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Tuesday, December 30, 2008

Agricultural Finance 7: Sumber Dana Pinjaman

Pengenalan
Individu atau institusi yang terlibat dengan Perniagaantani, sama ada petani, pemborong, peruncit, dan pemproses barang pertanian boleh mendapatkan modal atau dana pinjaman dari dua sumber, iaitu melalui pinjaman institusi dan sumber pinjaman bukan institusi. Sumber dana institusi ialah Pertubuhan Peladang, Koperasi, Bank Perdagangan dan Agrobank. Sumber bukan institusi termasuk peruncit atau pemborong melalui integrasi secara menegak (Vertical integration), pemilik tanah melalui sistem pajakan, ahli keluarga dan jiran. Perbincangan dalam sesi ini akan tertumpu kepada sumber dana institusi.

Institusi Pinjaman Perniagaantani di Malaysia
Terdapat beberapa institusi yang diwujudkan oleh kerajaan untuk membantu mereka yang terlibat dengan perniagaantani untuk mendapatkan modal bagi menjalankan perniagaantani mereka. Institusi-institusi tersebut adalah seperti berikut:

1. Pertubuhan Peladang
Pertubuhan Peladang ditubuhkan untuk mewujudkan satu pergerakan peladang yang kuat ke arah meningkatkan taraf sosioekonomi ahli-ahlinya. Pertubuhan ini menjalankan aktiviti bantuan teknikal berkaitan dengan pertanian, disamping aktiviti-aktiviti yang membantu pembangunan modal manusia dan pembangunan sosial petani. Kebanyakan aktiviti Pertubuhan Peladang adalah bertujuan untuk mengubah sikap masyarakat tani. Di antara strategi yang dilakukan oleh Pertubuhan Peladang ialah menjalankan aktiviti perniagaan yang berhubung secara langsung dengan perusahaan ahli-ahlinya seperti pembekalan input pertanian, pemasaran, pemprosesan, dan pemberian pinjaman. Di bawah pemberian pinjaman, Pertubuhan Peladang menjalankan aktiviti seperti berikut:

a) Menyediakan kemudahan pinjaman untuk membolehkan petani membeli input pertanian,
b) Menyediakan panduan untuk mendapatkan pinjaman dan menyelia penggunaan pinjaman pertanian,
c) Menguruskan pengutipan hutang yang diberi, dan
d) Menelaraskan pinjaman daripada AgroBank kepada ahli-ahli Pertubuhan Peladang.

2. Koperasi
Koperasi, sepertimana Pertubuhan Peladang, adalah sumber utama yang lain di mana petani boleh mendapatkan dana pinjaman. Gerakan koperasi di luar bandar, bertujuan di antara lain memberi pinjaman kepada ahli-ahli mereka, dan berusaha mengelakkan mereka daripada berhutang dengan orang tengah. Antara koperasi yang boleh dijadikan contoh ialah koperasi pekebun-pekebun kecil dan koperasi peneroka FELDA.

3. Bank Perdagangan
Bank Perdagangan juga merupakan institusi kewangan yang penting dalam pembangunan perniagaantani. Di antara bank yang memberi pinjaman kepada sektor perniagaantani ialah Bank Rakyat, CIMB, Public Bank dan Maybank.

4. Agrobank
Agrobank adalah sebuah bank milik kerajaan (GLC) di bawah Menteri Kewangan Diperbadankan (MKD). Dasar pembiayaan bagi sektor pertanian adalah berpandukan polisi yang ditetapkan oleh Kementerian Pertanian dan Industri Asas Tani.

Agrobank sebagai kesinambungan Bank Pertanian Malaysia mempunyai pengalaman melebihi 40 tahun dalam bidang perbankan pertanian yang mempunyai rekod cemerlang dalam membentuk dan membina usahawan-usahawan yang berjaya.

Agrobank menyediakan perkhidmatan kewangan yang menyeluruh mengikut kehendak pasaran dan pelanggan secara kelestarian kewangan kepada kumpulan sasar yang tertentu seperti:

i) Usahawan Tani
ii) Usahawan mikro, kecil dan sederhana
iii) Individu persendirian

Peranan utama Agrobank
i) Agrobank menyediakan perkhidmatan kewangan dan perbankan kepada semua aktiviti ekonomi.
ii) Menyediakan penarafan kredit pertanian
iii) Meningkat dan menggalakkan pembiayaan pertanian oleh sektor perbankan.
iv) Pusat kepakaran pertanian
v) Agen bagi program pembangunan kerajaan

PINJAMAN/PEMBIAYAAN
Agrobank menawarkan kemudahan kredit yang menarik dalam semua aspek untuk memoden dan membangunkan sektor pertanian, penternakan dan perikanan di dalam negara.

Tujuan pinjaman yang boleh dipohon:
Kemudahan pembiayaan adalah bertujuan menyediakan modal kepada individu/syarikat bagi memula projek pertanian baru atau mengembangkan projek sedia ada.

Skop Pembiayaan Pertanian
Semua jenis aktiviti pertanian yang bermula daripada pengeluaran, pemprosesan, pembuatan dan pemasaran merangkumi aktiviti huluan dan hiliran.

Sektor pertanian adalah meliputi penanaman, perhutanan, perikanan, penternakan dan bidang-bidang berkaitan dengan pertanian, umpamanya pelancongan tani.

Kelayakan
Mereka yang layak memohon adalah warganegara Malaysia atau syarikat Malaysia, iaitu seperti berikut :
i) Individu
ii) Perkongsian
iii) Syarikat
iv) Koperasi
v) Persatuan
vi) Pertubuhan

Had Pembiayaan:
Kemudahan pembiayaan adalah sehingga 70 peratus daripada kos projek

Bentuk Pembiayaan:
i) Pinjaman Pusingan (Revolving Credit)
ii) Pinjaman Berjangka (Term Loan)
iii) Kemudahan Perbankan (Banking Facilities)
iv) Kaedah Pembiayaan
v) Konvensional
vi) Sistem Perbankan Islam (SPI)

Kadar Faedah & Keuntungan
i) Kadar faedah adalah antara 1.0% hingga 4.0% melebihi Kadar Asas Berian Pinjaman (KABP).
ii) Kadar faedah bagi Dana Khas Kerajaan adalah berdasarkan kepada kadar yang ditetapkan oleh pemberi Dana.
iii) Kadar keuntungan bagi Perbankan Islam adalah berdasarkan kepada kadar yang dipersetujui.

