5. Despite the apparent similarity of profits from trade and profits from riba, only profits
from trade are allowed.
2. 9. 1 Types of Usury (Riba)
Shari’a scholars have differentiated between two types of riba.
1. Riba Al-Duyoon (Riba on Debts): This is what the Qur’an prohibited and refers to as a war
against Allah and his prophet. Riba al-Duyoon is known in Islamic Shari’a as riba Al-
Nasi’ah.
 Riba Al-Nasi'ah: Nasi’ah means delay, defer or wait. It is applied to “money-money
exchange”; money is exchanged for money with deferment. Since the verses of Qur’an
have directly rendered this type of riba as haram, it is called riba al-Qur’an. Similarly,
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since only this type was considered riba in pre-Islamic era it has earned the name of riba
al-Jahiliyya. Riba al-nasi’ah is the real and primary form of riba that represents
predetermined extra amount on deferred payments due to the inability of the borrower to
pay its debt on time; i.e., extending the period for payment by charging more than the
principal value. Riba al-nasi’ah underlies most of conventional financial products and
services.
2. Riba Al-Buyu’ (Riba on Sales): This type of riba is specifically prohibited by the Prophet
(SAW. It gives a more comprehensive implication to riba and is not merely restricted to
loans. Riba Al-Buyu’ applies to certain types of sales transactions, both immediate
exchanges as well as credit exchanges. It is commodity specific and results in what is known
as riba Al-Fadhl.
3. Riba Al-Fadhl (Riba on Increase). Also known as riba al-Sunna or riba alhadeeth Riba
al-Fadhl is described as an unlawful excess in the exchange of two counter-values where the
excess is measurable through weight or measure. The basis for the prohibition of riba in the
exchange of commodities is the famous hadith of the Prophet on six commodities “sale gold
for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt –
like for like, equal for equal, and hand-to-hand (spot); if the commodities differ, then you
may sell as you wish, provided that the exchange is hand-to-hand or a spot transaction.” This
hadith created a lot of confusion and many scholars in the past or in recent days expressed
their inability to appreciate the reasons and the logic behind the concept of Riba al-Fadhl and
its alleged prohibition. Economically speaking it would be irrational and unacceptable to
imagine that a person would knowingly commit himself to a bargain whereby he is required
to give a superior quality of his commodity to another person for inferior quality of the same
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commodity. It would indeed be unfair to expect the former to agree to any such deal in spot
exchange. Furthermore, there hadith shows that the Prophet (SAW) categorically stated that
the question of riba relates to exchanges involving credit and has nothing to do with spot
exchanges. What is believe now is that the Ahadeeth of riba al-Fadhl, if properly interpreted,
serve to clarify two important aspects relevant to the prohibition of riba: one that riba is only
applicable to credit dealings and, two, that while dealing with loan transactions, it is
absolutely essential that what is returned by the borrower should be identical to the item he
borrowed. If you give on credit gold, then receive back the same gold: the same weight and
the same quality; and if you give silver (on credit), then receive back the same silver: the
same weight and the same quality, because the one who gives more or expects more, then (he
should know that,) that is exactly Riba.’ Likewise, if you will sell gold for silver on credit
then there is a danger of interest in it.
2. 9. 2. Usury in Exchange
- Any profit or advantage gained or lost in the exchange of gold or silver, or in the
exchange of foodstuffs is considered usury and as such, prohibited. Foodstuffs, gold and
silver can only be exchanged for their exact equivalent.
- Payment in kind taken by a jeweler out of the metal entrusted to him, is considered usury
and as such illegal.
- Any advantage in a payment left to one of the parties is considered usury, unless it is
gratuitous.
- Thus, in the payment in cash of a sale price, it is lawful to give or to receive more than
the weight or quantity agreed upon, provided that the excess or deficiency received is not
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compensated for by any usurious advantage gained in another way, as for instance, by a
higher rate of currency of the coins given in payment.
- Adulterated goods shall be seized and given away in alms unless they were bought at
their intrinsic value with no intention of fraudulently reselling them.
- A reputed fraudulent; the dressing of cotton goods, silk etc. the debasing of metals, the
insufflation of carcasses etc.
- Provisions are articles of food, the trading in which may give rise to profits reputed to be
usurious, are those which constitute the daily subsistence of mankind and which can be
preserved; with regard to their being capable of being preserved different opinions exist.
Such as wheat, barley, and rye, forming one category; oats, millet and maize, each
forming a category. (Ruxton 158 -160)
2. 10. 0 ADDRESSING SOME MISCONCEPTIONS ABOUT RIBA
As mentioned in the definition of riba given above, anything, big or small, stipulated in the
contract of loan to be paid in addition to the principal is riba . — However, Naqvi, Abbas, and
Ahmad 560 - 562 stated that there have been a number of misconceptions about riba and its
prohibition, which was addressed as follows:-
2. 10. 1 Modern day interest is not riba
1. Interest-based commercial transactions were invented by modern day business thus not
covered by the riba referred to in the Qur’an. The prohibition of riba cannot be extended
to modern day banking.
2. Interest is based on the premise “money is a commodity”.
2. 10. 2 Addressing the misconception.

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1. Interest is the rent paid for the use of money. The lender rents you the money at a rental rate
called interest. In a legal sense, “interest” implies that excess amount which a creditor settles to
receive or recover from his debtor in consideration of giving time to the debtor for repayment of
his loan.
2. Thus, riba and interest are the same. The equivalence of riba to interest has been recognized
by the majority of Muslim scholars. They explicitly and clearly equate riba to interest.
2. 10. 2. 1 There is no difference between Interest and Profit.
- Bank interest resembles profit in murabaha.
2. 10. 2. 2 Addressing the misconception.
Allah (SWT) states in the Qur’an that some people might raise the issue of the apparent
similarity of profits from trade and profits from riba; however, only profits from trade are
allowed. Generally, trade means exchange of any goods for money. You can buy or sell goods
for money at any price. In murabaha, you buy an item at one price and sale it to someone at a
higher price, allowing him to pay you for it over time. In riba, you lend someone some money
and require him to pay back a greater value of money than what he borrowed. Murabaha
prevents you from being caught in a spiral of debt, as the amount that you pay fixed before hand.
You cannot get a situation where you have large debts that you cannot pay off and which rise
every year due to interest.
Several types of risks are associated with trade while charging riba (interest) is risk free.
There are other legal means to avoid risk of default. Usmani 26 claimed that Conventional
economy today is debt-based that transfer risk to others, while Islamic economy is asset-based
that emphasizes risk sharing. Great emphasis is placed in Islam on the distinction between trade
and riba. Riba, which represents unjustified monetary benefits, is different from trade, which
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promotes partnership and exchange in a just and fair way, which leads to a more equitable
distribution of income, and a more just economic system.
2. 10. 3. 1 Riba is only relevant to consumption loans, not commercial loans
The common practice of riba during the time of its prohibition was the charging of interest on
consumption loans taken by poor people to finance their basic needs. This form of exploitation is
not present in production loans whereby in many cases, the debtor is economically well-off and
loans taken are used to generate profit. Therefore, the basic cause of the prohibition of riba,
exploitation and injustice, is absent.
2. 10. 3. 2 Addressing the misconception
First, the prohibition of riba concerns the unjustified excess, not the use of funds. The Qur’anic
prohibition of riba includes all forms of it without any specifications of whether it is for
consumption or production and regardless of the financial status of a party (whether rich and
poor).
Since riba is equal to interest, it makes no difference whether the loan is for consumption
or business purposes, and whether the loan is given (or taken) by a commercial bank,
government, corporation, or an individual.
There are evidences that interest-based commercial or productive loans were in existence
since the beginning of human civilizations. In addition, a number of Ahadeeth reporting on the
practice of riba-based commercial loans.
Nevertheless, lending in Islam is considered as "a benevolent act with a view to helping
someone in need. If someone needs capital for commercial purposes, then capital should be
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given in a risk-sharing basis and if someone needs funds to overcome some short term need, then
such need should not be exploited and the borrower should not be put under undue burden.
2. 10. 4. 1 Inflation justifies interest
1. It is argued that a debt when repaid at a later date may have lower purchasing power due to
persistent increase in the general prices of goods and services (inflation). Hence, the borrower, in
essence, repays less, which would be unfair to the lender if he is not compensated for the loss of
purchasing power.
2. With the issue of inflationary nature of the contemporary economy, the prohibition of riba
would be applied to only real interest rate (the nominal interest rate minus the rate of inflation).
Otherwise, the absence of interest in an inflationary period would amount to negative real
interest, which would penalize lenders and rewards borrowers.
3. Indexation is needed to adjust the value of the loan to compensate for the change in the value
of money due to inflationary pressure so that there is no injustice to the lender.
4. Indexation refers to the price adjustment, which allows capital or income to take account of, or
benefit from, inflation. The purpose of indexation is to keep the purchasing power after inflation
as before inflation.
1. First, rates of interest are not based on rates of inflation, although there may be some kind of
correlation. Actually, several studies have illustrated that interest is one of the causes of inflation.
A better way to reduce inflation is to stop charging interest to begin with.

