27.01.2023, 13:08 75

Agricultural Production In Rural Development And The Role Of Participation Finance

At the point we have reached today, as "Strong Türkiye", we aim for a self-sufficient position with its products and develop new projects without compromising its social life.

Although it is a fact that production in rural areas has declined due to the migration wave from village to city all over the world, we continue our work in this field, being aware of the fact that agricultural production is one of the most significant powers of a country. When the population distribution in Türkiye is examined today, we see a rural population of nearly 21 million. Türkiye has between 2.5 and 3 million agricultural enterprises, agricultural employment varying between 5 and 5.5 million people, and more than 36 thousand village settlements, including towns. In line with these data, studies on diversifying agricultural and non-agricultural economic activities, strengthening family farming, and improving the social and physical infrastructure and life quality of rural settlements are highly important for our country. The revival of the economy in general, natural resources and protection of the environment are the issues that take place based on development in rural areas. As long as we act with this consciousness and awareness, we can say that the target for 2023 is to make Türkiye one of the top 5 countries with the highest production value. Undoubtedly, to achieve our goal, we should redefine the processes of agriculture by addressing different agricultural practices that follow today's technologies. As a matter of fact, in recent years, very successful studies in agricultural technologies have been in progress, and Türkiye continues to develop in this field. While the wheat cultivation area, which was 3.1 million hectares in 1925 in Türkiye, peaked at 9 million hectares in 2000, with the contribution of the technologicalinvestments implemented, it has demonstrated its good agriculture and successful farming capacity by achieving more harvest than all times with its 7.1 million hectares of cultivation area in 2022.

Income from the agricultural sector has a direct role in economic development. For this reason, it is imperative to support the agricultural sector with correct and appropriate financial management models. Agricultural financing is vital in supporting the producer, especially since seasonal incomes in agricultural production mean the income is at risk due to external factors.

The producer must also have a specific source for payments such as equipment, feed, irrigation and fertiliser for the period when he does not earn income, and externalfinancing is needed due to this situation. While these needs can be met from the own resources of the private enterprise in developed countries, the need for external resources primarily arises in developing countries. The Agricultural Credit Cooperatives of Türkiye is the forefront of the most important institutions that come to the fore in agricultural financing in Türkiye. The Agricultural Credit Cooperatives of Türkiye support the producers by meeting their financing needs with fixed-interest loans. In addition to loans, Agricultural Credit Cooperatives continue working to meet farmers' financing needs with contracted production models. In this direction, market demands are planned and conveyed to regional unions and cooperatives, and the products obtained from the farmers are brought to the market within the framework of the agreements made with the appropriate farmers. Thus, agricultural economic planning is carried out that will increase the power of the producer.

With the fundamental interest-free principle, participation banks make significant contributions to agricultural producers in line with the financing plans they have created in the agricultural sector. In the participation finance model, the concept of "salam" comes to the fore in agricultural banking. Salam is a participation finance product used to sell a standard good, which is agreed to be delivered on a deferred basis, with an advance payment. In this type of financing, the aim is to ensure that the buyer of the product protects himself against price increases and, in this process, to meet the cash financing that the product seller needs throughout production. In the beginning, maturity is determined, and all kinds of features such as the nature, type and amount of the goods subject to the agreement are clearly and unequivocally fixed with the contract. Thanks to this contract, the seller of salam has the opportunity to use the salam goods he has received until he delivers them, as he wishes, in line with his needs. In addition, the principle of salam sales is a profitable participation finance method generally used for the agricultural sector as a method that can be easily and successfully implemented with contract farming.

The agricultural sector is the primary focal point of countries because it is a sector that feeds not only its field but also many other fields in terms of economic development. Agricultural financing, which will help to enlarge and perpetuate the economic cycle of such a thriving sector, is of much greater importance today whenthe growing world population is considered.

Abdullah Eriş

Erişler Food Industry and Trade Inc. Board Member 

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