Cagaran
Semua jenis aset tetap, sijil-sijil saham, sijil-sijil amanah, deposit tetap dan lain-lain yang boleh diterima oleh Bank.

Permohonan
Permohonan pembiayaan berserta dokumen-dokumen yang diperlukan boleh dikemukakan di mana-mana cawangan, Pejabat Negeri atau Ibu Pejabat Agrobank.

Pengeluaran Wang
Pengeluaran wang pembiayaan adalah mengikut kemajuan projek atau berdasarkan dokumen-dokumen yang boleh diterima oleh Agrobank.

Pembayaran Balik
Pembayaran balik boleh dilakukan secara bulanan / sukutahun / setengah tahun dalam tempoh yang ditetapkan berdasarkan kepada jenis pinjaman yang dibiayai.

Perbincangan Seterusnya dalam Agricultural Finance 8 akan tertumpu kepada topik berkaitan Skim Jaminan Kredit Enhancer, Pinjaman Berjangka, Kemudahan Modal Pusingan (Revolving Loan), Kemudahan Banking (Banking Facilities), Skim Khas dan Skim Kredit Mikro yang ditawarkan oleh Agrobank.

Sebagaimana biasa nasihat ilmu pada kali ini menyentuh ingatan kepada diri saya dan mereka yang membaca blog ini berkaitan perkara-perkara yang kita lakukan sehari-hari. Selain dari perkataan "TIDAK", dalam kehidupan kita juga kena biasakan perkataan "JANGAN".

NASIHAT ILMU:
a) Jangan sengaja lewatkan solat. Perbuatan ini Allah tidak suka. Kalau tertidur lain cerita.

b) Jangan biarkan pinggan mangkuk yang telah digunakan tidak berbasuh. Makruh dan mewarisi kepapaan.

c) Jangan tidur selepas solat Subuh, nanti rezeki mahal (kerana berpagi-pagi itu membuka pintu berkat).

d) Jangan makan tanpa membaca BISMILLAH dan doa makan. Nanti rezeki kita dikongsi syaitan.

e) Jangan keluar rumah tanpa niat untuk membuat kebaikan. Takut-takut kita mati dalam perjalanan.

f) Jangan biarkan mata liar di perjalanan. Nanti hati kita gelap diselaputi dosa.

g) Jangan menangguh taubat bila berbuat dosa kerana mati boleh datang bila-bila masa.

h) Jangan mengumpat sesama rakan taulan. Nanti rosak persahabatan kita hilang bahagia.

i) Jangan lupa bergantung kepada ALLAH dalam setiap kerja kita. Nanti kita sombong apabila berjaya. Kalau gagal kecewa pula.

j) Jangan bakhil untuk bersedekah. Sedekah itu memanjangkan umur dan memurahkan rezeki kita.

k) Jangan banyak ketawa. Nanti mati jiwa.

l) Jangan biasakan berbohong, kerana ia adalah ciri-ciri munafik dan menghilangkan kasih orang kepada kita.

m) Jangan suka menganiaya manusia atau haiwan. Doa makhluk yang teraniaya cepat dimakbulkan ALLAH.

n) Jangan terlalu susah hati dengan urusan dunia. Akhirat itu lebih utama dan hidup di sana lebih lama dan kekal selamanya.

o) Jangan mempertikaikan kenapa ISLAM itu berkata JANGAN. Sebab semuanya untuk keselamatan kita.

ALLAH lebih tahu apa yang terbaik untuk hamba ciptaanNya.

Wasalam

Saturday, December 27, 2008

Agricultural Finance 6: Jenis-jenis Pinjaman Dalam Perniagaantani

Terdapat berbagai-bagai jenis pinjaman pertanian, dan peladang perlu memilih jenis yang sesuai dengan perniagaannya. Jenis-jenis pinjaman boleh dikelaskan mengikut tempoh masa pinjaman, penggunaannya, sekuriti dan jadual bayaran baliknya.

1. Tempoh Masa Pinjaman
Pengelasan pinjaman mengikut tempoh masa sering digunakan oleh institusi kewangan. Terdapat tiga kelas pinjaman iaitu pinjaman jangka pendek, jangka sederhana dan jangka panjang.

i) Pinjaman Jangka Pendek
Pinjaman jangka pendek ialah pinjaman yang mesti di bayar balik dlam tempoh masa selewat-lewatnya 12 bulan. Pinjaman jenis ini selalunya digunakan untuk membeli baja, racun, biji benih, makanan ternakan dan input berubah yang lain. Pembayaran semula dibuat hanya apabila hasil ladang telah dikutip dan dijual.

ii) Pinjaman Jangka Sederhana
Pinjaman Jangka Sederhana ialah pinjaman yang tempoh pembayaran melebihi setahun, tetapi kurang dari sepuluh tahun. Pembayaran haruslah dibuat setiap bulan, atau setiap tahun, tetapi peminjam mempunyai beberapa tahun untuk menjelaskan kesemua pinjaman mereka. Pinjaman jenis ini kerap digunakan untuk membeli asset tetap seperti jentera.

iii) Pinjaman Jangka Panjang
Pinjaman yang mempunyai tempoh bayaran balik melebihi sepuluh tahun dikelaskan sebagai pinjaman jangka panjang. Kebiasaannya untuk pembelian tanah dan bangunan. Pembayaran haruslah dibuat setiap bulan, atau setiap tahun, dan peminjam mempunyai tanggungan pembayaran yang lama.

