Agrobank, which focuses on strengthening the agricultural sector in Malaysia, will continue to support small and medium enterprises (SMEs) as well as unserved and underserved communities – B40 communities, women, people with disabilities and asnaf (poor and needy) – through its social development programs and syariah-compliant financing products.
Via a RM 350 million microcredit financing fund under the Penjana program, the leader in agricultural finance and securities banking has helped entrepreneurs whose businesses have been affected by the disruptions of the Covid-19 pandemic .
As of July 31 of this year, the bank approved financing of RM 200.4 million under its Penjana Agrofood Fund to 16,000 entrepreneurs in farming communities.
According to Agrobank covering CEO / Chairman Khadijah Iskandar, from 2020 to the end of August 2021, the bank dispersed over RM 900 million to help SMEs maintain business activities, safeguard jobs and encourage domestic investment through the special relief facility, agribusiness facility and automation and digitization of SMEs. establishment.
As part of the government initiatives Pemerkasa and Pemulih, by the end of August 2021, more than 46,700 clients had benefited from around RM 3.5 billion of loan moratoriums and financial aid programs, she said.
âWe support the government’s initiatives for economic recovery. We allocate funds to those who want to start small businesses and also to those in the agricultural sectors.
âFor existing customers who were unable to operate their business during movement restrictions, they can obtain financing from us to alleviate their cash flow and liquidity issues. This will give them a bit of a break and give them time to generate new cash flow and eventually pay off their loans.
âAs a development finance institution, we are different from commercial banks. We need to understand our customers and know how we can help them. The financing terms will therefore be very accommodating during this period, âshe said.
Khadijah points out that even before the Covid-19 pandemic, Agrobank had automatic moratoriums on loans for clients whose businesses are affected by natural disasters.
âWe are in the agricultural industry and naturally the risk is higher than in other industries. The automatic moratorium on loans must allow time for our clients to assess the losses and then speak to us for a permanent solution. “
She also notes that about 90% of the bank’s customers opted for the first automatic loan moratorium program announced by the government last year.
âHowever, in the targeted loan repayment assistance programs that followed, only about 35% of our clients requested it. This gives clients a better understanding of the implications of loan repayment assistance programs, âexplains Khadijah.
Syariah compliant solutions
Founded in 1969, Agrobank offers syariah-compliant financing solutions in various segments including business, enterprise, consumer, trade finance, and micro-finance.
Agrobank has been a fully-fledged Islamic bank since July 1, 2015.
In addition to 1,369 agricultural agents, the bank has a network of 206 customer contact points – including 138 branches, 19 commercial finance centers and 33 kiosks.
In 2020, 119 of the contact points are located in rural areas.
Meanwhile, RAM Sustainability Sdn Bhd recently awarded an environmental benefit rating to the sustainable sukuk which will be issued under Agrobank’s RM1bil sukuk wakalah program.
The rating agency assigned the rating of environmental benefits to three green solutions under Agrobank’s sustainable sukuk: sustainable water and wastewater management; environmentally sustainable management of living natural resources and land use; and the conservation of terrestrial and aquatic biodiversity. RAM Sustainability also assigned a benefit rating to social solutions within the framework.
For the first tranche, Agrobank seeks to issue RM500 million in sukuk wakalah. The proceeds from the sukuk issuance will be used for working capital requirements, general investments or to refinance any existing Agrobank financing that is syariah compliant.
âThe purpose of the sukuk is to diversify our source of funding, because currently the majority of our funding comes from deposits. We would also like to take advantage of the low interest rate environment now, âKhadijah said.
She asserts that Agrobank’s activities are in line with the United Nations Sustainable Development Goals (SDGs), such as Zero Hunger; drinking water and sanitation; decent work and economic growth; industry, innovation and infrastructure; and, life on earth.
âOur main customer segments are the unserved and the underserved. We therefore aim to contribute to the eradication of poverty.
âFor example, when funding poultry farmers, we make sure they meet regulatory requirements for non-pollution of water.
