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Agrobank Wins The Karlsruhe Sustainable Finance Awards For Outstanding Sustainable Project Financing

KARLSRUHE, GERMANY The Karlsruhe Sustainable Finance Awards 2016 has awarded Agrobank for Outstanding Sustainable Project Financing as recognition for success in the Paddy Credit Scheme. Dato’ Wan Mohd Fadzmi Wan Othman, President/Chief Executive Officer of Agrobank Malaysia received the award on behalf of the Bank in a ceremony held in Karlsruhe, Germany on Thursday evening.

Paddy-i Financing or formerly known as the Paddy Credit Scheme is an innovative financing by Agrobank with the aim to cater the seasonal needs of paddy farmers and suitable for the plantation and replantation of paddy. The scheme was first introduced in 1970 after the Bank’s establishment and has been instrumental in the development of commercialised and progressive paddy plantation industry in Malaysia. It was the first financing customised to meet the needs of paddy farmers since then and remains the first of its kind in Malaysia.
According to Dato’ Wan Mohd Fadzmi Wan Othman, as a development financial institution, Agrobank put significant focus in developing more innovative financing for targeted groups. Paddy-i is a financing that is designed to cater for seasonal income earners of paddy farmers.

One of the key success factors for the scheme was the ability of the Bank to structure a working capital financing for them. Under normal commercial financing practices, the paddy farmers will not be able to have easy access to financing due to the nature of paddy planting where the cash flows for repayment is seasonal and the plantation is susceptible to paddy price risks, adverse weather and excess supply.
With this scheme, farmers are able to obtain financing of up to RM2,500 per hectare or maximum financing of RM50,000 to meet the requirement for the purchase of paddy, seeds, fertilisers, land preparation and other production costs associated with the paddy farming. The scheme also provides low profit rate subject to 3.25% profit rate per
harvest season and no collaterals and guarantors required for the financing.

The features and benefits of the schemes significantly helped the paddy farmers especially to increase the production output and income. We are proud that the scheme achieve satisfactory collection rate from 97%-100% per season, said Dato’ Wan Mohd Fadzmi.

The success of Paddy-i has helped Agrobank to demonstrate our ability to offer structured financing particularly for the unserved and underserved community. Most of the Agrobank’s customers will subscribe to Paddy-i for a period of 5 years (10 paddyplanting seasons). The amount disbursed over the period of ten years (2006- 2015) stood at RM370.53 million, thus benefitting 84,970 farmers nationwide. We believe that the scheme has contributed significantly to improving the state of national food security and livelihood of paddy farmers in the country, whose income are among the lowest in the agriculture community. The scheme is not only considered as financing for sustainability but also for food sovereignty for the country, Dato’ Wan Mohd Fadzmi further explained.

Currently Agrobank has expanded the scope of Paddy-i financing to new rural areas in Kota Belud (Sabah), Batang Lupar (Sarawak), Rompin and Pekan (Pahang).

The Karlsruhe Sustainable Finance Awards honours financial institutions and organisations with significant contributions to the field of sustainable finance. The award recognizes outstanding success in long-term financing of exemplary industrial/ commercial or infrastructure projects that benefit local communities, protect the environment and ensure reliable returns to investors and lenders.

YB Datuk Othman Aziz, the chairman of Muda Agricultural Development Authority (MADA) and also the Deputy Finance Minister congratulated Agrobank on the latest awards received.

MADA has a long history with Agrobank since 1970. The first project by Agrobank was to carry out irrigation projects to accommodate double cropping for paddy farming in the state of Kedah and Perlis, which is also MADA designated areas. In its first year of business operation, Agrobank had given financing amounting to USD 150,000 to 2,724 farmers in MADA designated area.

Agrobank and MADA have been working closely throughout the years for the benefits and development of paddy farmers. MADA wishes to congratulate Agrobank on this significant achievement, said YB Datuk Othman.


Agrobank -- Karlsruhe Sustainable Finace Award

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