2. Penggunaan Pinjaman
Tujuan sesuatu pinjaman itu dibuat juga boleh digunakan untuk mengelaskan pinjaman. Umumnya terdapat tiga jenis penggunaan iaitu Pinjaman Harta Tanah, Pinjaman Bukan Harta Tanah, dan Pinjaman Persendirian.

i) Pinjaman Harta Tanah
Pinjaman kategori ini digunakan untuk membeli harta tanah seperti tanah dan bangunan.

ii) Pinjaman Bukan Harta Tanah
Semua jenis pinjaman perniagaan selain pinjaman harta tanah dimasukkan ke dalam kategori ini. Pinjaman ini mengandungi kedua-dua jenis tempoh pinjaman, iaitu pinjaman jangka pendek dan jangka sederhana. Pinjaman ini juga dianggap sebagai pinjaman pengeluaran atau pinjaman operasi.

iii) Pinjaman Persendirian
Pinjaman jenis ini adalah pinjaman yang dibuat bukan untuk perniagaan tetapi untuk membeli aset persendirian seperti rumah, kenderaan dan sebagainya.

3. Sekuriti

Sekuriti untuk sesuatu pinjaman ialah asset yang digunakan sebagai cagaran untuk mendapatkan pinjaman dan memastikan pembayaran balik dibuat. Jika peminjam tidak mampu untuk membayar ansuran pokok atau bunga bagi pinjaman, pemberi pinjaman mempunyai kuasa untuk mengambil alih aset yang dicagarkan itu. Aset ini lazimnya dijual oleh pemberi pinjam dan wang yang diperolehi digunakan untuk mendapatkan kembali wang pinjaman tersebut.

i) Pinjaman Bercagar
Untuk pinjaman jenis ini, aset digunakan sebagai cagaran untuk mendapatkan pinjaman. Pemberi pinjaman lebih suka memberi pinjaman jenis ini kerana ia memberi jaminan bahawa pinjaman tersebut akan dibayar balik. Sekiranya peminjam tidak membayar pinjaman yang dibuat, selepas melalui beberapa proses perundangan, aset tersebut akan menjadi hakmilik pemberi pinjaman. Untuk pinjaman harta tanah dan pinjaman jangka panjang, tanah dan bangunan seringkali dijadikan cagaran. Sebaliknya jentera pula sering dijadikan cagaran untuk pinjaman jangka sederhana.

ii) Pinjaman Tanpa Cagaran
Seseorang peminjam yang mempunyai kedudukan kredit yang baik mungkin boleh meminjam wang hanya dengan ‘berjanji untuk membayar balik’ dengan tidak menggunakan sebarang aset sebagai cagaran. Kebiasaannya berlaku bagi pinjaman jangka pendek.

4. Pembayaran Balik
Pinjaman juga boleh dikelaskan mengikut jadual pembayaran balik. Secara umum, terdapat dua jenis pinjaman mengikut jenis ini – iaitu bayaran tunggal dan pelunasan.

i) Bayaran Tunggal
Pinjaman jenis ini memerlukan jumlah yang dipinjam dibayar sekali gus apabila sampai tempohnya. Pinjaman jangka pendek atau pinjaman operasi adalah pinjaman jenis ini.

ii) Pelunasan
Pinjaman terlunas ialah suatu pinjaman yang mempunyai pembayaran pokok dan dan bunga yang berkala. Terdapat dua jenis pelunasan iaitu “bayaran pokok sama” dan “bayaran jumlah sama”.

Bagi “bayaran pokok sama”, jumlah pokok untuk setiap pembayaran adalah sama, dan bunga bagi baki pinjaman adalah berbeza-beza mengikut jumlah baki pinjaman. Sebagai contoh, pinjaman sebanyak RM50 ribu selama 10 tahun akan mempunyai bayaran pokok sebanyak RM5 ribu setahun, dan ditambah bunga bagi baki yang belum dibayar. Apabila baki pinjaman berkurangan dengan setiap bayaran pokok, bayaran bunga pun akan berkurangan.

Kebiasaannya, peminjam yang menggunakan wang pinjaman untuk projek berkaitan perniagaantani akan berasa sukar untuk membuat bayaran yang pertama kerana perniagaantani yang baru dijalankan memerlukan masa untuk mendapat aliran tunai yang baik. Oleh yang demikian pinjaman terlunas jenis “pembayaran pokok sama” tidak sesuai kepada kumpulan ini. Jenis pinjaman yang sesuai ialah “bayaran jumlah sama”. Untuk pinjaman “bayaran jumlah sama”, jumlah pokok yang dibayar pada tahun-tahun awal pinjaman dibuat adalah kecil, kemudian bertambah besar apabila tempoh pinjaman hendak tamat.

NASIHAT ILMU:
Dikesempatan cuti panjang di hujung bulan Disember 2008 ini, saya ingin mengucapkan ribuan terima kasih kepada kenalan saya dari Taman B. Jambul, Pulau Pinang yang memberi tunjuk ajar bagaimana menggunakan laman blog. Beliau membantu menyusun blog ini dengan baik sekali dan memudahkan saya memasukkan artikel-artikel terbaru dari masa kesemasa. Hanya Allah SWT dapat membalas jasa baik beliau.

Laman blog ini sangat berfaedah dalam kerjaya saya sebagai pensyarah. Melalui blog ini saya dapat memasukkan artikel-artikel terbaru dan membacanya semula di mana saja saya berada. Begitu juga melalui blog ini, nota-nota kuliah dan perbincangan di antara pelajar dan peminat isu-isu akademik dalam bidang ekonomi dan pengurusan perniagaantani telah dapat dilakukan sama ada di dalam kelas, kolej, masjid, rumah dan internet cafe. Perbincangan bernas tersebut dapat memberi idea bagi mempertingkatkan ilmu dan kefahaman isu-isu yang diperkatakan. Sebenarnya banyak lagi yang perlu dipelajari bagi menjadikan blog “Happy Day” lebih menarik. Sebarang cadangan dan bantuan dari pembaca blog “Happy Day” amat dihargai.

