Advances in Natural and Applied Sciences, 8(4) April 2014, Pages: 180-186 AENSI Journals Advances in Natural and Applied Sciences ISSN:1995-0772 EISSN: 1998-1090 Journal home page: www.aensiweb.com/anas/index.html Corresponding Author: Muhammad Ridhwan Ab. Aziz, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia (USIM), Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan, Malaysia Phone: +606-7986410; E-mail: ridhwan.aziz@usim.edu.my Risks and Uncertainties for Agriculture Projects in Islamic Banking Institutions Muhammad Ridhwan Ab. Aziz and Muhammad Mohamad Yusoff Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia (USIM), Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan, Malaysia ARTICLE INFO ABSTRACT Article history: Received 25 January 2014 Received in revised form 12 March 2014 Accepted 14 April 2014 Available online 5 May 2014 Keywords: Risks Agro Projects Islamic Banking Institutions Background: Risk and uncertainty are inherent in any agro projects. Farmers, agro- entrepreneurs, international agencies, and banking institutions are increasingly seeking effective and sustainable strategies and approaches to mitigate, transfer, or cope with these inherent risks. Objectives: To examine the type of risks and uncertainty associated with agro projects for financing in Islamic Banking Institutions. Results: There are many risks that associated with agriculture initiatives and by understanding the risks, agro-entrepreneurs able to minimize it and avoid any unexpected uncertainties. Conclusion: The general finding of this article shows that agro- entrepreneurs faced various risks, which shows that there is a need to have a proper Shariah-compliant financing mechanism for agriculture projects through Islamic banking institutions. © 2014 AENSI Publisher All rights reserved. To Cite This Article: Muhammad Ridhwan Ab. Aziz and Muhammad Mohamad Yusoff., Risks and Uncertainties for Agriculture Projects in Islamic Banking Institutions. Adv. in Nat. Appl. Sci., 8(4): 180-186, 2014 INTRODUCTION There are several risks that businessmen had to go through in daily business work inclusive for agro- entrepreneur. Agro-projects (agriculture-based projects) are no exception, whereby most of these risks had negative effects towards every entrepreneur’s agro project. It is a very risky business due to uncontrollable elements within it with unexpected returns, which may cause problems and loss (Mark, 2010). Most entrepreneurs may find it hard to encounter these risks, but as time passes by, they will get familiar and know common risks that they may encounter. In addition, the loss caused from the risks may halt the progress of agro-projects and also may involve monetary fund's to accommodate it. There are several banking institutions in Malaysia that offered financial supports to agro-entrepreneurs (Joni Tamkin et. al, 2000).Thus, agro-entrepreneurs who finance their projects through banks need to use some part of the funds to cover the loss, but may have to deal with shortage of funds for other uses, causing the financing schemes failed to fulfill the entrepreneurs’ needs as initially planned. Therefore, this article aims to identify risks associated with agro-projects among agro-entrepreneurs. After conducting analysis, the researcher will attempt to suggest and determine the best financing mechanism to help and support entrepreneurs and also will form new and profitable financing methods as a guidance and reference for Muslim entrepreneurs and Islamic banking institutions in getting and providing funds for any initiatives related to agribusiness that complied with Shariah law. Research Literature: Islam and entrepreneurship are closely connected with each other. In fact, there are several valid dalils from the Holy Quran and Hadith which mention about business and its benefits (Mohd. Faizal et. al, 2013). Nevertheless, it is also recommended for any Muslim entrepreneurs to use only Islamic financing instruments which are Shariah-compliant to go along with their businesses including agro projects. One of the roles of Islamic financing in agriculture is to prevent the involvement of haram elements while funding agriculture- based projects (Muhammad Ridhwan et. al, 2013). In Malaysia, there are few Islamic banks or Islamic windows of conventional banks that offer Islamic financing facilities for agro entrepreneurs in agriculture. These banks are Agro Bank (previously known as Bank Pertanian Malaysia Berhad), Bank Kerjasama Rakyat Berhad Malaysia Berhad (commonly known as Bank Rakyat) and Maybank Islamic Berhad (Muhammad Ridhwan, 2012).