Agrobank targets 10% net growth in financing this year

KUALA LUMPUR: Agrobank, formerly known as Bank Pertanian Malaysia Bhd, is targeting net financing growth of 10% this year, driven by its core business of agriculture financing, to reach a total of RM9.5 billion from the time it was established until the end of 2017.
President and CEO Datuk Wan Mohd Fadzmi Wan Othman said it has grown 3%-4% year-to-date, which remains in line with its full-year target of 10%.
“Although last year we grew a record 16.9%, we remain conservative as we want to see a balanced growth. So far we’re growing nicely, we still have three more quarters to go. We will put in procedures and action plans to ensure that we meet the objective,” he told selected media in an interview yesterday.
Agrobank was established in 1969 with a mandate to provide financial access and credit to the development and growth of the agriculture community in Malaysia. It is also a full-fledged Islamic bank.
“We need to grow about RM800 million-RM900 million net (financing), and on a gross basis we need to grow RM2.4 billion-RM2.5 billion. In the past two to three years, we’ve been able to do that,” Mohd Fadzmi said.

He added that 90% of Agrobank’s financing is now channelled towards agriculture, comfortably above the required 70%.
When Mohd Fadzmi joined the bank in 2011, agriculture financing was only 55% of its portfolio.
“Of course, we have the flexibility to move it (agriculture financing ratio) down if we want to but so long as there’s continued growth coming from our mandated role, we’re okay. We can even go 100%. At 90%, we’re about right. We can even drop it to 80% and still be comfortable. We’ve been consistently above 85% for the last year or so,” he said.
Mohd Fadzmi said its customer segment ranges from individual, micro, small business, SMEs, commercial to corporate. Hence the bank also has a consumer portfolio for personal financing.
While Agrobank has managed to cut its non-performing loans to 4.96% from 22.7% in 2011, it is still high compared with the commercial banking industry’s 2%, which Mohd Fadzmi said is under control for a development finance institution.
“We don’t have the luxury of managing our portfolio. We still have to operate in the agriculture sector. We cannot go into manufacturing, housing or credit cards. Our challenge is how to balance between making money, do things that commercial banks don’t do, and we have to settle for higher impairment.
“Agriculture is inherently a high-risk sector. If we put all our eggs in our basket, it’s not good for the institution. We have a risk management division, whose sole job is to ensure that we’re not concentrated in terms of sector and client,” he said.
Mohd Fadzmi explained that even in agriculture sub-sectors, some are perceived to be higher risk than others. For example, the commodity sector is safe as it has developed over the years and palm oil is deemed a stable sector. Fisheries or ruminants are risky sectors they it involve livestock.
“Also there are issues like weather and natural disasters, which you don’t see in other sectors such as manufacturing.”
Agrobank has 189 outlets, including 125 branches, as well as kiosks. It plans to open two to three more commercial centres this year in agricultural hubs, purely for financing consultation. Commercial centres are a new business model that it undertook in 2016 after rolling out two such centres, in Cameron Highlands, Pahang, and Bagan Datuk, Perak.
“We’re a rural bank and 70% of our presence is in the rural area. To the rural community, a presence is necessary,” Mohd Fadzmi said.