Seterusnya saya ingin menyentuh artikel yang ditulis oleh Dato’ Dr Harun Din dalam isu peranan pemerintah dalam mentadbir Negara.

Wassalam.

Jamal Ali, PhD
Department of Economics,
UUM College of Arts and Sciences,
Universiti Utara Malaysia,
06010 Sintok, Kedah
email: jamalali@uum.edu.my


Peranan pemerintah dalam mentadbir Negara:

Allah sudah memberi petunjuk dan panduan kepada pemerintah yang diberi kuasa memerintah. Apa yang sepatutnya dilakukan, misalnya dalam firman Allah SWT (mafhumnya): "Golongan yang diberi kuasa untuk memerintah di muka bumi ini, hendaklah mereka (memperkukuhkan hubungan dengan Allah) mendirikan sembahyang dan (menjaga kepentingan golongan bawahan) menunaikan zakat, dan menegakkan yang makruf, membasmi yang mungkar dan berserahlah kepada Allah, yang kepada-Nya kembali segala urusan." (Surah al-Hajj, ayat 41)

Nabi Sulaiman a.s., ketika Allah mengurniakan kepadanya kekuasaan dan kelebihan yang nyata dengan pelbagai keajaiban, baginda menyebut seperti yang dalam al-Quran (mafhumnya): "...Ini adalah suatu kurnia dari Tuhanku, untuk menguji daku, apakah aku bersyukur atau aku kufur kepada-Nya. Dan barangsiapa yang bersyukur, maka sesungguhnya dia bersyukur untuk kebaikan dirinya, dan barangsiapa yang kufur, maka sesungguhnya Tuhanku Maha Kaya lagi Maha Pemurah." (Surah an-Naml, ayat 40)

Ingatlah apa yang berlaku dalam sejarah awal Islam pada zaman silam, ketika Allah menguji para sahabat dengan kesusahan dan bala bencana, termasuk kezaliman musuh ke atas mereka sehingga ada yang korban syahid, mereka tahan diuji.

Apabila Allah menguji mereka dengan kemenangan, maka ada yang kecundang, khususnya dalam Perang Uhud, apabila harta rampasan perang bersepah di hadapan mata, tentera Islam yang diperintah mempertahankan Bukit Rumaah di Uhud, tidak sabar berhadapan dengan kilauan kemenangan sehingga sanggup melanggar perintah Rasulullah s.a.w.

Hasil daripada kesilapan itu, akhirnya mereka kecundang. Allah menceritakan perihal ini dalam firman-Nya (mafhum): "Dan sesungguhnya Allah telah menunaikan janji-Nya kepada kamu, ketika kamu mengalahkan musuh kamu dengan izin-Nya (di awal Perang Uhud), sampai kepada saat kamu lemah dan berselisih faham, sama ada hendak terus mematuhi perintah Rasulullah, ataupun melanggarinya, setelah Allah menguji kamu dengan memperlihatkan kemenangan yang sementara.

Antara kamu yang mengkehendaki kesenangan dunia, ada yang mengkehendaki akhirat, (oleh kerana ada yang mengkehendaki kesenangan dunia) kemudian Allah menewaskan kamu untuk menguji kamu. dan sesungguhnya Allah telah memaafkan kamu dan Allah memberi limpah kurnia yang banyak untuk orang-orang yang beriman). (Surah ali'Imran, ayat 152) .

Kemenangan ini juga suatu nikmat dari Allah. Nikmat wajib ditangani dengan sebaik-baiknya. Allah memperingatkan kita dalam firman-Nya (mafhum): "Dan ingatlah tatkala Tuhanmu memaklumkan bahawa sesungguhnya jika kamu bersyukur di atas nikmat-Ku, pasti akan ditambahkan lagi nikmat itu. Dan jika kamu mengkufurinya, maka sesungguhnya azab aku tersangat pedih." (Surah Ibrahim, ayat 7)

Ambillah iktibar tersebut, sentiasa beringat dengan nikmat tersebut dan hargai anugerah-Nya, jangan lupa diri dan berlaku adil dalam semua urusan kerana sifat adil itu mendekatkan diri kita kepada Allah SWT.

Bekerja keraslah untuk menjaga kemenangan kerana kemenangan itu sifatnya sementara, melainkan dengan pertolongan Allah jua ia akan kekal.

Waalhua'lam.

Friday, December 26, 2008

Agricultural Finance 5: Sepuluh Langkah Dalam Menilai Pinjaman Perniagaantani

Pegawai kredit sesebuah institusi kewangan, dalam menilai permohonan pinjaman seseorang pelanggan, akan mengambilkira 10 langkah berikut dalam proses penilaian:

