Case studies

Paper

The future of Rural and Agricultural Finance Institutions: Bank Pertanian Malaysia

Paper presented in the 48th APRACA Executive Committee Meeting And Regional Symposium on the Future of Rural and Agricultural Finance Institutions, Tehran and Isfahan, Iran, October 9-15 (2004)

Malaysia’s Vision 2020 is to be a developed nation by the year 2020. Manufacturing and the service sectors will be the driving force of the economy but the agriculture sector will still remain an important contributor, especially in the food production. Although the percentage contribution of agriculture to gross domestic product (GDP) is declining, in term of absolute value the amount is increasing. The agriculture sector has contributed significantly to the growth of the Malaysian economy and for it to continue significantly contribute to the national economy, it has to be globally competitive. The Third National Agricultural Policy (NAP3), which covers the period 1998 to 2010, provides the policy framework for the future growth of the agricultural sector in the next decade. The future of the rural and agricultural finance institutions in Malaysia including Bank Pertanian Malaysia (BPM), a development financial institution entrusted to play an important role in the development of agricultural sector, rest on the ability of these institutions in meeting the challenges to remain sustainable and competitive. With the liberalisation of the world trade including the financial sector through the WTO, the Common Effective Preferential Tariff (CEPT) of the ASEAN Free Trade Area (AFTA) agreements, the trade competition will be stiff amongst existing players and new competitors from within and outside the nation. BPM must find ways to strengthen its existence by having enough capital, improving its operation, expanding its scope of business and operating as a total bank.

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