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2. If surplus on loan amount is only attributable to actual value loss due to inflation, there will
be no commercial incentives to banks.
3. With regard to indexation, it is justifiable from Shari’a perspective for wages to face the
inflationary rise in prices. But the majority of scholars oppose indexation of financial assets
based on the following arguments:
1. Islam considers any excess of the loan’s principal as riba. So only the original amount lent
should be repaid.
2. The presence of inflation will result in the decline in the purchasing power of lender’s money
whether it is given to the borrower or not.
3. The factors that lead to inflation are beyond the borrower’s control, so why the borrower
should be held responsible
4. Even if indexation is allowed there is no perfect index to fully and fairly capture the loss of the
value.
1. However, one solution to protect the purchasing power of money lent, the lender and
borrowers can agree that the loan can be denominated in terms of some relatively stable
commodities such as gold or diamond, or a strong currency. Thus, the lender can lend a certain
quantity of gold to the borrower who is obligated to return the same quantity when it is due.
2. For example, suppose an individual borrow 50,000 Yemeni Rial from his friend when the
exchange rate between USD and YR was 1: 4, which means the YR50000 equals to $12,500.
After several years, the borrower decides to return the amount of debt to his friend, but the
exchange rate between USD and YR is now equal to 1: 200, which means the YR50000 equals
only to $250. What do you think? To me, it is unfair to return the original amount with its value
now equal to $250 instead of the original value of $12500.

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3. The above example results in a big loss to the lender and a large gain to the borrower.
Denominating the loan in terms of a relatively stable commodity is a reasonable and fair solution
to both parties.
4. Another solution to overcome the decline of the value of money is the Islamic way of profit-
and-loss sharing partnership, so both parties share the risk.
2. 10. 5. 1 If it is not excessive, it is not riba
It has been stated in Surat al-Imran (3:130) - “O those who believe do not eat up riba doubled
and redoubled”. Thus, if the rate of interest is not excessive (e.g. doubled) then it does not
constitute riba and therefore not prohibited.
1. Verses of the Qur’an on the same subject matter must be studied in relation to each other; e.g.,
Al-Baqarah (2:278) – “O those who believe fear Allah and give up whatever remains of riba, if
you are believers” Every amount, regardless of magnitude, over and above principal is riba. We
must understand the Qur’an as a book of guidance that directs us to the core of values; otherwise,
Qur’an will be misinterpreted. For example, verse 41 in Surat Al-Baqarah (2:41) states “Do not
sale my verses for a little price”. Does this imply that one can sale verses for a high price?
2. The expression “doubled” only meant to show how bad the practice of riba, and emphasize
the added severity of the sin due to its excessiveness.
2. 10. 6. 1 Riba is allowed under Dharura (Necessity)
1. Under dharura circumstances, the haram is permissible. If it is permissible to consume pork
to save one’s life from dying of hunger, riba is allowed under dharura too.