1. Borang permohonan pinjaman atau kertas kerja pinjaman
2. Menjalankan temuduga – semasa pemohon menghantar borang permohonan pinjaman, pegawai kredit institusi kewangan akan menemuduga bakal peminjam untuk mendapatkan maklumat yang tidak ditunjukkan di dalam borang permohonan pinjaman. Di antara perkara-perkara yang biasanya ditanya ialah: sama ada ia merancang projek perniagaan dengan betul atau tidak; orang yang memberi nasihat di atas projek yang dijalankan; kefahaman mengenai kredit; pengalaman, pendidikan dan latihan yang diterima berkaitan dengan projek yang hendak dijalankan; dan mengetahui risiko projek yang hendak dijalankan.
3. Membuat ‘homework’ (pengkajian) dari segi: mengenalpasti masalah yang masih perlu diselesaikan; mengetahui secara mendalam perlaksanaan projek; sumber maklumat dan bantuan; membuat ‘cash flow’ budget; dan mengetahui keadaan industri yang berkaitan dengan projek seperti permintaan dan penawaran, harga, persaingan, dan dasar kerajaan. Begitu juga keadaan tempat yang berlainan juga akan memberikan keadaan harga dan kedudukan permintaan yang berbeza – contohnya di antara Kuala Lumpur dan Kedah.
4. Melawat kawasan projek tersebut – ianya bertujuan melihat kedudukan kawasan; menyelesaikan persoalan-persoalan yang masih belum terjawab; membuat penyelidikan di kawasan projek dari segi pasaran, harga, harga input; melihat reputasi, daya inisiatif dan kejujuran bakal peminjam dengan perbincangan dengan penghulu, pembekal yang pernah menjalankan perniagaan dengannya, dan agen pasaran.
5. Penilaian projek – dengan melihat penyata aliran tunai (cash flow) projek – seperti mengkaji pengeluaran per unit dan harga yang dijangka; menggunakan analisis nisbah; melihat kedudukan kewangan tiga tahun yang lepas; dan cagaran yang boleh disediakan oleh pemohon pinjaman – dari segi nilai cagaran dan benda yang dicagarkan.
6. Analisis Penyata Kewangan – menganalisis Kunci Kira-kira dan Penyata Pendapatan (atau Penyata Untung Rugi); dan melakukan analisis nisbah seperti Nisbah Keberuntungan, Nisbah mudah tunai, dan kemampuan membayar tanggungan. (SILA RUJUK NOTA ANALISIS NISBAH)
7. Jaminan (security)
8. Laporan Penyiasatan Pinjaman (Loan investigation report)
9. Kelulusan Pinjaman (Loan approval)
10. Persediaan dan Proses menandatangani perjanjian (preparation and signing the agreement)

NASIHAT ILMU:

SURAH AN-NISSA' (Perempuan)

Barangsiapa yang membaca ayat yang ke 75 dari surah ini, nescaya ia akan terselamat dari kejahatan para penjahat.

Agricultural Finance 4: Penilaian Pemberian Kredit dalam Perniagaantani

Dalam menilai permohonan untuk mendapatkan kredit, Institusi kewangan akan melihat kepada 5 C:

THE FIVE C's OF CREDIT:
CAPITAL (Modal),
CAPACITY (Keperibadian),
COLLATERAL (Cagaran),
CONDITIONS (Keadaan), dan
CHARACTER (Karektor).

1. CAPITAL
CAPITAL (modal) adalah faktor penting dalam menilai permohonan kredit (pinjaman). Terdapat dua jenis modal yang perlu dinilai, iaitu modal kerja dan modal ekuiti. Modal kerja adalah berkaitan dengan kecairan dan kemampuan firma memenuhi tuntutan jangka pendek kepada tanggungan kewangan dan operasi. Sebaliknya Modal Ekuiti ialah jumlah modal milik pemilik perniagaan yang dilaburkan di dalam perniagaan. Kekurangan modal ekuiti mengurangkan kemampuan perniagaan untuk bertahan apabila berada di dalam kerugian.

2. CAPACITY
CAPACITY
(kemampuan) merujuk kepada kemampuan peminjam membayar balik pinjaman yang dibuat. Keuntungan perniagaan adalah komponen penting dalam melihat CAPACITY. Begitu juga Penyata Aliran Tunai (Cash Flow) juga berkaitan dengan CAPACITY. Makalumat ini membolehkan pemberi pinjam menilai sama ada perniagaan mempunyai aliran tunai mencukupi untuk memenuhi tuntutan hutang jangka masa pendek, selain keuntungan untuk memenuhi tuntutan dalam jangka panjang.

3. COLLATERAL
COLLATERAL (Cagaran) ialah rangkaian keselamatan yang digunakan untuk mengatasi masalah ketidakmampuan peminjam membayar semula pinjaman yang dibuat. Cagaran dalam bentuk tanah dan bangunan adalah berguna kepada institusi kewangan yang hendak memberi pinjaman.

Nilai cagaran mestilah mencukupi untuk menampung baki pinjaman. Dalam kebanyakan kes cagaran ialah aset yang dibeli dari pinjaman yang dibuat. Cagaran tambahan diperlukan sekiranya nilai aset tidak mencukupi untuk digunakan sebagai cagaran kepada pinjaman.

4. CONDITIONS
CONDITIONS
(keadaan) merujuk kepada kedudukan ekonomi semasa dalam perniagaan yang berkaitan. Ianya juga meliputi prospek harga, masalah dalam industri pada masa kini, dan keadaan permintaan. Contohnya pinjaman untuk aktiviti pertanian berasaskan getah menghadapi keadaan penurunan harga komoditi, dan persaingan dari getah tiruan apabila harga minyak mentah berterusan merosot di pasaran antarabangsa. Faktor-faktor ini akan diambilkira oleh institusi kewangan dalam memberi pinjaman kepada pekebun yang hendak meminjam untuk membeli kawasan penanaman getah misalnya.

5. CHARACTER
CHARACTER
(keperibadian) peminjam. Pemberi pinjam sentiasa mengambil berat keperibadian peminjam wang dari institusi kewangan mereka. Persoalan yang selalu ditanya ialah adakah mereka jujur? Adakah mereka akan berusaha bersungguh-sungguh untuk membayar semula pinjaman yang telah diambil?

Di antara perkara yang boleh di tengok ialah individu itu sendiri, kebolehan peminjam menguruskan perniagaan, dan kemampuan perniagaan untuk terus berjalan (continuity of management). Di antara ciri-ciri yang boleh dilihat ialah dari segi ketepatan peminjam membayar bil-bil bulanan, maklumat diberikan betul atau tidak, dan jika ia menjadi pelanggan bank kita, boleh dilihat rekod ketepatan dari segi masa pembayaran pinjaman. Sesuatu yang pasti, orang yang bangkrap tidak akan dilayan permohonan pinjaman mereka.

