Last week, I plunged into the heart of Malaysia's food supply crisis - a ticking time bomb amidst a burgeoning population and seemingly stagnant domestic agricultural outputs. This delicate (dis)equilibrium profoundly impacts Malaysia's future food security state. If you missed it, I encourage you to catch up on the intricacies of Malaysia’s agricultural and food security outlook.
Before we explore potential strategies to help boost our agricultural production, it's imperative to grasp the pulse of our agricultural industry - how it operates and what is at stake.
The Malaysian agricultural industry follows a dichotomous model, characterised by two distinct sectors, delineated by farm sizes. The smallholder sector encompasses farms with land areas sprawling 40 hectares or less, while larger agricultural land holdings are classified as estates.
Interestingly, smallholder farms account for a substantial two-thirds of Malaysia’s total agricultural land. Despite the massive land expanse, these farms exhibit a a lamentable low average yield of 3.5 metric tonnes per hectare, representing merely half of the potential yield of 7.2 metric tonnes per hectare.
The suboptimal productivity levels of smallholder farms are largely responsible for the scarcity in domestic food supplies, which indirectly results in inflated food product prices. This productivity deficit is believed to stem from a confluence of several factors:
Low technology adoption: Smallholders are heavily reliant on traditional farming methods rather than modern technologies, such as utilising drones for water level monitoring.
Limited access to financing: Smallholders possess little to no capability to secure large credit facilities for scaling up due to stringent financial requirements from banks, such as the need for collaterals.
Lack market linkages: Smallholders are typically underdeveloped and remotely located, resulting in a disconnect from the broader market opportunities.
Inadequate compensation packages: Farmers, in general, struggle to receive fair compensation for their produce as they are constantly exploited by multiple layers of intermediaries throughout the value chain, making it difficult to run a profitable business.
Climate conditions: Extreme heat, prolonged rainfall and flooding contribute to declining agricultural production. scientific research has linked traditional farming methods to increased carbon emissions and global warming, exacerbating climate-related challenges.
Having outlined all the key factors contributing to the poor productivity of smallholder farms and establishing that this sector is the linchpin to the state of our domestic food supplies, it is indisputable that increasing their productivity may help to improve food security.
As an MOF-incorporated development financial institution (DFI) bank mandated to transform the Malaysian agriculture industry into a thriving agribusiness, Agrobank, with over 16,000 smallholder farmers in its clientele base is seen as the perfect embodiment of an instrument for improving national food security.
But what active role can Agrobank take to improve agricultural productivity among smallholder farmers? Where does Agrobank fit in this equation? How can Agrobank step up to the plate?
The answer to these questions lies at the junction right where all these factors intercept. With Agrobank’s large financial capability and diverse market connections, it can strategically position itself at the core and take the supportive role of transforming smallholder agricultural farms into highly productive and resilient agribusinesses by acting as a One-Stop Mobility Hub for smallholder farmers to directly associate and trade.
One Stop Mobility Hub via Cooperative Business Model
The Hub aggregates and stores information of every player within the industry in a cloud database, which is developed, managed and maintained by Agrobank. Agrobank can then grant access to this information to all Hub members, enabling them to engage in direct trade with other market players, eliminating the need to navigate through the lengthy intermediary-dominated value chain, all facilitated by a robust Cooperative Business Model.
In addition to facilitating direct market connections and trading opportunities, Agrobank can offer comprehensive support to all members by advocating:
Adoption of automation technology and digitalisation to enhance farming efficiency and productivity;
Equitable access to financing and investment opportunities to all farmers, along with appealing Takaful protection packages in the event of catastrophic incidents;
Fair compensation packages for their produce by directly targeting specific market segments; and
Green and sustainable farming initiatives, such as vertical farming to address the challenge of low agricultural productivity resulting from limited arable land.
Conversely, the Cooperative Business Model can serve as a powerful tool to empower smallholder farmers who often struggle with capital by enabling them to pool resources together for collective purchases of input materials, such as fertilisers and animal feed, thereby leveraging economies of scale. This model also allows them to negotiate more favourable pricing with suppliers and buyers alike for optimal profits.
Given Agrobank's extensive network within the farming community and the broader industrial landscape, I cannot overstate the significance of Agrobank's role in developing and managing this One Stop Mobility Hub through Cooperative Business Model to empower farmers, especially the smallholders to beef up their farming efficiency and productivity levels. As agricultural productivity and food supplies increase, so does the ability of farmers to scale up. Similarly, food products become more accessible and affordable to consumers, which ultimately enhances national food security.
References:
[1] Agriculture Statistical Handbook 2008. Ministry of Agriculture.
Disclaimer: All data are properties of their respective owners, unless otherwise stated. All charts and graphics are properties of Hafeez Hamdan.
This is a free-access document. To cite this work, use: Hafizuddin, H. (2024, March 10). Enhancing food security with Agrobank. https://www.hafeezhamdan.com/post/enhancing-food-security-with-Agrobank
Commentaires