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Sab1401 Lect5

The document discusses agribusiness credit and finance in Malaysia. It outlines the role of government agencies like Bank Negara Malaysia, Agrobank, and MARA that provide financial assistance to agribusinesses. It explains the five C's of credit evaluation - capacity, capital, collateral, conditions, and character. Government agencies help ensure small businesses have access to financing through various funds and schemes.

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49 views17 pages

Sab1401 Lect5

The document discusses agribusiness credit and finance in Malaysia. It outlines the role of government agencies like Bank Negara Malaysia, Agrobank, and MARA that provide financial assistance to agribusinesses. It explains the five C's of credit evaluation - capacity, capital, collateral, conditions, and character. Government agencies help ensure small businesses have access to financing through various funds and schemes.

Uploaded by

noreenasyikin
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SAB1401

INTRODUCTION TO
AGRIBUSINESS

AGRIBUSINESS CREDIT AND FINANCE


Learning Objectives
At the end of the lecture, students should be
able to:
• Discuss the role of agencies appointed by the
government in providing financial assistance to
the agribusiness sector
• Explain the five C’s of credit in applying loans
• Discuss the issues encountered by the
agribusiness in getting credit
The Government
Roles
• The government of Malaysia has
provided credit scheme and loans for
entrepreneurs/businesses via:
- Bank Negara Malaysia
- Agrobank
- MARA
- SME Corp.
BANK NEGARA
MALAYSIA (BNM)
• A statutory body which started operations
on 26 January 1959
• The role of BNM is to promote monetary
and financial stability
• BNM has established a comprehensive
mechanism to ensure SMEs have
continued access to financing
BANK NEGARA
MALAYSIA (BNM)
(cont’)
• Establish institutional arrangements
• Strengthen financial services providers
• Develop a microfinance institutional
framework
• Establish special funds and financing
schemes
• Improve outreach and awareness
MARA
• Majlis Amanah Rakyat (MARA) was
established on 1st March, 1966
• The Business Financing Division provides
business financing assistance to assist
Bumiputera entrepreneurs to start
business or raise capital to improve
existing business
• e.g., Business Improvement Financing
Scheme (SPPP), MARA Entrepreneur
Guarantee Scheme (SJUM)
SME Corp.
• Small and Medium Enterprise
Corporation Malaysia (SME Corp.) was
commenced on 2 October 2009
• It is now the central point of reference
for information and advisory services for
all SMEs in Malaysia
• Disseminate information on government
funds and incentives on SMEs
The Five C’s of Credit
1. Capacity(kapasiti)
2. Capital(modal)
3. Collateral(cagaran)
4. Conditions(keadaan)
5. Character(karakter)
1. Capacity
• Refers to the ability to meet the loan
payments(kmmpuan byr blk)
• The lender will consider the cash flow from
the business, the timing of repayment, and
the probability of successful repayment of
the loan
• Lenders will also consider payment history
as an indicator of future payment potential
2. Capital
• The money invested in the business
• Is an indicator of how much is at risk
should the business fail
• Lenders will generally consider the
company’s debt-to-equity ratio to
understand how much money the lender
is being asked to lend (debt) in relation
to how much the owners have invested
(equity)
3. Collateral

• A form of security for the lender


peminjam

• Banks usually require collateral as a


type of insurance in case the borrower
cannot repay the loan
• The loan agreement should carefully
specify all items serving as collateral cagaran
3. Collateral (cont’)
• Potential forms of collateral includes
equipment, buildings, inventory and
accounts receivable
• In some cases, the lender may ask for a
third-party guarantee where someone
else will repay the loan if the borrower
fails to
4. Conditions
• Refer to the intended purpose of the
loan, e.g. working capital, additional
equipment, or new offices
• Conditions also include the national,
industry level, and local economic
situation
• A volatile or unstable economic situation
can negatively impact the evaluation
5. Character
• The obligation that a borrower feels to
repay the loan
• Since there is not an accurate way to
judge character, the lender will decide
subjectively whether or not the borrower
is sufficiently trustworthy to repay the
loan
5. Character (cont’)
• The lender will investigate the
borrower’s payment history, review a
credit bureau report, and consider the
educational background and experience
in business
• The quality of the borrower’s references
and the background and experience of
the borrower’s employees will also be
considered
Issues in Getting Credit
1. Lower access to credit particularly for
small firms
2. Lack of knowledge on the credit and
financial assistance available
3. Poor financial management
4. High competition with other industries
T
H
A
N
K

YOU…

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