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Organic Farming in Malaysia and Agrobanks Role 2012

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By Mr. Krishna Kumar

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Organic Farming in Malaysia and Agrobanks Role 2012

  1. 1. International Symposium on Marketing and Finance of the Organic Supply Chain Seoul, Republic of Korea 23-26 September 2012
  2. 2. Overview of Agricultural Sector in Malaysia Agriculture sector contribution in GDP: • In 2010, RM40.7 billion / US$12.87 billion • In 2000, RM30.6 billion / US$9.67 billion • Ranked third after services and manufacturing sector (Agrofood Statistics, 2011) The Malaysian government sees potential in organic 2 The Malaysian government sees potential in organic farming as there is an increasing demand for organic products in the domestic and export market.
  3. 3. Government Policy in Support of Agriculture • To transform food agribusiness industry into a competitive sector producing safe and quality products through sustainable farming practices. 3rd National Agricultural Policy (NAP3) (1998-2010) 9th Malaysia Plan (9MP: 2006-2010) 3 9th Malaysia Plan (9MP: 2006-2010) • The government included organic farming in this policy. • 460 OA projects implemented with land area amounting to 359 hectares and expenditure of RM2.27 million (US$0.72 million) over a 5-year period. 10th Malaysia Plan (10MP: 2011-2015) • In 2011, 2 projects with 25 hectares have been implemented. • The maximum allocation rate raised from RM10,000 (US$3,161.56) per hectare to RM30,000 (US$9,484.67) per hectare.
  4. 4. Growth Factors for Organic Farming in Malaysia More health-conscious urban households Supermarkets andEnvironmental 4 Supermarkets and hypermarkets demand Overcome chemical residue High quality and safe food Environmental awareness
  5. 5. 71,208 (0.13%) 79,992 (0.67%) 34,079 (0.17%) 30,000 40,000 50,000 60,000 70,000 80,000 90,000 hectares Land Area Under Organic Farming 1,582 (0.02%) 0 10,000 20,000 30,000 Indonesia Malaysia Philippines Thailand • Malaysia lagging in terms of land areas utilised for organic farming • Only 0.02% of agriculture land in Malaysia is devoted to organic farming. Source: International Federation of Organic Agriculture Movements
  6. 6. Malaysia Organic Certification (Sijil Organik Malaysia) (SOM) • Established in 2003 by Department of Agriculture. • To certify organic farmers and entrepreneurs. • Focusing mainly on vegetables, herbs, medicinal plants and fruits and integrated farming with mixed cropping. • The requirements cover: • Operations, preparation, storage, transport & labelling. • Does not cover the downstream processed products derived from the unprocessed plants and plant products. 6 unprocessed plants and plant products.
  7. 7. 3 2 3 1 * SOM Certified Farmers Location of Organic Farmers* by State in Malaysia 18 STATE No of Farmers Johor 13 Kedah 3 N Sembilan 5 Pahang 18 Penang 1 Sabah 2 Sarawak 3 Selangor 17 Total 62* 17 13 5 *Source: Department of Agriculture, Malaysia 2010* Latest status @ April 2012, indicates now there are 75 SOM certified farmers.
  8. 8. Suggestion from CETDEM Centre for Environment, Technology and Development, Malaysia (CETDEM) Viewpoint The NGO, CETDEM, started organic farming around 1986 on a one hectare (ha) plot in Sungai Buloh, Selangor . 8 • No incentive for land and credit. • Consumers unwilling to pay premium price • Farmers mindset • Labour shortage • Lack of knowledge • Stringent certification criteria • insufficient capital and low yield Challenges in Organic Farming • Government Support • Raise public awareness • Farmers to cooperate through: Integrated farms Centralised marketing practice better farm management quality control. Suggestion from CETDEM
  9. 9. 2,000 2,500 3,000 3,500 RM mil Palm Oil 1,036 33% Livestock 672 21% Others 173 5% Agrobank’s Agriculture Loan Balance Agrobank’s Loan Balance by Sector (% share, June 2012) Agrobank’s Primary Agriculture Financing 0 500 1,000 1,500 2008 2009 2010 2011 Jun/12 Food Crop Primary Agriculture Food Crop 771 25% Fishery 398 13% Forestry 88 3% • Agrobank’s loan balance for primary agriculture has increased from RM2.5 bil (US$0.8 bil) in 2008 to RM3.2 bil (US$1.0 bil) in 2011. • Loan balance for food crops rose to RM0.75 bil (US$0.2 bil) in 2011. • In Agrobank’s primary agri portfolio, the largest financing went to palm oil (33% of total), followed by food crop, livestock and fishery sectors.
  10. 10. 50,000 60,000 70,000 80,000 90,000 100,000 No of borrowers Palm Oil 17,575 19.97% Forestry 132 0.15% Livestock 6,378 7.25% Others 5,366 6.10% Agrobank’s No of Borrowers by Sector (% share, June 2012) Agrobank’s No of Borrowers Agrobank Financing: Number of Borrowers 0 10,000 20,000 30,000 40,000 50,000 2008 2009 2010 2011 Jun/12 Food Crops Primary Agriculture Food Crops 53,459 60.74% Fishery 5,101 5.80% • The number of borrowers in primary agriculture rose from 39,196 in 2008 to 90,077 in 2011 • Borrowers of food crops rose to 52,178 in 2011 (2008:17,179) • Food crop segment makes up the largest number of borrowers of 53,459 or 60% of total