Dari segi kebolehan peminjam menguruskan perniagaan, akan dilihat pengalamannya dalam perniagaan, keupayaan menguruskan kos dan jualan, kebolehan merancang dan mengawal perniagaan, sama ada ia terlibat secara serious dalam perniagaan yang dijalankan.

Akhir sekali dari segi kemampuan perniagaan untuk terus berjalan, dilihat dari segi ciri umur, latar belakang dan keadaan kesihatan peminjam.

NASIHAT ILMU:
Mulai hari ini, baik juga saya masukkan beberapa amalan baik yang patut diamalkan oleh orang-orang Islam. Diharapkan ia menjadi sebagai peringatan dan boleh diamalkan di dalam zaman moden yang serba mencabar ini. Begitu juga dalam buku “JANGAN BERSEDIH” yang saya dapati dari rakan saya, mengingatkan saya kepada sesuatu yang sangat berguna, di antara intipati dalam buku tersebut ialah: “Setiap sesuatu yang berlaku ada sebabnya dan jangan bersedih. Apa yang perlu disedihkan ialah apabila kita lupa akan siksaan Allah di akhirat nanti akibat dari kemungkaran yang kita lakukan semasa hidup di muka bumi ini”.

Amalan baik ini saya masukkan sebagai Nasihat Ilmu:

SURAH AL-FATIHAH (Pembukaan)
Barangsiapa membacanya sebanyak 41 kali di antara sembahyang sunatnya, nescaya permintaannya diperkenankan, jika sakit lekas sembuh dan nescaya dikasihi oleh makhluk dan ditakuti oleh musuh. Barang siapa membaca 20 kali sesudah tiap-tiap sembahyang fardhu, nescaya rezekinya dilapangkan oleh Tuhan dan bertambah baik keadaannya, serta bercahaya rohaninya.

Thursday, December 18, 2008

Malaysia MOA Incorporation Agriculture and Agro-based Industry Ministry Project Implementation

BACKGROUND
Projects implementation of agricultural development need the efficient and effective service support. Skilled human-resources preparation, adequate financial resources, infrastructure and state-of-the-art technology from the early stage of input preparation, production, handling to products and agricultural-products marketing and also food is very important in efforts for success and development of this sector. In accordance with that, agricultural projects implementation approach through the MOA Inc. method were introduced and launched by the Ministry of Agriculture and Agro-based Industry on 23rd of March 2003.

OBJECTIVE
The objective of projects implementation by MOA Inc. is to improve effectiveness of the presentation system to achieve the agricultural sector transformation’s target and enhance the Government’s role in facing agricultural sector issues, challenges and requirements so that viable to contribute to the national economic growth incessantly.

APPROACH
Implementation of agricultural development projects based on MOA Inc. concept outlined the pooling of total thinking, energy and human-resources from all of three Departments and eight Agencies under Ministry to transfer expertise service and best recommendation to help the target group. Through this approach also, all involved Deparments and Agencies will provide the service in teamwork in all level of development project such as planning, implementation, management, marketing, monitoring and evaluation.

PROJECT FEATURES
The projects perform based on MOA Inc's approach such as food production, processing and agro-tourism should :
i. viable and could be implemented continuously;
ii. have a business plan that could be implemented;
iii. have marketing plan through FAMA or other marketing agent to determine revenue can be marketed;
iv. based upon economic size and commercial as determined by Agency;
v. managed by a Project's Manager;
vi. head for to certification of quality and food safety; and
vii. determine entrepreneur have 20% equity if the project supported by bank.

TYPES AND SIZE OF QUALIFIED PROJECT TO APPLY
INDUSTRY
CROP
1. Vegetables :
a. Open system - minimum size 4 hectares;
b. System fertigasi - minimum size 1 hectare

2. Fruits:
a. starfruit, papaya, banana, pineapples and watermelon - minimum size 10 hectares
b. Durians, rambutan, jackfruit mangosteen, jackfruit, duku / dokong, sapodilla and mango - minimum size 20 hectares

3. Paddy - minimum size 40 hectares

4. Flower - minimum size 4 hectares

5. Coconut - mimimum size 40 hectares

LIVESTOCK
1. Integration Cattle - Minimum 100 female seed
2. Feedlot Cattle - 600 / rotation
3. Dairy Cattle - 50
4. Broiler (closed pen) - 50,000 / rotation
5. Pullets - 50,000 chicken
6. Goat - 500 seed

AQUACULTURE
1. Pond
a. Tiger Prawn - Minimum Park area 2 hectares
b. Lobster - Pond size 0.4 ha per unit
c. Freshwater fish - 4 ponds
d. Salt water fish

2. Cage
a. Sea fish - Minimum Area 2500 m
b. Freshwater fish - Tank size 50m x 20m x 1.5cm

3. Tank
Freshwater fish - Minimum Area 1 ha; Tank size 50m x 20m x 1.5cm; and number of tank - 8

4. Hatchery
Sea prawn / lobster / Ikan sea / fish freshwater

FOOD PROCESSING
a. Poultry-based product - Minimum fixed capital RM 0.5 million
b. Cereal-based product - Minimum rotation working capital RM0.5 million
c. Fruit dan vegetable-based product - Minimum module paid up RM1million
d. Fishery-based product
e. Coconut-based product

CATCHING FISHERY
a. Vessel type - Zone C and above fish catching vessel including tuna
b. Vessel number - Minimum 2 vessels
c. Property type - Charter / lease / sub local lease
d. Operation jetty - Major jetty: Tok Bali, Kelantan; Kuantan, Pahang; Batu Maung, P. Pinang, and Tg. Manis, Sarawak
e. Revenue landing - In the country
f. Employee/crew - must be Local

FISHERY PRODUCT
a. Fish processing - Minimum investment amount RM500,00 Employee minimum number 50 people

APPLICATION METHODS
i. Company / individual who wish to apply to be listed under MOA Inc. project must provide project’s paperwork or business plan.
ii. Application is brought forward to those pertaining Deparment / Agency in state and Headquarters level.
iii. Company / individual will be called to present their paperwork / business plan to J/K MOA Inc. Headquarters level.
iv. If certified by J / K, the application will be aired to MOA Inc. Ministry Agricultural and Agro-based Industry secretariat for registration.
v. Registration certificate will be issued to related Department/Agency and copied to the company / individual.

