Financing table olive cultivation with diminishing musharakah: Financial analysis of a project in Bursa province

Authors : Gürkan Işık, Eflal Umunç, Beyza Betül Arslan

Pages : 1-9

View : 79 | Download : 33

Publication Date : 2024-12-23

Article Type : Research Paper

Abstract :Despite the high demand for olives, there has been a decline in cultivated olive acreage in Türkiye in recent years. An important reason for this is the financial sustainability issues associated with the current interest-bearing debt financing model. The irregularity of income versus the regularity of loan repayments exposes farmers to commercial and seasonal risks, shifting the entire risk burden onto them without shared accountability from lending institutions. This study conducted a comparative financial analysis over a ten-year horizon for an olive orchard project in Bursa province, utilizing current market data, property values, and insights from table olive growers and it is revealed that the Diminishing Musharakah financing model is significantly more profitable for farmers compared to the interest-bearing debt financing model. Although the initial cost of establishing the orchard is similar under both models, interest-bearing debt financing model leads to a higher total repayment amount due to interest, whereas Diminishing Musharakah financing model maintains the initial cost without any interest, allowing for greater profitability. Additionally, this model provides distinct advantages in managing cash flow, as it aligns repayment schedules with harvest periods, thereby reducing the financial strain on producers. This financing structure also facilitates risk sharing among partners, effectively addressing challenges related to yield fluctuations and market volatility. The study shows that enhancing the financial sustainability of olive cultivation requires the adoption of alternative financing models.
Keywords : Tarımsal sürdürülebilirlik, Sürdürülebilir finansman, Azalan müşareke, Faizli finansman, Zeytin yetiştiriciliği