Rice self-sufficiency

In 2008, Malaysia achieved 73% self-sufficiency for rice. That was good.

What's even better is the 2010 target of 86% self-sufficiency.

To get to the target, the Ministry for Agriculture and Agro-based Industries has an allocation of RM3 billion. That's all lot of money.

It is estimated that there are 426,260 hectares of rice-growing areas in Malaysia.

When will the 100% target be met?

Apparently, Malaysia has a Food Security Policy. So far, all I can find out further about this policy is this link to the Ministry of Information.

Being a staple food, rice is, indeed, a security issue. The 100% self-sufficiency is certainly within the capabilities of this country. 

Microfinance: Govt not doing enough!

Further to my earlier, rather prolix blog entry on microfinance (read Time to step up microfinance programmes), the M'sian banking system is beginning to mobilise on microfinance products. In the Star Online report entitled Banks upbeat on micro-financing, the focus of banks appears to be on micro-enterprises which are defined as business entities with less than 5 full-time employees and annual sales of less than RM250,000.

Among established financial institutions, the market leader in microfinancing is Agro Bank (formerly Bank Pertanian). It's range of microfinance products are targeted mainly at agro-based activities; check the list here.

Commercial banks are NOT able to provide values-based microfinance

While we should be heartened that the banks share the view that during this period of economic challenge, microfinance is an area to focus on, one cannot help feeling that the established banks like Public Bank and AmBank do not really have the heart nor stomach for microfinance. Their goals are so materially different from Grameen Bank's values in relation to microfinance.

So, we can expect very stringent criteria for microfinance applicants at these commercial banks. While we cannot criticise the risk management criteria of these commercial banks, we have to ask the federal government how genuine microfinance applicants who fail the stringent criteria of the commercial banks can receive any microfinancing. Besides, commercial banks are only targetting small and medium enterprises (SME) only, not the micro-enterprises which are really one-person kari pap and kueh sellers who also need some funds to meet rising costs of production.

Better delivery system needed for microfinance

In other words, if the federal govt takes the view that the effective distribution channel for microfinance is through commercial banks, then the federal govt is approaching the principles of microfinance from a very dubious and cynical starting point. And, left to commercial banks, the RM1.2 billion allocated for SME financing, which is wrongly defined as microfinance, will not reach the truly needy micro-enterprises in Malaysia.

What the govt should do

Instead of wasting time with politics and schmoozing with commercial bankers, the 2nd Minister of Finance, Minister for Agriculture and Minister for Domestic Trade and Consumer Affairs need to get together to organise a better delivery system for microfinance to reach micro-enterprises, mainly in the rural areas and smaller towns.

Agricultural Investment Schemes

The Malaysian Companies Act offers an interesting alternative for plantation owners to gain access to investment funds. This is an alternative to conventional funding methods such as bank loans or being publicly-listed. This avenue should be of particular interest to plantations that are starting-up or undergoing a major replanting programme.

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The first-ever Agricultural Investment Scheme ("AIS") approved by the Companies Commission of Malaysia ("CCM") is the Country Heights Growers Scheme ("CHGS") promoted by Tan Sri Lee Kim Yew, the creator of the upmarket gated communities of Country Heights in Kajang and Damansara and, the Mines Resort City.

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After extensive research into AIS programmes in Australia, Canada, Scotland and several other countries, I was able to conceptualise and present a concept paper on behalf of CHGS for CCM's consideration and approval.

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CHGS established 40,000 investment units known as Growers Plots. The scheme was launched in March, 2007 and to-date, the takeup rate has been so phenomenal that more than 80% of available Growers Plots have been subscribed for.

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With the success of the pioneering CHGS, plantation owners are now able to consider AIS as a fundraising option.

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AIS gives plantation owners direct access to a ready pool of investors who are interested in a direct investment in the oil palm sector. An investor may invest in shares of a listed plantation company, which offer returns in the form of dividends and, gains (or losses) in the movement of share prices. The risks and returns are obvious to all. AIS, however, offers a steadier, yet attractive, rate of return which should appeal to risk-averse investors.

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AIS is similar to a closed-end fixed yield instrument. This is one of the key features of CHGS. The annual yield payable to the investor is a range of percentages between 6% to 12% of the initial investment sum which is linked to the annual average price of crude palm oil ("CPO") published by the Malaysian Palm Oil Board ("MPOB").

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The yield computation formula is designed to achieve 2 things:-

• It is easy for the investor to monitor his/her expected returns for the year.
• It is an objective formula i.e. not dependent on the operational efficiency of the plantation.

The added sweetener is that there is a bonus feature in that additional yields will be paid to the investor based on the actual tonnage of fresh fruit bunches ("FFB") harvested by the plantation.

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AIS is an agricultural investment model that has arrived in Malaysia. It is worthy of consideration by plantation owners seeking access to investment funds for starting-up plantations or replanting programmes. To have a better idea of the AIS-model have a look at CHGS at http://www.chgs.com.my/.