  11. 11. Agrobank’s No of Borrowers for Fruits & Vegetables Agrobank’s Financing of Fruits & Vegetables 200 250 300 350 RM mil 15,000 20,000 25,000 No of borrowers Agrobank Financing: Fruits & Vegetable Segment 11 • Financing for fruits and vegetables increased to RM230 mil and RM285 mil respectively in 2011, from RM135 mil and RM85 mil in 2008. • Financing of Organic Farming >USD 1.26 mil. (>RM 4 mil) (2% of total financing to the vegetable sector) • The number of borrowers for fruits and vegetables rose to 8,273 and 21,038 respectively in 2011. 0 50 100 150 200 2008 2009 2010 2011 Jun/12 Fruits Vegetables Spices And Herbs 0 5,000 10,000 2008 2009 2010 2011 Jun/12 Fruits Vegetables Spices And Herbs
  12. 12. Titi Eco Farm Resort Sdn Bhd : spinach, cucumber, corn papaya, etc. Zenxin Agri-Organic Food Sdn Bhd: various vegetables Ganofarm Sdn Bhd : mushroom Leo Kim Ong : Vita Agrotech Sdn Bhd: mushroom About 10 operators with SOM certification are Agrobank’s clients , out of total 60-70 nationwide. Loan amount reached Organic Farmers Receiving Agrobank Financing 12 Permatang Cabaran Sdn Bhd: dragon fruit N&N Farm Sdn Bhd: vegetables Nasuha Enterprise: herbs Leo Kim Ong : Chinese broccoli, Swamp cabbage Bindu Florikultur : dragon fruit, pea, sprouts Mazlina Kahar: mushroom Loan amount reached RM8.0 mil (or 3%) out of RM285.4 mil to finance vegetable segment Expect more clients in future as organic farming expands
  13. 13. • Located in southern Malaysia (Johor). Operated since 2001. • Since 2008, certified from Nat. Assoc. Of Sustainable Agriculture Australia (NASAA), member of IFOAM. • Leading grower & retailer of organic produce in Malaysia and Singapore. • 80% of its customers are repeat buyers • Believes organic products would thrive in the next 5 years. • Enjoyed double-digit growth in sales and the number of customers has grown steadily. Growing 60 varieties of vegetables • Zenxin believes that they have more than 50,000 regular customers. Agrobank Client : Zenxin Agri-Organic Food • Zenxin believes that they have more than 50,000 regular customers.
  14. 14. • Produces organic fertilizers from palm oil waste that is the empty fruit branches (EFB). • Their unique products improve crop productivity, land rehabilitation, soil fertility, soil health and environmental sustainability. • They have R&D and bio-manufacturing capabilities to produce bio-fertilizers, bio-pesticides and bio-remediation products. • An example of their product is “aGricare BIO-ORGANIC” Fertilizer from palm oil wastes (EFB and other green wastes) Agrobank Client: Myagri Nutribio Sdn Bhd Fertilizer from palm oil wastes (EFB and other green wastes) composted using the latest technology containing beneficial microorganisms. Isolated and cultured in Malaysia
  15. 15. TYPE Micro Financing (MUS1M-i ) Fund For Food (3F) Commercial Fund Target Customers Micro entrepreneurs with projects of more than 1 year Entrepreneurs with projects for food production Entrepreneurs and Corporate with projects for food production Financing Size Maximum of RM20,000 Maximum of RM10 mil Maximum up SCL 3.75% per year for Agrobank Financing Products for Food Sector Profit Rate 15% per year 3.75% per year for amount <RM5 mil BLR + Margin Financing Tenure Maximum 60 months Maximum 60 months Maximum 10 years Collateral Not required Full collateral Based on Credit Ratings Guarantors 1 guarantor for loan amount ≥ RM20,000 Rebate/Incentive 20% of profit rate for prompt repayment
  16. 16. • Agrobank to contribute towards the production of safer foods and environmental-friendly agriculture that will make Malaysians healthier. Conclusion Agrobank will support the development of the food crop sector, including organic farming in line with the government’s policy towards sustainable farming, good farming practices and producing safer food for human consumption. 16 agriculture that will make Malaysians healthier. • Potential of organic farming in Malaysia is bright because people are becoming more health and environmentally conscious. • While organic farming is a small percentage of Agrobank’s total financing, the amount is likely to increase in future years, in line with the growing demand for organic foods. • Agrobank will continue to play its role to support organic farming.
  17. 17. Thank you
  18. 18. AFRIS. AsianFoodRegulationInformationService. We have the largest database of Asian food regulations in the world and it’s FREE to use. We publish a range of communication services, list a very large number of food events and online educational webinars and continue to grow our Digital Library. We look forward to hearing from you soon! www.asianfoodreg.com adrienna@asianfoodreg.com

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