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1. First, there is a misunderstanding of dharura. Dharura is applied only to life threatening
circumstances. To identify dharura that necessitate riba the individual debtor must answer the
following two questions with absolute sincerity: Is the purpose of the riba-based loan to protect
an absolute necessity? Have all other permissible alternatives been exhausted?
2. At the institutional level, removal of riba from the economy does not imply that financial
institutions will have to give charitable (interest-free) loans. The role of loan giving and taking in
Islam must be well understood.
3. While giving a benevolent loan is highly commendable, the taking of a loan is discouraged
and limited to cases of absolute necessity. Islam provides means of financial intermediation in
the form of profit and loss sharing
2. 10. 7. 1 Interest represents an opportunity cost which cannot be denied.
1. Interest rate is just a compensation for the opportunity cost of the lender during the time of
loan. According to this argument, the lender could use his money to consume goods or services
or could benefit from investing this amount today. Therefore, the postponement of consumption
or investment involves sacrifice and hence, the individual deserves compensation for giving up
the satisfaction he would get from consumption today or the return he would get from
investment.
1. The notion of interest as a reward for deferring consumption is rejected in Islam. Saving by
itself should not be rewarded by an increase in capital. The ability to save is a reward by itself.
2. There may be some alternative uses to the loaned fund but there is no guarantee that these uses
would guarantee a return. Furthermore, as Muslims, we should not consider only the material
aspects but also the non-material dimensions such as the rewards in the hereafter.
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2. 10. 7. 1 Interest as a compensation for risk element.
1. Lender faces different economic risks including the default of the borrower, unanticipated
changes in economic circumstances such as rapidly rising inflation. Taking all these risks should
be compensated.
1. It is always true that lenders may face different types of risks whether he lend his money or
not.
2. Shari’a-based contracts provide rules and regulations that protect both lenders and borrowers
in ways other than charging interest.
2. 10. 9. 1 Interest is a reward for money as a commodity
1. The advent of interest-based lending has introduced a fourth function of money: “money as a
commodity”
2. It is argued that, just as a merchant can sale his commodity for a higher price than his cost, he
can also sale his money for a higher price than its face value
3. Similarly, just as a person can lease his property and can charge a rent against it, he can also
lend his money and can claim interest on it.
1. Islam rejects the notion that money is a commodity
2. The prohibition of riba dictates that money should never be treated as a commodity
3. There are differences between money and commodities
1. Money is not an objective in itself. Treating money as a commodity (trading in
money) goes against the original wisdom behind its creation (medium of exchange.
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2. Money has no intrinsic value, it, in itself, cannot be used for direct fulfillment of
human needs.
3. Commodities can have different qualities while money is perfectly homogeneous.
4. In a commercial transaction, specific commodities are identified for exchange
whereas money is generic. Treating money as commodity directs economic activities
towards money out of money, and against providing real goods and services. In the
contemporary world economic setting, most of the money that is transferred around
the world in daily basis is for purely financial transactions, and has no link to
transactions in the real economy. Another critical repercussion of the prevailing
monetary system (which treats money as a commodity) is that the system, by design,
promotes inflation
2. 10. 10. 1 Time Value of Money.
1. Time value of money (time preference) is an important concept of modern conventional
financial system. In simple terms, it means that money has a time value. Having money now is
more valuable than having it at some future time. A rational person would prefer to have
USD1000 today rather than having it later because the USD1000 today may not be same as
USD1000 tomorrow.
2. Sacrificing present consumption for future consumption must be compensated.
1. Islam does not permit the reward for time but allows reward for efforts and risk-taking
activity in business. Because money in Islam is just a medium of exchange, it cannot earn more
money by itself without putting it into real productive actions such as sale, lease, and investment.
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2. Time value of money is recognized by Shari’a but only on sales contracts not in debt
contracts. There is a great distinction in Shari’a between investment and lending. Since time by
itself, without any economic activity does not yield any return, it is actually the economic
activity that is undertaken during the time, which creates the yield.
3. Lending does not constitute, by itself, a productive economic activity. But, investment is an
economic activity that needed to be compensated for any profit or loss received during the time.
Investment is different from pure riba-based risk-free debt. A seller in a trade, whether on spot or
deferred payment basis, is free to charge any price and the profit that accrues to him is legitimate
(halal). There is a possibility that his “spot” price may be lower than his “deferred” price. Such
price differential is obviously due to deferment and is recognized as the time value of money.
Such time value of money is acceptable in the Islamic framework. What is not permissible is the
time value of money in the context of debt.
4. Nevertheless, when the buyer in a deferred-payment sale decides to defer his payment beyond
the due date for payment, neither he nor the seller is allowed to increase the price. Price is now in
the nature of debt and a debt cannot be replaced by a higher or lower debt. A higher debt
replacing a lower debt results in riba on the old debt.
5. Shari’a applies Islamic time value of money in such a way that exists in mudaraba contacts
where rabbul-mal has the right to a share of the venture’s profits because he has given up current
consumption or the ability to invest the funds elsewhere (but at the same time rabbul-mal may
suffer loss too)
2. 11 PARTNERSHIP (MUSHARAKAH)
Doi opined that “Musharakah or partnership contract signifies the conjunction of two or more
persons to carry on a business to share the profits by joint investment. In the widest sense of the
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term Musharakah, the partnership exists where property is held in common between two or more
co-proprietors. A person thus alienates and undivided share of his property, in return for an
undivided share of the property of another each having a right to administer the whole.” (365)
“The word sharing and partnership in activities has occurred several times in the Qur’an –
Moses prays to Allah to make Harun, his brother, his partner in his great mission to
Pharaoh: “Harun (is) my brother: add to my strength through him and make him share
my task”
Sharing the estate in mirah as partners is mentioned in Surah Al-nisa’i
“But if (they are) more than two, they are sharers (shuraka) in a third”
The Musharakah may be affected in a specified amount of capital or in labor on
contribution of labor and skill or in credit where no capital is contributed and the partners buy
and sale on credit on understanding that they shall share the profits. There may be a musharakah
of mixed characters in cases of capital and labor, Agricultural farms and labor and so on and so
forth.
2. 11. 1 Limited Partnership (Musharakah al – inan):
Musharakah al – Inan is a limited partnership in which a partner is not allowed to do anything
without his co – partner.
2. 11. 2 Musharakah al – abdan: Association of Bodies or Labor Association, Islamic law allows
two or more persons to associate themselves for the exercise of a profession or a handicraft. The
profits will be practically equal for the partners with a view to lending mutual assistance even
through the associates work separately. Imam Malik says in Mudawwamah al – kubra that the
stock of tools may be provided by each partner in such labor associations, but the other jurists
say that the tools will be owned by the association or hired by the association at common
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expense. In this kind of sharikah, any payment received or engagement entered upon by one of
the associates for some work done or to be done binds the other, and the payment remains at
their risk even after the dissolution of the sharikah. It will be illegal for one of the associates to
hold a greatly predominant share in the stock of tools by one of the associates of the sharikah.
2. 11. 3 Dormant Partnership (Qirad)
Qirad agreement is a contract by which a person entrusts funds to a trader (amil) in order that he
shall trade with it, subject to the lender having a share in the profit. Thus, in Qirad, the capital is
handed over to an agent to trade with, and the contract comes into force when the agent starts his
trading journey. Qirad was encouraged by the Prophet (SAW) himself, and it was a common
form of trading in the early days of Islam.
The commercial enterprises in the time of the Prophet Muhammad (SAW) used to be
organized under the charge of a caravan leader commissioned by one or more rich persons of the
society.
In the contract of dorman partnership a certain fixed capital is handed over to agent on
condition that the person entrusting it shall participate in the profits in certain proportion. The
dormant partner remains the owner of the capital. The agent is only in possession by virtue of the
trust reposed in him. He is only held responsible for negligence or the breaking of the rules of the
contract.
2. 11. 4 Capital in Qirad Partnership
In the dormant partnership, the capital should not consist of a debt owed by a debtor to his
creditor nor should it consist of a pledge or of a security. That is, the debtor or the holder of the
pledge should not be the agent and the creditor should not be the dormant partner. Capital should
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not consist of debased coins or of goods which the agent has taken upon himself to realize
because in these cases the value of the capital cannot be strictly determined. It is prohibited in a
Qirad contract that all there is of the enterprise are turned upon the agent. The dormant partner
will continue to remain the owner of the capital. The agent is only in possession by virtue of the
trust reposed in him. In Qirad partnership, the risk for the enterprise should not be thrown upon
the agent; otherwise the contract will become invalid. It is prohibited that the shares should not
remain ambiguous or fake; otherwise, it will create confusion later on. The agent will be required
to perform his duties in good faith taking into consideration the good of the entrepreneur. He
should take the same amount of care as he would do if the concern where solely his own.
2. 11. 5 Co - Partnership:
Moving about in the land of Allah seeking for trade or work is mentioned in surah Al – Baqarah.
Perhaps, the word Mudarabah is derived from this Qur’anic phrase. Qureshi says “Mudarabah,
in legal terminology, is a contract in which certain property or stock (Ras al - mal) is offered by
the owner or proprietor (Rabb al - mal) to the other party to form a joint partnership in which
both parties will participate in profit( 7-24). Ruxton stated that “The other party is entitled to a
profit in lieu of his labor since he is giving to manage the property (Mudarib). It is a contract of
co – partnership. It is proposed by Muslim economics that the Islamic interest – free banking
system can best be established on the principles of Mudarabah.” (34)
2. 11. 6 The Nature of the Partnership
The four Sunni Schools of thought have gone as usual into some details about the nature of the
Mudarabah act: is it an act of association or partnership, or is it a sort of proxy or is it a
combination of both? Whatever their views may be, there is no doubt that such an act is
permissible and valid under the following premises:

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a) There should be (at least) two persons who, out of their free will, enter into an agreement
by which one (or more) would contribute a fixed amount of disposable money to be
delivered to the other party who would trade with this subscribed capital for the benefit of
the partnership (or association). (Ahmad 69)
b) Every party to the act must know for sure and without ambiguity hos share in the
expected profits and provided that this share is a percentage and not an absolute fixed
amount. (Ahmad 69)
In case no profit is realized, the active partner would receive nothing for his efforts. If there
is a loss, it would be deducted from the principal (i.e. the contributed capital).
All expenses necessary for implementing the Qirad act are deductible before the distribution
of any profits, even if such expenses exceed the total of gross profits.
c) The active partner must have the absolute freedom to trade in the money given to him and
take whatever steps or decisions that he deems appropriate to realize the maximum gain.
Any conditions restricting such liberty of action vitiates the validity of the act. (Ahmad
70)
2. 12 SUMMARY OF LITERATURE REVIEW
The research is written on Anchor Borrowing Programme in Islamic perspective. Most of the
works are written in different aspects like loan, debt, interest, borrowing from banks or
otherwise, but not in Anchor Borrowing Programme. It was argued that most of the writings are
in hypothetical or theoretical forms but not on specific terms or programme like Anchor
Borrowing Programme. Writings are available on banking system.
From the above literature review, alot of writings was done on interest, banking and
Islamic banking by some scholars; Siddiqi (237), Maududi (521), Qureshi (526), Ahmad (168),
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Abdouh (504; 505) Abu Saud and Naseer (154), Mahmud (168), Farid (514), Elgari (16), and
others. But in all their writings, nothing was discussed regarding the Anchor Borrowing
Programme.
Furthermore, there are alot of contributions from the above literature on loan, debt and
borrowing done by scholars, such as; Ahmad (84), Ruxton (37), Humayoun (2), al-Suli (76),
Miskwaih (213, 220, and 360), Mazraq (139), al-Mubarrad (1060), Tabari (312 - 313), and a
number of Qur’anic verses (2:282 - 283) and ahadith of the Prophet SAW from Bukhari,
Muslim, Ibn Majah and Abu-Dawud, but nothing was touched as per Anchor Borrowing
programme is concern.
Much so, writings on Qirad, Mudarabah, and Musharakah was done in the above
literature review by Doi (365), Khan (230) Ahmad (66 -73), Siddiqi (250), Kahf (612), Ruxton
and others, where they discussed extensively on them, but there is no any work writing on
Anchor Borrowing Programme.

