Agrobank: The Catalyst of Agriculture
Business Today Malaysia|October 2021
Nurturing Malaysia’s future agropreneurs towards sustainability and digitalisation.-Khadijah Iskandar Covering President / Chief Executive Officer (CP/CEO)

In 2021, green finance is expected to increase at a significant rate. Based on data from the Climate Bonds Initiative (CBI), 2021 green bond issuances might exceed that of last year, with US$219.7 billion issued for the first half of the year compared to the US$290.1 billion issued in 2020.

Bonds issued from the AsiaPacific made up more than a quarter of the first half’s figures, at US$51.9 billion, just a few million short of the US$53.2 billion issued for the entire year of 2020.

China issued approximately US$22 billion worth of green bonds in the first half, exceeding the combined issuances from South Korea (US$5.9 billion), Japan (US$5.5 billion), Singapore (US$5.2 billion and India (US$4.6 billion). Separate from Mainland China’s, a total of US$3.2 billion worth of green bonds was issued from Hong Kong SAR.

The launch of the RM1 billion sukuk programme by Agrobank, which is also a green and sustainable effort, has set forth a new standard in both Islamic finance and the instruments to raise funds by the local bank under the leadership of Covering President / Chief Executive Officer (CP/CEO), Khadijah Iskandar.

Funds raised through the Sukuk would go towards the working capital for its new or existing businesses and projects, that promote any of the Sustainable Development Goals (SDG), including those with regards to mitigating climate change, the CP/ CEO said in an exclusive interview with BusinessToday

“The sukuk is a hybrid sukuk which means we can issue the sukuk for shariah compliant purposes only or for purposes that are aligned with Sustainable Development Goals. RAM Sustainability Sdn Bhd (RAM Sustainability) has already rated us, and we met all the necessary requirements,” says Khadijah.

In addition, Khadijah highlights that the proceeds may also be used for future business expansion. She does not discount the possibility of using the proceeds for acquisition, takeover or merger in future.

Customer Growth

Aside from issuance of sustainable sukuk, the Bank has developed various initiatives that would gain traction amongst farmers, investors and small businesses. While Agrobank is known for its agriculture financing, it also offers other products and services such as deposit taking and takaful products.

“Through the Sukuk programme, we hope to create visibility and awareness especially with regards to our developmental roles that are far more than just giving out financing. Deposit placed with Agrobank will also mean that depositors do participate indirectly in our financing business. Those who advocate sustainability are always welcomed to place deposit with us and be able to satisfy their sense of purpose,” Khadijah says.

Reviewing the banking operations and the type of assistance that it renders and wishes to render its customers, she says that as a DFI, the Bank’s priority is to nurture and improve the “bankability” of its customers at competitive cost.

Agriculture is generally perceived as high-risk sector and may not be within the risk appetite of commercial banks. Being a DFI with agriculture focus, not only do we understand the industry and the risk, we are also in the position to offer low-rate financing by channelling the suitable government funds to these customers. This kind of support will help the entrepreneurs to build their business and improve their credit standing gradually, she says.

“One of the Bank’s mandated roles is to coordinate and supervise the funds for agricultural purposes. The financing cost for this fund is below the market rate to help the business owners to keep their cost at manageable level especially at the beginning of their business cycle. In this way, we hope we can eventually ‘migrate’ them to another level of their business growth phase”

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