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The agriculture sector is one of the main players in the growth of the
Malaysian economy, contributing approximately 15.9% of the Gross Domestic
Product (GDP) for the year 2008 (Table A1, Appendix). The strong emphasis on agriculture sector in the
Ninth Malaysia Plan (RMK 9) is in line with the performance of Malaysian stock market
and agriculture sector's contribution (Junaina et
al., 2009). In terms of agriculture
development, during the Ninth Malaysia Plan, the federal government has RM 11.4
bn, 84% higher than the RM 6.2 bn spent on the agriculture development under the Eighth
Malaysian Plan (Table A2, Appendix). Thus, financial institutions will be encouraged to provide
adequate funds for investments in agricultural production and processing, agro-based activities
and other related agricultural activities.
Currently, the government development agencies, the commercial banks and
the various rural credit institutions are the major institutional sources of credit for
financing agriculture and its related activities. For example, commercial bank lending to
the agricultural sector rose substantially by RM 135,593.3 mn in the year 2007 to
RM 157,780.3 mn or 14% of the total commercial bank lending by the end of the year
2008. However, based on the direction of commercial bank lending (Table A3,
Appendix), loans to the agricultural sector are quite a small and it is the second lowest
after mining and quarrying and only represents an average of 2.5% of the total
commercial bank lending, compared to the other sectors. In terms of movement of lending to
the agricultural sector, the graph (Figure A1, Appendix) shows that the movement has
not been stable and there is a decreasing trend, which started in 2000 continued to 2007. |