MOA INC. PROJECTS ADVANTAGES
i. Obtain advisory service, guidance and expertise from the related Department/Agency.
ii. Benefit from financing facility / fund loan provided by Bank Pertanian Malaysia restricted to the loan conditions.
iii. Types of funds that are provided.
· Fund For Food - 3F
· Loan Scheme For Trader Society & Bumiputra's Industrial (TSBI)
· Loan Scheme For Mechanization & Agriculture Automation (MAA)
· 2nd Small & Medium Industry Fund (2 SMIF) Food Manifacturing Credit Scheme (FMCS)

Source: MOA
http://agrolink.moa.my/moa/

Agriculture Industrial: The Direction of Strategic Agro-Food's Sector In The Ninth Malaysia Plan

Within this Ninth Malaysia Plan, agricultural sector is about to achieve the first mission in the Ninth Malaysia Plan, that is to increase the value added in the country 's economy. The task of this agricultural sector shows that this sector is equal to the other economic sectors such as manufacturing and services. This mean that the agricultural sector in the Ninth Malaysia Plan must be developed, dynamic and viable compete as those outlined under the Third National Agriculture Policy.

AGRICULTURE INDUSTRIAL THROUGH NEW AGRICULTURAL
New agricultural concepts are inspired by YAB Prime Minister’s presentation in RMK-9 can be seen as the most ideal implementation method which could realise this paradigm shift. New agricultural approach in this Ninth Malaysia Plan has features as following :-

a. Large scale commercial
b. Extensive use of modern technology
c. High quality production and high value added
d. Fully usage of the potential of biotechnology
e. Merger with information technology and communications
f. Involvement farming entrepreneur and skilled manpower

THE CORE OF THE 9TH MALAYSIA PLAN POLICY
In accordance with the purpose of Third National Agriculture Policy and the vision of national’s highest leader, hopefully that this new agricultural approach will trigger the agriculture industrial current in our 9th Malaysia Plan. This revolution would be able to encourage the agricultural sector and to make it as one of nation’s generator for economic growth. To achieve this goal, the development in the agricultural sector Ninth Malaysia Plan will be implemented based on basic fundamental as follows:
1. Increase the agriculture production including the new growth resource exploitation with participation of bigger private sector
2. Expand the agriculture-based processing activity and product diversification
3. Strengthen marketing and global network
4. Increase the income of smallholders, farmer and fisherman; and
5. Improve the delivery system service.

THE 9TH MALAYSIA'S PLAN TARGET
Based on implementation basic fundamental of Ninth Malaysia Plan that prescribed, planning and implementation project and programme will be done to achieve 5 specific targets as follows:
a. Generate growth of value-added as many as 7.6% as compared with plantation sector contributions as many as 3.2%
b. Achieve the trade balance in food as many as RM 1.2 billion
c. Achieve growth value added for agro-based industry as many as 5.2%; and
d. Attract private investment as many as RM 20.1 billion to commercialise food sector production and agro-based industry.
e. Achieved the SSL’s target for commodities that has been aimed.

THE STRATEGY IMPLEMENTATION OF THE 9TH MALAYSIA PLAN
The translation of direction and Rancangan Malaysia Kesembilan's basic fundamental will focus on efforts to achieve the ultimate goal and target which has been prescribed. Programmes and development projects in Rancangan Malaysia Kesembilan that will be implemented are in accordance with the strategy as follows
i. Increase the production area for agro-food
ii. Develop new growth resources such as deep sea fish catch and tuna, seaweed, ornamental fish and all kinds of flowers
iii. Enhance agro-based industry
iv. Diversify the revenue resource of target group
v. Benefit the agro-biotechnology And marine biotechnology
vi. Increase the marketing capability
vii. Standard Compliance And International Quality
viii. Loan And Incentive Provision
ix. Concentration on Total Factor Productivity

CONCLUSION
By overall, the main target in the production development of agro food and side processing under this Ninth Malaysia Plan is to increase the farmer group, commercial and modern farmer and fisherman, as well as agro entrepreneurs to lead the development of agro food private sector driven, without neglecting the traditional farmer, where their capacity and production capacity will be enhanced so that they can be absorbed in this transformation process, and consequently, boost their productivity and income. The implementation of this 9th Malaysia Plan is parallel with the hope of nation’s highest leader to revolutionize and industrializing this agricultural sector to make it more modern, dynamic and viable compete.

Source: Bahagian Perancangan Strategik dan Antarabangsa, MOA

Tuesday, December 16, 2008

Agricultural Finance 3 – Acquiring Capital to Farm

Agricultural finance provides the economic principles for analysis of how much it would be profitable and safe to borrow, and the principles or type of information needed to select a lender which best suit the needs of the borrower. However, the final choice of decision on both questions must be made by the individual borrowing the money.

The second area of significance of agricultural finance is the importance of finance in the farm business and the increasing role of credit in the expanding capital requirements of agriculture. Many do not realize the rapid expansion of capital demanded by the technological revolution going on in agriculture nor the consequences which face the farmer who does not “keep up”. Adequate units become in adequate in half of generation if the family does not continue to add capital. Burdened with the load of acquiring the minimum of capital needed to start farming, what chance does the beginning farmer have of ever developing an adequate unit if capital requirements keep growing at a faster rate than he can save?

One solution to these questions may lie in knowing how to use credit and how to get it extended on proper terms. Farmers use credit and will continue to do so, but the significance rests in how much they use, how they use it, and where they obtain it. Where will they obtain credit – from lenders who can help them help themselves, or from lenders who are not interested in their efforts to make progress? Or will they forfeit a portion of their managerial freedom and turn to vertical integration as a means of acquiring capital with which to work? The supply of credit, the terms on which it is made available to agriculture and the knowledge farmers have about how to use it, have great significance for the future. These things might very well determine the future of the family farm. The question then arises: Where can the needed capitals be acquired?

