Agrobank Launches First Shariah-Compliant Financing For Paddy Farmers
KOTA KINABALU, July 21 (Bernama) -- Agrobank has introduced a shariah-compliant financing facility specifically designed to help paddy farmers nationwide finance their paddy cultivation operating costs in a more systematic, sustainable and inclusive manner.
Agrobank president and group chief executive officer Datuk Tengku Ahmad Badli Shah Raja Hussin said the innovative facility, called Agro Padi-iSalam, is based on Maqasid Shariah principles, and is the first of its kind in Malaysia, making Agrobank the pioneer in introducing financing through the Bai’ Salam contract for paddy farmers.
He said the product is offered to paddy farmers in both granary and non-granary areas with organised paddy field management systems, including those who sell their harvest to Padiberas Nasional Bhd (Bernas), Area Farmers’ Organisations, commercial rice mills or third-party buyers.
“This product enables financing to be extended to paddy farmers throughout the country, including Sabah. They require working capital to cover cultivation operating costs during the three- to four-month period before they receive income from their harvest.
“Under this concept, we provide financing to farmers at a low profit rate, enabling them to purchase seeds, pesticides, hire machinery and meet their operational needs until they harvest their paddy.
“This is a new concept in Islamic banking in Malaysia, using the Bai’ Salam contract, which differs from the Murabahah, Mudarabah and Tawarruq concepts,” he told reporters after the launch of Agro Padi-iSalam here today.
The product was launched by Minister in the Prime Minister’s Department (Religious Affairs) Dr Zulkifli Hasan during the 20th Nusantara Shariah Scholars’ Conference here today.
Tengku Ahmad Badli Shah said under the facility, paddy farmers can obtain financing ranging from RM1,000 to RM50,000, depending on the size of their cultivated area and cultivation costs.
He said the financing tenure is up to 6 months per planting season, with the facility renewable for up to 5 years. The financing also requires no collateral or an individual guarantor.
The approach is intended to improve access to financing for eligible individual paddy farmers aged between 18 at the time of application and not more than 70 upon the financing maturity date.
“About 230,000 paddy farmers nationwide are registered with their respective Farmers’ Organisations. We consistently receive requests for working capital financing from paddy farmers and assist between 20,000 and 30,000 farmers annually for this purpose,” he said.
Agrobank disburses more than RM70 million annually as working capital financing for paddy farmers.
The financing innovation also reflects Agrobank's commitment to spearheading financial solutions that address the actual needs of the agricultural sector, while expanding access to shariah-compliant financing for the paddy farming community.
Through Agro Padi-iSalam, Tengku Ahmad Badli Shah said the financial institution hopes to provide paddy farmers with easier access to financing to manage cultivation operating costs, thereby improving their productivity and income.
“The paddy industry is now evolving with the adoption of advanced technologies such as modern machinery and drones to support cultivation activities and fertiliser application in paddy fields.
“Accordingly, this financing will also be channelled to groups of farmers under the Farmers’ Organisation Authority and State Farmers’ Organisations to enable them to acquire suitable machinery.
“This initiative is aimed at ensuring modern technology can be adopted more extensively,” he said, adding that Agro Padi-iSalam also reflects the bank’s commitment to strengthening the country’s paddy and rice ecosystem to ensure sustainable food security for Malaysians.
Visit any Agrobank branch nationwide or browse www.agrobank.com.my for more information about Agro Padi-iSalam.
-- BERNAMA