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CHAPTER THREE
RESEARCH METHODOLOGY
3. 1 CONTEXT OF RESEARCH
3. 1. 1 A HISTORY OF JIGAWA STATE
Most parts of Jigawa lie within the Sudan Savannah with elements of Guinea Savannah in the
southern part. Total forest cover in the state is below national average of 14.8%. Due to both
natural and human factors, forest cover is being depleted, making northern part of the state
highly vulnerable to desert encroachment. The state enjoys vast fertile arable land to which
almost all tropical crops could adapt, thus constituting one of its highly prized natural resources.
The Sudan savannah vegetation zone is also made up of vast grazing lands suitable for livestock
production.
The socio-cultural situation in Jigawa State could be described as homogeneous: it is
mostly populated by Hausa/Fulani, who can be found in all parts of the state.[4] Kanuri are largely
found in Hadejia Emirate, with some traces of Badawa mainly in its Northeastern parts. Even
though each of the three dominant tribes have continued to maintain its ethnic identity, Islam and
a long history of inter-marriages have continued to bind them together.
According to National population commission retrieved 2017, About 3.6 million people
inhabit Jigawa State. Life expectancy as at 2001 was about 52 years with a total fertility rate of
about 6.2 children per woman of childbearing age (a little above the national average). Although
population of the state is predominantly rural (90%), the distribution in terms of sex is almost
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equal between male (50.8%) and female (49.2%). This pattern of population distribution is same
across various constituencies and between urban and rural areas. The 2002 CWIQ Survey
indicated that 45.2% of the population was made up of young people below the age of 15; 49.0%
between the ages of 15 and 59 while 5.8% were people aged 60 and above. This survey reveals
a dependency ratio of almost 1; meaning that there is almost one dependent to every
economically active person in the population.
Average household size was about 6.7 almost all of which were headed by males. About
60% of household heads were self-employed with agriculture as their main occupation, and
nearly two-thirds of these households were monogamous families. The overall literacy rate was
about 37% in 2002 (22 percent for women and 51 percent for men). School enrolment ratio is
fairly high with very good improvements in the last few years, even though there is still clear
disparity between boys and girls.
Basic indicators for water supply sector show that access to potable water is over 90%,
which is among the highest in the country. The 2002 CWIQ Survey however, indicated that
while access to high quality safe drinking water (pipe born, hand pump boreholes and protected
wells) is low at about 63%, nearly two-thirds of households have good means of sanitation. In
terms of health services, about two-fifths of the population have access to medical services
which is, however, higher in urban areas where access was found to be about 55%. The CWIQ
Survey found that an average of 70% of those who consulted a health facility expressed
satisfaction with the services provided.
Religion in Jigawa State is mainly Islam which constitutes about 98.9% of the
population, while 1.1% are indigenous Christians.

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Jigawa State—created out of the old Kano State in August 1991—is one of the 36 states
in the Federal Republic of Nigeria. The agitation for the creation of the state was led by Malam
Inuwa-Dutse, a former commissioner in the Ministry of Agriculture and Natural Resources
during the governorship of late Audu Bako, the governor of old Kano State (comprising present
Kano and Jigawa states). By the 1999 Constitution of Federal Republic of Nigeria, the state
comprises 27 local government councils, which are divided into 30 state constituencies, grouped
into 11 federal constituencies and 3 senatorial districts. These 27 local government councils were
further subdivided into 77 development areas by law No. 5 of 2004 of the State House of
Assembly. In line with the democratic setting in the country, the governments at both the state
and local government levels are elected, and comprise an executive with a unicameral
legislature. The state legislature has 30 elected members each representing one of the state
constituencies. To complete the state governance structure, there is an independent state judiciary
as the third arm of government.
The State Government administrative apparatus is organized into ministries, extra-
ministerial departments and parastatals, which are located across the three senatorial districts in
the state since 1999. This decentralized approach to governmental administrative structure was
seen as a move towards stimulating economic activities socio-economic development and
empowerment over a wider area since government is the largest employer, perhaps second only
to agriculture. In addition, this was also seen as a way for spreading even development among
major urban centers and a shift from “city-state syndrome” that obtained in the old Kano State.
Jigawa State consists of twenty-seven (27) Local Government Areas, They are:

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Auyo, Babura, Biriniwa, Birnin Kudu, Buji, Dutse, Gagarawa, Garki, Gumel, Guri, Gwaram,
Gwiwa, Hadejia, Jahun, Kafin Hausa, Kaugama, Kazaure, Kiri Kasamma, Kiyawa, Maigatari,
Malam Madori, Miga, Ringim, Roni, Sule Tankarkar, Taura,Yankwashi.
The economy of Jigawa State is largely characterized by informal sector activities with
agriculture as the major economic activity. Over 80% of the population is engaged in subsistence
farming and animal husbandry. Trade and commerce are undertaken on small and medium scale,
especially in agricultural goods, livestock and other consumer goods. Other informal sector
activities include blacksmithing, leather-works, tailoring services, auto repairs, metal works,
carpentry, tanning, dyeing, food processing, masonry etc. Even though modern industrial sector
is yet to gain a solid footing, the seed for their development was planted through establishment
of small-scale industries particularly in areas of food processing and other agro-allied activities
such as the Jigawa ethanol programme. These industries have been helped by the Information
Communication Technology program initiated by the Saminu Turaki, the states former governor.
The Federal Office of Statistics, in 2001, classified Jigawa State among those with relatively
high severity and incidence of poverty in the country, with a Gross Per Capita Income of N35,
000 per annum (US$290), which is below the National Average; till date Jigawa State is being
rate among the poorest states in Nigeria. However, the 2002 Core Welfare Indicators
Questionnaire (CWIQ) Survey indicated that over two-fifths of the population do not consider
themselves poor.
The State of infrastructure for economic development such as roads, electricity,
telecommunication and information technology have recently witnessed tremendous
improvements through massive rehabilitation and expansion works. With massive road
rehabilitation projects already undertaken throughout the State during the last five years, coupled
86
with efforts made towards power generation via Independent Power Platforms, and the Internet
Broadband Project, investment climate in Jigawa State in terms of economic infrastructure is
quite promising.
Education in Jigawa state is progressing well. Currently the state has a Federal University
which is situated in the state capital, Dutse and a state-owned University situated at Kafin Hausa
Local Government Area of the state. There is also Federal Polytechnic in Kazaure and a number
of Monotechnics across the state. Established in 2011, Federal University Dutse is fast growing
with number of applicants rapidly growing.
British support has provided the Jigawa State School of Midwifery in northern Nigeria with
essential equipment as well as helping the teachers develop the curriculum and get accreditation
for the programme.
Government of Jigawa State relates very well with multilateral agencies in the country
particularly the World Bank, UNDP, UNICEF, DFID and other international donor agencies and
NGOs. Multilateral agencies have been a veritable source of development funds and technical
assistance to State Government. Presently, the State partners with DFID, UNDP, UNICEF,
IBRD, IFAD, ADF and some other International Development Agencies in pursuit of several
development projects and programmes, particularly in the sphere of pro-poor growth, poverty
reduction, education, and positive reform programmes such as Public Expenditure Management,
Health Systems and Justice System Reforms.
3. 1. 2 A BRIEF HISTORY OF BAUCHI STATE
Bauchi (popularly known as Yakoba) is a city in northeast Nigeria, the capital of Bauchi State, of
the Bauchi Local Government Area within that State, and of the traditional Bauchi Emirate. It is
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located on the northern edge of the Jos Plateau, at an elevation of 616 m. The Local Government
Area covers an area of 3,687 km2 and had a population of 493,810 at the time of the 2006
Bauchi State has twenty Local Government Areas:
Bauchi, TafawaBalewa, Dass, Toro, Bogoro, Ningi, Warji, Ganjuwa, Kirfi, Alkaleri, Dar
azo, Misau, Giade, Shira, Jama’are, Katangum, Itas/Gadau, Zaki, Gamawa and Damban [2]
The city was founded by Yaqub ibn Dadi, the only non-Fulani flag-bearer of the Sokoto Empire.
The name was derived from a hunter called Baushe, who advised Yaqub to build his city west of
the Warinje mountain. In return Yaqub promised to name his city after the hunter.
Abubakar Tafawa Balewa is buried in the city, while the Yankari National Park is
110 km from the state capital. The city lies on the Port Harcourt – Maiduguri railway line.
The Bauchi State Library Board was established in 1976.
In July 2009, attacks in Bauchi by Boko Haram following the arrest of some of its
members resulted in over 50 people killed and over 100 arrested. ]After the 2014 Chibok
kidnapping, over 200 students were transferred to the Federal Government Girls College,
Bauchi. The majority were from Federal Government Girls’ College, Potiskum, Yobe State.
Bauchi was originally served by a narrow gauge 762 mm (2 ft 6 in) light railway, but this
was later converted to the normal gauge of 1,067 mm (3 ft 6 in).
Up until August, 2014, Bauchi was served by Bauchi Airport, located in-town. Scheduled airline
service was then transferred to the newly constructed Sir Abubakar Tafawa Balewa International
Airport, 23 kilometres (14 mi) north of Bauchi, near the village of Durum.
According to the Köppen Climate Classification system, Bauchi has a tropical savanna climate,
abbreviated "Aw" on climate maps.

