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The Malaysian agri-business sector has been neglected over the past few decades after the country’s focus moved towards heavy industries to spur growth.
The agriculture sector however, is now being revisited and due to Malaysia’s natural resources, it is opening up doors for potential growth for many young graduate entrepreneurs.
Illustration by DinarStandard.com
Naturally, even graduate entrepreneurs hit their first stumbling blocks when it comes to igniting their business ventures. Financing is a tell-tale obstacle for young businesses as the procedure for financial assistance is often plagued by red-tape and high interest rates.
The alternative to banks are financing authorities licensed to provide funds for entrepreneurs. Likewise however, bureaucracy and waiting lines exist in these types of organizations. In fact, the contract terms are also rigid enough to turn investors and even potential entrepreneurs away.
With the formalities inherent in these procedures, small-scale entrepreneurs with high growth prospects are now turning to creative means of financing to overcome this stumbling block.
Entrepreneurship Co-operatives
Entrepreneurship co-operatives have existed long before the banking sector. The general model of a co-operative encompasses membership of business owners and their rights to use the funds of the co-operative, injected by shareholders.
These co-operatives used to operate as small centres catering to the surrounding community. But as the concept of co-operatives grew, so did the red-tape and various restrictions towards the operations of these bodies, leading to the concept now known as bank loans. However, the need for co-operative bodies is resurfacing, alongside attractive investment plans for members and investors.
One of Malaysia’s leading co-operatives dedicated to entrepreneurial activity is Koperasi Usahawan Malaysia Berhad (KUMB).
Image Source: www.farmfresh2u.com
Recently, Farm Fresh Industries, a local butchery, enlisted in KUMB’s services to structure an investment scheme that would fund their business model and provide returns to their masses of investors.
The investment scheme attracted a range of Malaysians who were not only intrigued by the high returns on this short-term savings plan but by the concept of fresh meat butchery in Malaysia. Though butcheries are common in the West, meat sellers in Malaysia are often found in wet markets or supermarkets. The concept of a specialist store for fresh meat represents a new dimension to the market.
With the help of KUMB, the local butchery promises a high profit margin on initial investments (by investors) in a short duration of three years. There is a restriction of a one-time contract per investor, reducing the risk of abuse within the system.
Dina Talib, General Manager in leading agricultural firm MM Vitaoils Sdn Bhd, describes this investment scheme as a strong opportunity for passive income. Investors are also entitled to royalties, having “introduced” friends and family to the investment scheme. “I am able to earn extra income without incurring costs,” she says, “There is no better way of surviving the current price-hikes in Malaysia.”
Dina adds that introducing other investors is just an option. “No one is forced to participate in this pyramid scheme,” she assures, “even without introducees along the line, one would earn the stipulated monthly commission for three years plus a portion of the initial investment at the end of 36 months.”
“I am someone who has always been interested in investment plans and schemes; this one tops the others in terms of returns.” |
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More importantly, from the perspective of the business owner, the funds are sufficient to fund the business model that seeks to support the local demand for beef. Currently, a large percentage of beef is imported from Australia to satisfy the local market. In addition to the Malaysian market, Farm Fresh Industries seeks prospective markets overseas – this accounts for the bulk of their revenue.
Informal Co-operative Investments
Not all agri-business entrepreneurs choose to commit to contracts with co-operatives like KUMB. Some prefer to stand alone and leverage on the concept of co-operative through their own investment plans for prospective investors.
Khairi Abu Bakar for instance, jump-started his worm farm in March 2008 on a limited budget. With promising revenue lines in tow, the IT Manager of a tourism agency began to search for potential investors to buy a “lot” of worms. According to Khairi, a “lot” denotes 1 kg of worms that will be harvested into two profitable streams – the sale of worms and the sale of fertilizers.
Profit-sharing for the worm-harvesting business model differs significantly from the contract managed by KUMB. Revenue streams come in at least 6 to 12 months later, and as described by Khairi, are perpetual at stipulated frequencies. His business plan also, does not rest on the pyramid scheme, thus does not promise royalties of any sort.
However, his plans of worm harvesting have been innovative enough for his farm to formulate two different investment plans that are launched on alternate months. This allows prospective lot buyers to gauge their investment capability and choose the plan that fits their income bracket. Furthermore, with no restriction on the number of lots or the frequency of purchases, Khairi’s worm farm is set to attract a myriad of depositors.
Khairi’s promotion of worm lots has landed him with 14 lots at present and with a 50-50 profit sharing scheme between investor and rearer, he is confident that 22 more lots will be bought by the end of this year.
Profit-sharing Facilities and Community Building
Co-operative-based investments for entrepreneurs are alternatives to bank loans or other traditional forms of financial assistance, whether they are contracted formally with co-operatives or formulated independently.
By calling investors into the realm of the business model, these agri-business owners are involving more parties to boost capital payments rather than solely relying on the banking sector.
Both companies in this article leverage on outside investors and respond to their interests by virtue of profit-sharing. |
Illustration by DinarStandard.com |
From the investor’s perspective, profit-sharing is the popular (and permissible) alternative to interest revenue and can be seen through Islamic saving accounts that pay dividend to their account holders instead of interest. Similarly, these profit-sharing investments act to benefit more people than solely the corporation that is involved.
In many ways, this personifies the company and allows an entrepreneur to connect with the surrounding community, which does not only support their businesses but share their benefits through their creative profit-sharing and financing trade-off.
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