Islamic Agricultural Finance and Growth

The objective of this study is to model and estimate theeffect of financial services in the agricultural sector of iran onthe value added of this sector. moreover, since as of 1984, theinterest free banking law was implemented, the effect of thischange on the value added of the sector will be studied as thesecond objective. the model ofthe study consists ofthree tions.the volume ofreal investment in the first tion. is assumed to bethe function of value added, flow of finance, and last year'scapital stock. the second tion consists of a capital accumulationidentity, and the third tion formulates value added as functionof capital stock and labor force in the agricultural sector. thethree tions are estimated simultaneously with co integrationmethod and both long run and short run estimation ofcoefficients exhibit a positive and significant effect of credit onboth the capital stock and output. further, the results showapplication of islamic tools of finance also contribute to theincrease of agricultural sector's value added significantly.these results reinforce the arguments of islamic economiststhat islamic finance is growth promoting.