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3. 2 METHODS OF THE RESEARCH
This research is a qualitative and quantitative research that combines the methods of interview
and sampling technique. One Focas Group Discussion (FGD) was also conducted. The research
uses both primary and secondary sources of data, sourced from the literature and the field. The
primary sources of data include commentaries of the Qur’an particularly the verses that deal with
loan, interest/usury this
includes; Q2:275 – 276, 2:278 – 279, 3:130, 4:161 and 30:39. Yusuf Ali Qur’anic translation was
used, because it is the type of book being used most scholars. Original sources of Hadith which
include Sahih Bukhari, Sahih Muslim. These authentic books were used because of their
authenticity. And a book on Islamic jurisprudence which includes Muwatta Malik was used,
because it is widely and generally accepts by Maliki school of law. The research techniques are
narrative face-face interview. This technique is chosen because of its advantage in providing
good response, accurate information from the respondents as well as complete and immediate
information.
3. 3 INSTRUMENTS
The instruments used in gathering the data were narrative interviews and Focas Group
discussion. The interviews were divided into two sections. ‘A’ and ‘B’.
Section ‘A’ was designed to obtain the personal information of the respondents. Section
‘B’ was designed to obtained information on the Muslims participation in the Anchor Borrowers
Programme. The interview was conducted in Jigawa State and Bauchi State respectively. 40
persons were interviewed, 15% in Bauchi and 15% in Jigawa State. Officials from Central Bank
of Nigerian 2%, Commercial Banks 2% each (Jaiz, Union, Agricultural banks) and 2% of the
officials of the various Ministries of Agriculture of the states covered were interviewed. Also
89
interviewed where the farmers, non – farmers, and Non-Governmental organizations of the area
of studies.
One Focus Group Discussion was conducted that covered about eight (8) persons in
Bauchi. Some important questions were asked and answers were collected and recorded
accordingly. Some of the questions includes; How many persons apply for the programme this
year? Do they make a refund?, how many people being transformed?, did the state government
give any incentive? How effective is the programme? Etc.
3. 4 PROCEDURE OF DATA COLLECTION
The patinent data of the research was collected in a narrative face to face interview. Such that
when questions were asked, answers were recorded. The answers collected from the respondents
were then sorted out in to workable manner thereby enabling their analysis. Thus to each
question the set of answers were recorded which will enable the said analysis.
3. 5 DATA ANALYSIS
The data collected was analysis using simple percentage technique. Tables were drawn, and the data’s
collected were presented in a tabular form base on the question and the respond of the respondents.
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CHAPTER FOUR
RESULTS AND DISCUSSION I
CENTRAL BANK, COMMERCIAL BANKS, MINISTRIES OF AGRICULTURE
This chapter presents the findings from field work together with objective discussion or of the
findings based on each research question. The chapter covers data obtained from CBN,
Commercial Banks and ministries of Agricultures.
Table 1:- From your record, do Muslims participate in the anchor borrowing programme
as they should?
Options No. Interviewed Respondents Percentage

Yes 15 13 86.67%
No 15 1 6.66%
Undecided 15 1 6.66%
Total 15 100%
Source: Fieldwork
From the Table above, respondents who answer ‘yes’ to the question ‘From your record, do
Muslims participate in the anchor borrowing programme as they should?’ are in the majority
with 86.67% while only 6.66% answered No’ with 6.66% undecided answers. This implies that,
from records available with the Central and Commercial banks as well as the Ministries of
Agriculture of the two states covered, those who have participated in the anchor borrowing
programme are Muslims in the majority. Though, the area of study is dominated by the Muslims
nonetheless, the response indicates Muslims have duly responded.

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Table 2:- To what extent do they participate?

80 – 100% 15 9 60%
60-79% 15 2 13.33%
40 – 59% 15 1 6.67%
Partial 15 3 20%
Total 15 100%
Source: Fieldwork
From the table above, respondents who gave between 80 – 100% to the question ‘To what extent
do they participate?’ have the highest percentage of 60%. This means that, Muslims participated
in the programme. Though, those who responded partially have 20% respondents meaning that,
they participated not as expected. There is need for improvement.

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Table 3:- Have you received any criticism of the programme from Muslim or Muslim
groups or any religious group?

Yes 15 10 66.67%
No 15 5 33.33%
Partial 15 - -
Total 15 100%
Source: Fieldwork
From the table above, respondents who answer ‘yes’ to the questions ‘Have you received any
criticism of the programme from Muslims or Muslim groups or any religious group? Are in the
majority with of 66.67%. This implies that Muslims, Muslim groups, and religious group
criticized the programme. That criticism may be discouraging for some Muslims from
participating in the programme. That about 33.33% of the respondents that is about one-third
claimed that, no any criticism experienced from Muslims, Muslim groups, or religious groups
implies that, the criticism is not prevalent.

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Table 4:- What is the nature of the criticism?

Interest/usury’ 15 8 53.33%
No 15 6 40%
Others 15 1 6.67%
Total 15 100%
Source: Fieldwork
From the table above, respondents who mentioned ‘interest’ to the question ‘what is the nature of
the criticism?’ have the highest percentage of 53.33%. This implies that, Muslims’ criticism of
the programme is on the basis of charge of interest or usury which contradicts the teachings of
Islam.
Table 5: Do you think the bank (CBN) has done enough awareness regarding the
programme?

Interest 15 3 20%
No 15 9 60%
Others 15 3 20%
Total 15 100%
Source: Fieldwork
From the table above, respondents who answer ‘No’ to the question’ ‘do you think the bank
(CBN) has done enough awareness regarding the programme?’ have the highest percentage of
60%. This implies that, Central Bank of Nigeria has not done enough awareness regarding the
programme.
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Table 6:- Has the programme achieved its set objectives?

Yes 15 3 20%
No 15 4 26.67%
Not as expected 15 8 53.33%
Total 15 100%
Source: Fieldwork
From the table above, respondents who answer ‘not as expected’ to the question ‘Has the
programme achieved its set objectives?’ are in the majority with 53.33%. This implies that the
Anchor borrowing Programme partially achieved its set objectives. Therefore, a lot needs to be
done so as to achieve 100% objective. Looking at the table, only 20% of the respondents
indicated that, the programme has achieved its set objectives, which is the lowest percentage of
respondents on the table.
.3. 2. DISCUSSION
Muslims are participating in Anchor Borrowing Programme. This study reveals that, the
Muslims participate in the programme going by records available with the Central and
Commercial banks participating in the programme. This contradicted what people have been
saying, who have not made any enquiry employing the correct scientific tools. This also
contradicts what Khan (9) claimed that:
“the Muslims societies have placed a low value on wage-labour. Instead, they have
always enclouraged self – employment or such forms of business as shirkah or
mudarabah. It was the capitalist mode of production which, for the first time in human
history, made large chunks of population dependent on capitalists for their livelihood”.
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The Muslims, Muslim groups, or any religious organization did not criticize the
programme.
The programme did not achieve its set objectives. This is because, records and
observation showed that government is fully involved in the programme.
The issue here is that, can the government participate in the programme by paying the
interest rate charges to its indigene and also provide other incentives in order to motivate the
participants?
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CHAPTER FIVE
RESULTS AND DISCUSSION II
(FARMERS, NON FARMERS AND NON – GOVERNMENTAL ORGANIZATIONS)
This chapter presents the findings from field work together with objective discussion or of the
findings based on each research question. The chapter covers data obtained from Farmers, Non-
farmers and Non – government; Organizations.
Table 1:- Are you aware of the anchor borrower programme?

