Thursday, August 14, 2008

Malaysia: Why banks shun agro sector

Kuala Lumpur: Risk factors and lack of marketing strategies are among the reasons why commercial banks are reluctant to give out loans for agro-based projects, said Agro Bank chairman Datuk Mohamed Salleh Bajuri.

He said poor marketing led to agricultural produce being damaged before it reached the market place.

"How can these banks give out loans to them (agro-based projects) when they find that agricultural produce is always damaged as it reaches the market late. As such, farmers lose money. Definitely, the banks lose confidence in them... we cannot blame them (banks)," he said.

He was commenting on Prime Minister Datuk Seri Abdullah Ahmad Badawi's remarks that some banks were still doubtful about giving out loans for agro-based projects.

Mohamed Salleh said if the marketing network was efficient, excess produce could be sent more quickly to places where the demand was high, thus enabling it to be sold systematically.

He said fluctuation in the prices of agricultural produce resulted in farmers not getting consistent earnings.

"If the price drops, they (farmers) cannot afford to repay their creditors, what more if they are operating on a small-scale," he said.

Mohamed Salleh said those involved in the agricultural sector also lacked initiatives when confronted with the dumping of agricultural produce especially fruits.

Commercial banks were also concerned about weather uncertainties as they affected the cultivation of crops, he added.

He said to win the confidence of commercial banks, the Federal Agricultural Marketing Authority (Fama) had to device efficient marketing strategies to ensure that agriculture produce reached the market on time and this would prevent farmers from losing money.

On Agro Bank, he said it gave out 70 per cent of its loans to farmers through the padi credit scheme, graduate agroentrepreneur scheme, food production credit scheme, and bumiputera industrial and trade community scheme.

Why banks shun agro sector
Daily Express, Malaysia