Kuala lumpur: 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 highlighted that the innovative facility, called Agro Padi-iSalam, is based on Maqasid Shariah principles. It is the first of its kind in Malaysia, positioning Agrobank as a pioneer in offering financing through the Bai' Salam contract for paddy farmers.
According to BERNAMA News Agency, the product is accessible to paddy farmers in both granary and non-granary areas with organized paddy field management systems. This includes farmers who sell their harvest to Padiberas Nasional Bhd (Bernas), Area Farmers' Organisations, commercial rice mills, or third-party buyers. Tengku Ahmad Badli Shah stated that this initiative allows paddy farmers throughout the country, including those in Sabah, to receive working capital necessary to cover cultivation operating costs during the three- to four-month period before they obtain income from their harvest.
Under the Agro Padi-iSalam concept, financing is provided 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 marks a new concept in Islamic banking in Malaysia, utilizing the Bai' Salam contract, which differs from the Murabahah, Mudarabah, and Tawarruq concepts. The product was launched by Minister in the Prime Minister's Department (Religious Affairs) Dr. Zulkifli Hasan during the 20th Nusantara Shariah Scholars' Conference.
Tengku Ahmad Badli Shah further explained that under this facility, paddy farmers can obtain financing ranging from RM1,000 to RM50,000, depending on the size of their cultivated area and cultivation costs. The financing tenure is up to 6 months per planting season, with the facility renewable for up to 5 years, requiring no collateral or individual guarantor. This approach aims 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.
He noted that approximately 230,000 paddy farmers nationwide are registered with their respective Farmers' Organisations. Agrobank consistently receives requests for working capital financing from paddy farmers and assists between 20,000 and 30,000 farmers annually for this purpose, disbursing more than RM70 million annually as working capital financing for paddy farmers.
The financing innovation also underscores 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, Agrobank hopes to provide paddy farmers with easier access to financing to manage cultivation operating costs, thereby improving their productivity and income.
Tengku Ahmad Badli Shah mentioned that the paddy industry is evolving with the adoption of advanced technologies such as modern machinery and drones to support cultivation activities and fertiliser application in paddy fields. Accordingly, the 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 aims to ensure that modern technology can be adopted more extensively, reflecting the bank's commitment to strengthening the country's paddy and rice ecosystem to ensure sustainable food security for Malaysians.
For more information about Agro Padi-iSalam, visit any Agrobank branch nationwide or browse www.agrobank.com.my.