Yes 15 15 100%
No 15 - -
Partial 15 - -
Total 15 100%
Source: fieldwork.
From the table data, respondents who answer ‘yes’ to the question ‘Are you aware of the anchor
borrower programme?’ have the highest percentage of 100%. This implies that people are fully
aware of anchor borrowing programme introduced by the Nigerian Government.

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Table 2:- Comment on the easiness of the accessibility of the programme.

Very Easy 15 4 26.66%
Difficult 15 7 46.66%
Partial 15 2 13.33%
Unanswered 15 2 13.33%
Total 13 100%
Source: Fieldwork
From the above table, respondents who answer ‘difficult’ to the statement which says ‘Comment
on the easiness of the accessibility of the programme’ are the majority with 46.66%. This implies
that accessibility of the facility is very difficult. While those who responded by saying ‘very
easy’ came second with 26.66% respondents. This implies that, some people find it very easy to
access the facility. Also those respondents as ‘partial’ have the least percentage of 13.33%
respondents. This means that, to some is neither easy nor difficult. Furthermore, 13.33% of the
respondents did not make any comment.

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Table 3:- Do you think the Muslims are participating in the programme as they should?

Yes 15 12 80%
No 15 1 6.7%
Partial 15 2 13.3%
Total 15 100%
Source: fieldwork
From the table above, respondents who answer ‘yes’ to the question ‘Do you think the Muslims
are participating in the programme as they should’ are in the majority with 80%. This implies
that, Muslims participate in the anchor borrowing programme as they should. Being that the area
of study (Bauchi in the North-East and Jigawa in the North West) are predominantly dominated
by the Muslims. However, those who responded by saying ‘No’ to the question, came second
with 13.3% respondents. This means that, they are neither participating as they should nor
participating as they should. 6.7% respondents go to those who said ‘No’. Meaning that Muslims
are not participating in the anchor borrower programme.

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Table 4:- What do you think are the reasons limiting their participation in the
programme?
Response No. Interviewed Respondents Percentage

Interest (usury)/Cheating/Fraud 15 10 66.67%
5%/20% equity contribution 15 1 6.67%
Unanswered 15 4 26.66%
Total 15 100%
Source: Fieldwork
From the table above, respondents who mentioned Interest/cheating and fraud to the question
‘What do you think are the reasons limiting their participation in the programme?’ have the
highest percentage of 66.67%. This implies that, interest, cheating and fraud are limiting the
participation of the Muslims in the programme. This corresponded with what a group of people
have said when I had the opportunity to chat with them on the issue. They said apart from the 9%
interest to pay during refund, there is also a kind of fraud and cheating in the process, they will
buy the product at a cheaper price and they give low quality materials with exorbitant price.
However, unanswered, take 26.66% respondents. 6.67% respondents mentioned 5% equity
contribution as the reason limiting the participation of the Muslims in the programme.
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Table 5:- Do you think their reason for refusal to participate in the anchor borrowing
programme is valid in the light of the teachings of Islam.

Yes 15 8 53.33%
No 15 5 33.33%
Partial/I don’t know 15 2 13.34%
Total 15 100%
Source: Fieldwork
From the table data, respondents who answer ‘yes’ to the question ‘Do you think their reason for
refusal to participate in the anchor borrowing programme are valid in the light of the teachings of
Islam’ are in the majority with 53.33%. This implies that, Muslims who refused to participate in
the anchor borrower programme had basis in the light of the teachings of Islam. Interest, fraud
and cheating are all prohibited in Islam. Normatively, they are prohibited by a number of
Qur’anic verses and the traditions of the Prophet Muhammad (SAW). However, those who
responded ‘No’ to the question, have 33.33% respondents. Meaning that, those who refused to
participate in the programme there reasons are not valid in the light of the teachings of Islam.
Those who responded by saying ‘they don’t know or partial’ scored 13.34% respondents.
Meaning that they don’t know the stand of Islam on the programme.
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Table 6:- Do you think the anchor borrowing programme has the potentials to impact
positively on the lives of the Muslims?

Yes 15 14 93.33%
No 15 - -
Partial 15 1 6.67%
Total 15 100%
Source: Fieldwork
From the table above, respondents who answer ‘yes’ to the question ‘Do you think the anchor
borrowing programme has the potential to impact positively on the lives of the Muslims?’ are in
the majority with 93.33%. This implies that, the programme has the potential to impact
positively to the lives of the Muslims if properly executed. However, those who comment
‘partially’ have 6.67% respondents. This implies that, it may impact positively on the lives of the
Muslims and it may not.

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Table 7:- is the programme so far impacting positively on the life of Muslims since
inception to date?

Yes 15 14 93.33%
No 15 1 6.67%
Unanswered 15 - -
Total 15 100%
Source: Fieldwork
From the table above, respondents who answer ‘yes’ to the question ‘is the programme so far
impacting positively on the life of Muslims since inception to date?’ have the highest percentage
of 93.33%. This implies that, the programme has impacted positively on the lives of the
Muslims. This goes with the statement made by the President of the Federal Republic of Nigeria,
President Muhammadu Buhari, who said ‘Muslims that participated in anchor borrowing
programme have benefited. But unfortunately, they are adding more wives and others are
travelling to Saudia Arabia for Hajj, instead of them to wait and improve more on their lives.’ In
addition, also the Rice Farmers Association, counting their blessings as the year comes to an end,
confessed that “they have been transformed from poverty to wealth.” They said this at a Gala
Night organized by Rice Farmers Association in honor of Anchor Borrowers Programme
beneficiaries, at the State Banquet Hall, Abuja, through their Chairman Mr. Goronto. In turn,
they announced the contribution of hundred naira each, amounting to N1.22 billion to boost
presidential campaign of 2019 Buhari/Osinbajo.

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Item 8:- What suggestions do you have for the improvement of the programme generally?
From the data collected, the respondents are given suggestions like: supply of agricultural inputs
in good time. Most times, they bring the inputs when the season is rounding up. At that time, the
inputs are late, and they are of no use. And that discourage some of the farmers from partaking in
the programme. This has gone in line with what Wheat Farmers Association of Nigeria (WFAN)
lamented through its chairman, Muhammad (28)
“what it called lateness in accessing the Central Bank of Nigeria (CBN) inputs
intervention under the Anchor Borrower scheme. The association said has been an
annual occurrence, which it says has been affecting wheat farming over the years.
The chairman of the association added that wheat planting has a time frame that
farmers must adhere to, which delay in meeting with planting period will amount
to low yield or a total loss of produce”
Removal of 5% equity contribution: The respondents also suggested that 5% equity
contribution has to be removed. Because some farmers want to participate, but they don’t have
that 5% to deposit in to their account before the disbursement of the funds. Failure to deposit that
percentage, will lead to denial to participate in the programme, and that is a set back to the
programme.
Train the beneficiaries before the disbursement of the fund/facilities and the
commencement of the programme: The beneficiaries have to undergo a training of what to do,
how to do and the rest, before they embark on the programme. That is why some people
collected the facilities will end up diverting it to something else that will not yield anything, and
when it is time for refund, it will be a problem. And with this attitude, the aim of the programme
will be defeated. But from the Anchor Borrowing Programme guidelines, it was indicated that,
104
training and issues of certificate, is one of the requirements. But it was found that the training is
only mention but not executed.
The respondents also by saying, the government should use its institutions in distributing
this facilities so as to reduce cheating and fraud. A committee has to be set comprising
government officials, officials of the financial institutions, and Farmers group leaders to
participate in the purchase and distribution of the inputs.
Item 9:- What suggestions do you have for the improvement of participation of Muslims in
the programme?
From the data collected, they suggested that, the interest (riba) should be removed in its entirety.
Islamic scholars should be involved in the enlightenment and participation of Muslims in the
programme.
Table 10: How did you get to know about the anchor borrowing programme?

Through Media 15 3 21.4%
Through 15 9 64.3%
Group/Cooperative
Through Friend 15 2 14.3%
Unanswered 15 1 -
Total 15 100%
Source: Fieldwork
From the table data, respondents who answer ‘through group/cooperative’ to the question ‘how
did you get to know about the anchor borrowing programme’ are in the majority with 64.3%.
while only 21.4% answered through media, with 14.3 through friend. However, Central Bank of
Nigeria did ‘not do enough awareness regarding the programme.