âWe also provide finance to SMEs and encourage the adoption of technology in agriculture,â she says.
Based on Agrobank’s 2020 financial reports, around 5% of its funding portfolio is devoted to sustainable activities – for example, oil palm plantations as well as independent and organized small farms under the certification program. Malaysian Sustainable Palm Oil (MSPO).
âSo 5% is a good start. Some banks are aiming for 5% but we are already there, âshe said.
She shares that Agrobank works closely with the Ministry of Agriculture and Food Industries to support the country’s food security programs and entrepreneurial development.
âOne of our mandates is to make our customers ‘bankable’. If you are a start-up, come to Agrobank and we will guide you. Small businesses that are not bankable in the eyes of commercial banks, we want to bring them to the stage where they are bankable, âexplains Khadijah.
Agrobank intends to provide an investment platform for agricultural products, which would connect private investors and entrepreneurs.
âThere are many investment opportunities in agriculture and we want to provide space for more private equity. More people will be able to participate in improving this industry.
âOur exposure to fishing is RM 651 million compared to RM 325 million in the banking sector. For crops, our exposure is RM3bil against the RM2bil of the banking sector. For livestock, ours is RM1bil compared to RM3bil in the banking sector, âshe says.
Aid to the poor
In August, the bank organized a program called Agrobank & Komuniti in cooperation with several SMEs. With donations amounting to RM 100,000, as part of the initiative, food aid was distributed to 1,600 beneficiaries across the country.
The food aid program included rice, sugar and flour purchased by Agrobank district branches from partner SMEs.
Khadijah said the initiative was aimed at helping communities affected by the Covid-19 pandemic and in need of basic necessities and food aid.
âWe will have more Agrobank & Komuniti disaster relief programs and also to help communities in need.
âRecently, the fishing community of Kuala Kedah has been affected by flash floods. For the flood season, we plan to provide assistance such as food, mattresses and pillows, âshe said.
Commercial / financial training
As for the Agrobank Center of Excellence (ACE) initiatives and programs to help businesses and promote financial inclusion, Khadijah says they include training to guide people on financial management and business start-ups.
âDuring the pandemic, we are doing more online courses. We bring in some of our clients, who share their business experiences with the participants in the training program. Participants learn business or online marketing. Many of them have had encouraging business results, âshe says.
Quoting a pizza vendor whose business closed due to movement restrictions related to the pandemic, Khadijah said: âWe have provided funding and training, and she has restarted the home business. She appointed other housewives as her agents. Later, she had to expand her business by renting another premises, in order to be able to serve more customers.
âSo there are always opportunities in a crisis, and we advise our clients not to give up, and we continue to engage them. “
Agrobank is collaborating with the Ministry of Agriculture and Food Industries on the My Future Agro program for unemployed graduates.
âWe share with them opportunities in agriculture. After the program, more than 20% of the participants started businesses related to agriculture. 42% were absorbed by companies. It is therefore one of our ways of contributing to the development of human capital in the industry, âsays Khadijah.
Agrobank’s financing portfolio includes over RM 300 million of microfinance where the average exposure is no more than RM 150,000.
âWe also provide funding to communities in rural areas, such as affordable housing programs, and to small padi and rubber producers. We have developed products for the agricultural mechanism and automation scheme, to further support the injection of technology into the sector, âshe said.
Khadijah cited the bank’s initiative in a fishing village in Pahang where 40 housewives who participated in a small business training program were each able to generate around RM1,000 per month through their start-ups.
âThese are the things we do to empower women and the community,â she says.
As an equal opportunities bank, Agrobank offered its Agro Bakti financing program to entrepreneurs with disabilities.
Khadijah says the bank is also filling funding gaps like fishing boats “because nobody wants to touch them.”
âWe are working with the Ministry of Agriculture and Food Industries where we have a funding program for fishermen to help them buy fishing boats that will allow them to go further out to sea. It will also help. to keep fish stocks closer to shore, âshe said.