105
.3. 2. DISCUSSION II
9% Interest/usury, 5% equity contribution and cheating/fraud are what limited the participation
of the Muslims in the Anchor Borrowing Programme. This corresponded with what a group of
people have said during Focas Group Discussion. They said apart from the 9% interest to pay
during refund, there is also a kind of fraud and cheating in the process, they will buy the product
at a cheaper price. Also they give low quality materials with exorbitant price. Their claim has
gone along with Anchor 8 which stated that “The Participating Financial Institutions shall access
at 2% from the CBN and lend at a maximum of 9% p.a.”
In Bauchi state, at the inception of the programme, about 63, 000 people indicated
curiosity to participate in the programme. But when they noticed interest (riba) in the
programme, only less than 20,000 people became willing to participate. Therefore, the
Government of Bauchi state paid the interest rate, those who withdrew, returned and participated,
believing that government is paying the interest and they don’t have any evil in the sight of God.
But that is wrong in Islam riba is riba, whether individual, group or government, as it shows in
the theoretical frame work. “The prohibition of riba applies equally to the loans obtained from or
extended to Muslims as well as non-Muslims. There is no distinction between Muslims and non-
Muslims, or between individuals and states with respect to the receipt and payment of interest.
Therefore, the prohibition of riba has universal application.” This is consistent with Islam being
a universal religion that preaches the unity of mankind and the equality of all individuals,
irrespective of their sex, color, nationality or faith.
However, as it shows in the theoretical frame work. “The prohibition is explicitly
mentioned in four different revelations (Surah) of Qur’an (2:275-76, 2:278-279, 3:130, 4:161 and
30:39)”.
106
The research also found out that the central Bank of Nigeria did not do enough awareness
regarding the programme. Lack of wider enlightenment and involvement of religious scholars
made some farmers particularly Muslims not to participate in the programme. Those who refused
to participate in the programme; they don’t have detail knowledge of the programme. That is
why, they only look at the interest side and concluded not to participate. However, an Islamic
scholar Sheikh Ibrahim Khalil Kano opined that, the programme is halal, and the 9% interest
was not an interest (riba). It will be considered as administrative charges. Because, the
Participating Financial Institutions (banks) collected the money from the Central Bank, and
disbursed it to the farmers. They are also part of the Project Monitoring Team. They go to the
field to monitor the execution and processes of the farming. Therefore they deserved something
for that job. During the life time of the Prophet Muhammad SAW, he had a contract with people
of Khaibar about their land. “The Prophet concluded a contract with people of Khaibar to utilize
the land on the condition that half the products of the fruits or vegetable would be their share…”
(Bukhari 521).
In another hadith, reported by Ibn Umar, that Allah’s apostle gave the land of Khaibar to
the Jews on the condition that; they work on it and cultivate it, and are given half of its yields.”
(Bukari 524”. The above quoted ahadith, shows that, borrowing and paying with farm products is
not a new thing in Islam. Since the prophet collected their land, and pay them with
fruits/vegetables as their share. He also pay them double (half) of the produce, one –third and the
like depending on the agreement. From the theoretical frame work, the programme looks like
mudaraba process. Qureshi says “Mudarabah, in legal terminology, is a contract in which
certain property or stock (Ras al - mal) is offered by the owner or proprietor (Rabb al - mal) to
the other party to form a joint partnership in which both parties will participate in profit. (7-24).
107
The bank is giving the money to those that have farming experience. The Small Farmers
will collect the money and boost their production capacity, which at the end of the period or after
harvest, they will pay what they collected with product equivalent to amount collected, with only
9% profit, popularly known as interest/usury. Banks with capital and farmers with experience
partner together and invest. However, if the programme is followed strictly according to the set
guideline, the 9% interest will not be looked at as interest. Because, it shows in the theoretical
framework that “A mandatory training programme shall apply for farmers that will participate
under the ABP covering; Farming as a business, Improved agricultural practices, Group
management dynamics. The cost of such training shall be borne by the participating anchor”
therefore, even the training alone can go with 9% charges.
The research has showed that, Muslims participated in the programme. They are limited
from participating in the programme as a result of interest, cheating, fraud, 5% equity
contribution, and lack of full knowledge and enlightenment of the programme. This contradicted
the statement of Khan 9 who claimed that “the Muslims societies have placed a low value on
wage-labor. Instead, they have always encouraged self – employment or such forms of business
as shirkah or mudarabah. It was the capitalist mode of production which, for the first time in
human history, made large chunks of population dependent on capitalists for their livelihood”.
108
CHAPTER SIX
SUMMARY OF FINDINGS, CONCLUSION, AND RECOMMENDATIONS.
This chapter, focuses on the summary and conclusion on the findings of this study,
recommendations and suggestions are also made to both the farmers, banks and government in
general as well as the researchers who may wish to carry out this study in some other part of the
country or world in general. Contribution to knowledge and works cited were also captured in
the chapter.
6. 1 SUMMARY OF FINDINGS
The research reveals that:
1. Muslims are aware of the Anchor Borrowing Programme of the Federal Government of
Nigeria but the programme is not fully understood.
2. Muslims participate in the anchor borrowing programme of the Federal Government. It
indicates in the records given by the banks and various ministries of agriculture.
3. Nine percent Interest, five percent equity contribution and cheating (by way giving
substandard materials at high rates) limit the participation of the Muslims in the anchor
borrowing programme.
4. Muslims’ reasons for not participating in the Anchor Borrowing Programme is in the light of
Improper understanding of the teachings of Islam.
5. Government involvement in the programme, corrupted the process and leads the programme
to collapse. As up to today, more than 80% of the beneficiaries did not refund their money,
neither the product.
6. The agricultural inputs were not supplied in good time, until when the season is rounding off.
At that odd time, if supply is made, it will have less value to the farmer.
109
7. The research also found that the Anchor Borrowing Programme has the potential to impact
positively on the lives of Muslims, if properly executed.
6. 2 CONCLUSION
From the findings of the research, the following conclusions are drawn:-
Muslims are participating in the Anchor Borrowing Programme largely due to necessity. Thus in
spite of the interest or usury in policy as well as various forms of cheating and fraud in the
implementation process, Muslims lacking any alternative, participate in the programme for
greater productivity .
The Muslims are fully aware of the programme. They heard of it through various ways,
which includes; electronic Media (Radio, Television cables), print Media like newspapers, group
or cooperatives and others through friends. But details of the programme remained unknown to
them.
Nine percent Interest/usury, cheating, fraud, and 5% equity contribution are the basic reasons
that limited the full participation of the Muslims in the programme. But after careful study of the
programme, it shows that, no any prohibition in the programme. Because the 9% charges are
administrative charges for the services rendered by the banks, Project Monitoring Teams, take
off agents. Also on the issue of risk and sharing of loss and profit. In case of loss. After careful
study of the incidence and find out that is not out of negligence, CBN will pay 50% while your
Financial Institution will pay 45% and the beneficiary will forfeit his 5% equity contribution.
Moreover, it is out of the profit, that the beneficiaries will pay the 9% interest.
The Anchor Borrowing Programme can be said to have impacted positively on the lives of
those Muslims that participated in the programme actively.

110
The research found that majority of the participants of Anchor Borrowing Programme are not
farmers. Government officials and Politicians politicized the programme by bringing in their
family members, friends and loyalist. That is why majority of the banks withdrew from the
programme right from inception. That is also the reason why more than 80% of the beneficiaries
did not yet make a refund. Those that collected the money thought it is a national cake, where
everybody can take his cut.
6. 3 RECOMMENDATIONS
After careful studies of the available relevant materials, both circular and religious documents.
And also going to the field and conducting the interview. The research was able to come out with
the above data. It is in view of that, the following are considered recommendations.
1. The central Bank of Nigeria should provide a way of enlightening citizens through the use of
religious leaders. That will earn more value to the programme. And Muslims will participate
actively as they should.
2. Although, the Muslims participated in the programme, the CBN should find a way of
simplifying the process involved in applying for the programme. That will boost the participation
of the Muslims and the set objective will be achieved maximally.
3. Much so, the name interest should be removed and substituted with the term use
Services/utility charges. That will be more appropriate and will not bring any confusion.
However, the research recommended solution better than renaming the nine percent (9%) is that
offered by Bauchi State Government to paying off the interest charges and allowing the
beneficiaries paying off the only capital. Furthermore, 5% equity contribution should be either
reduce or completely remove from the process. That will increase the number of participants in
the programme. As for the cheating, CBN or Participating Financial Institution in conjunction
111
with Ministries of Agriculture should be the one to supply the Agricultural inputs so as to get the
standard and quality tools for farming.
4. Assumption of the defaulting participants is that, the programme is not in line with teachings
of Islam. In view of that, seminars, workshops, and training have to be organized, by inviting
prominent Islamic scholars to deliver talks. However, the lecture should be publicized through
the media.
5. Central Bank of Nigeria should revisit its guideline and remove state governments as anchors.
That will sanitize the process and allowed other banks to participate. That will also reduce the
level of loss that CBN may likely incur.
6. Central Bank of Nigeria, Participating Financial Institutions and Project Monitoring Team
should make sure that, the agricultural inputs are supplied in good time to the farmer for the full
scale use of the tools. That will help the product to germinate quickly and yield good product.
7. Central Bank of Nigeria should continue to be increasing the funds to the Anchor Borrowing
Programme. Due the fact that, the programme is impacting the live of citizens, particularly the
Muslims.
6. 4 LIMITATION OF THE STUDY
The research is limited with the following problems;
1. The research being on a very contemporary issue, it was not possible to have enough
literature for review.
2. The programme is a national programme which covered the whole country. Ii was not
possible to reach all the states. But chose only Bauchi in the North – East and Jigawa in
North – West.
112
6. 5 SUGGESTION FOR FURTHER RESEARCH
The world is dynamic not static, therefore, the study is limited to Bauchi in North East and
Jigawa in North West. The following suggestions are made for further researchers who may wish
to carry out the like of this study:
1. A research should try to relate the same study to other states within the Zone.
2. A research can also do a comparative study for the North Central and South West and
find out whether the Muslims are participating in the programme or not.
6. 6 CONTRIBUTION TO KNOWLEDGE
The research investigates the participation of the Muslims in the Anchor Borrowing Programme
of the Federal Government of Nigeria. Whether they are participating or not. If they are not
participating, what limited them from participating? However, the research found that Muslims
participated in the programme but not as they should, because some challenges discourage them
from participating. The main challenge is the fear of interest/usury which is absolutely prohibits
in Islam.
This research has positively contributed to knowledge by clarifying the understanding
that the interest charges in the case of ABP is in reality utility charges and not usury.
The research has attempted to show that ABP is closer to the permitted transactions
referred to Islamic economic as Mudarabah rather than the prohibited usury/interest (riba)
113
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Islamic Economic System and The Anchor Borrowing Programme of The Federal Government of Nigeria

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1

ISLAMIC ECONOMIC SYSTEM AND THE ANCHOR BORROWING PROGRAMME OF

THE FEDERAL GOVERNMENT OF NIGERIA

SANI, MUSA MUHAMMAD

ISLAMIC ECONOMIC SYSTEM AND THE ANCHOR BORROWING PROGRAMME OF

THE FEDERAL GOVERNMENT OF NIGERIA

MUSA MUHAMMAD SANI

A Thesis in the Department of RELIGION AND PHILOSOPHY, Faculty of Arts

Firdaus’. I am most indebted to my supervisor, Professor Ibrahim Haruna Hassan al-Wasewi

My immeasurable appreciation goes to my Head of Department/Principal Hajia Binta

sponsoring me during this programme. I thank them very sincerely.

Abubakar, for always taken care of my children whenever am busy on my work.

TITLE PAGE ------------------------------------------------------------------------------------------ i

CERTIFICATION ----------------------------------------------------------------------- ------------ iii

TABLE OF CONTENTS ---------------------------------------------------------------------------- vi

ABSTRACT ------------------------------------------------------------------------------------------- vii

1.2 STATEMENT OF THE PROBLEM ---------------------------------------------------------- 4 – 5

1.3 RESEARCH QUESTIONS --------------------------------------------------------------------- 5

1.4 AIMS AND OBJECTIVE OF THE STUDY ------------------------------------------------- 5

1.5 SIGNIFICANCE OF THE STUDY ----------------------------------------------------------- 5 – 6

1.6 SCOPE AND DELIMITATION OF THE STUDY ----------------------------------------- 6

1.7 CONCEPTUAL FRAME WORK ------------------------------------------------------------- 6

1.7.1 Islamic Economic System -------------------------------------------------------------------- 6 – 7

1.7.2 Anchor Borrowing Programme -------------------------------------------------------------- 7 – 8

1.7.3 Targetted Beneficiaries ------------------------------------------------------------------------ 8

1.7.4 Identified Agricultural Commodities ------------------------------------------------------- 8 – 9

1.7.5 Eligible Participating Financial Institutions ----------------------------------------------- 9

1.7.6 The Loan Amount ----------------------------------------------------------------------------- 9

1.7.7 Interest Rate ------------------------------------------------------------------------------------ 9

1.7.8 Repayment -------------------------------------------------------------------------------------- 9

1.7.9 Charging of Interest Rates Higher Than Prescribed --------------------------------------- 9

1.7.10 Capacity Building For The Farmers --------------------------------------------------------10

2.2. MUDARABAH OR QIRAD -------------------------------------------------------------------- 15 - 16

2.2.2Qirad Under The Present Banking System-------------------------------------------------- 17 - 19

2.2.3 Qirad And Interest ----------------------------------------------------------------------------- 19 - 20

2.2.4 Profit Sharing (Mudarabah Or Qirad) ------------------------------------------------------ 20

2.3 MODERN THEORY OF INTEREST -------------------------------------------------------- 21 – 23

2.4 SALES (BAY’I) --------------------------------------------------------------------------------- 23 – 24

2.5 BAUCHI STATE AGRICULTURAL DEVELOPMENT PROJECT LOAN

(1981- UNI) ---------------------------------------------------------------------------------- 25

2.5.1 Objectives --------------------------------------------------------------------------------------- 25 - 26

2.5.2 Implementation Experience ------------------------------------------------------------------- 26 - 28

2.5.3 Sustainability ----------------------------------------------------------------------------------- 28 - 29

2.5.4 Financial Lessons Learned ------------------------------------------------------------------- 29

2.5.5 Bank Performance ----------------------------------------------------------------------------- 30

2.5.6 Borrower’s Performance ---------------------------------------------------------------------- 30

2.6 LITERATURE REVIEW ---------------------------------------------------------------------- 30

2.6.1 Loan And Debt --------------------------------------------------------------------------------- 31 - 33

2.6.2 Responsibilities Of Debtors And Creditors ------------------------------------------------- 33 - 35

2.7 BORROWING FROM BANKS --------------------------------------------------------------- 35 - 37

2.8. PUBLIC BORROWING BY THE PROPHET (SAW) ------------------------------------ 38 - 45

2.8.1Public Borrowing In The Period After The Prophet (Saw) ------------------------------- 46 - 48

2.8.2 Public Borrowing In The Early Fourth Century Ah --------------------------------------- 48 - 53

2.9 USURY/INTEREST (RIBA) ------------------------------------------------------------------ 53 - 54

2.9.1 Types Of Riba ---------------------------------------------------------------------------------- 54 - 56

2.9.2 Usury In Exchange ---------------------------------------------------------------------------- 56 - 57

2.10.0 ADDRESSING SOME MISCONCEPTIONS ABOUT RIBA------------------------ 57

2.10.1.1 Modern Day Interest Is Not Riba ---------------------------------------------------------57

2.10.1.2 Addressing The Misconception --------------------------------------------------------- 57

2.10.2.1 There Is No Difference Between Interest And Profit ---------------------------------- 57

2.10.2.2 Addressing Misconception---------------------------------------------------------------- 58

2.10.3.2 Addressing Misconception --------------------------------------------------------------- 59

2.10.4.1 Inflation Justifies Interest ----------------------------------------------------------------- 60