There are seven methods by which farmers may obtain the major part of the capital which they use in their business:

1. Savings
2. Family arrangements
3. Incorporation
4. Leasing
5. Vertical integration
6. Borrowing

1. Savings
Capital accumulated through savings forms the foundation of the farm financial structure. Except for gifts and inheritance, savings provide not only capital, as such, but risk-bearing ability (reserves) and demonstrated capacity to earn and save two very essential components of a strong credit rating.

Farming is a big business and big business requires a large amount of capital and a sound financial foundation and framework which savings alone can provide. Few people who are unable to save will be successful in commercial farming. The farmer is the one to whom profit derived from farming accrues and therefore, he must stand the risk of loss. Funds also are needed for sickness, education, and other family uses. Saving must be accumulated by the successful farm family to provide a financial base for all such purposes.

2. Family arrangements
Family arrangements are of considerable importance in acquiring capital to farm, particularly for beginning farmers. Where parents or family members are able, gifts or loans are made to the beginning farm family to assist in providing capital. In other cases assistance in acquiring capital to farm is provided through formalized agreements, such as father-son partnerships, and rental arrangements.

Father-and-son agreements are the most common form of family arrangements. They provide a means whereby a son or son-in-law with limited capital can work into the farm business. From the father’s viewpoint such an arrangement often is desirable since he is able to “ease-up” a little bit. With the decrease in the amount of manual labor an older farmer can perform comes an almost certain decline in farm upkeep and income. The agreement also has advantages for the younger man, offering him an opportunity to start farming with less capital than is possible with any other method. By working with his father, he can profit from mature advice and can develop gradually his knowledge of agriculture and business and his management ability.

Various studies of father-and-son partnership agreements have shown that there are some factors that can influences successful of father and son farm partnerships:
a. Desire of the son to farm.
b. Satisfactory living conditions for two families.
c. Ability to get along with each other.
d. Belief that a farm partnership is desirable.
e. Adequate size of farm business.
f. Good farm management.
g. Good business judgment in the use of money.
h. Good partnership agreement.

3. Incorporation
Forming a corporation provides another method of acquiring capital to farm. A corporation is a legal entity authorized by state law and is capable of doing business, making contracts, borrowing money, and the like, the same as an individual proprietor. Individuals who form a corporation are its owners and are issued certificates representing shares to show the interest each holds in the corporate assets. The shareholders elect directors to represent them in business policy and management decisions. The directors in turn employ officers who operate the business according to policy established by the directors.

4. Leasing
Leasing – or renting – is a common way of obtaining additional capital for farming. Many leading farmers, who own considerable land, rent additional acreage to utilize more efficiently their managerial ability, and the land, machinery, and equipment they own.

Leases are usually classified according to the kind of rent paid. Most of them fall into three general groups: the crop-share lease, the livestock-share lease, and the cash lease. With share leases, a share of the crop or livestock production is paid in cash. The various types of leases may be combined or otherwise modified in renting a farm. A common method is to give a share of the grain crops as rent, and pay cash for pasture.

With the crop-share lease, the landlord usually provides the land and improvements and pays related taxes and other expenses, while the tenant pays most of the operating expenses and furnishes power, machinery and labor. Some expenses such as seed and fertilizer may be shared with the landlord. Crops produced are shared as agreed upon in the lease.

With cash leasing arrangements, the landlord is paid a specified cash payment and usually furnishes the land, buildings, and other improvements. The tenant furnishes all other items required for production, including labor, machinery, and operating expenses. The entire production of crops and livestock belongs to the tenant.

5. Vertical integration
Vertical integration means bringing together under central management two or more of the links in the chain of production and marketing. A farmer whose operations are vertically integrated shares with one or more related businesses – such as his supplier, processor, or distributor – some of his managerial decisions in production and marketing. A farmer whose operations are vertically integrated shares with one or more related businesses – such as his supplier, processor, or distributor – some of his managerial decisions in production and marketing. In return, the supplier, processor or distributor involved (the integrator) provides financing and assumes the associated risks. This linking together of two or more stages of the production – marketing process often is accomplished through contractual arrangements. Thus, it is sometimes contract farming.

Farmer-businessman arrangements can vary from connections only closer than conventional open-market relationships to full ownership and management of the farm by the associated business. However, the degree of vertical integration thus far in agriculture generally falls between these extremes, but usually involves varying degrees of financing the enterprise or operation. Therefore, vertical integration is another way for a farmer to obtain capital with which to work.

Advantages and Disadvantages of obtaining Capital Through Integration Contracts.

Advantages:
a) The integrator (businessman) assists with, or carries full responsibility for, management of the enterprise covered in the contract. Specialized management, with full information on latest scientific developments in feeding and other practices, probably facilitates more efficient production.
b) Risks are shared with, or completely transferred to, the integrator. While shifting risks does not remove them, it makes them more manageable by consolidation in the hands of the integrator.
c) With more capital, the size of the enterprise can be increased, contributing to greater efficiency in use of labor and equipment.
d) Specialized management and the larger amount of capital facilitates “continuous” production, - as with broilers where four batches may be produced each year, - thereby making more efficient use of buildings, equipment, capital, labor, and management employed in the enterprise.
e) With a larger enterprise, better breeding stock and seed varieties may be used. These, coupled with market demands, result in orderly marketing of a higher quality product that suits the need of the public.
f) With a large volume of business, the integrator is in position to use highly specialized equipment in production or processing which would not be possible for the individual farmer.
g) Greater efficiency in use of supplier-producer-processor resources and management, coupled with advantages such as higher quality products, contributes to an over-all net gain either in terms of higher income for parties involved in the production-marketing chain, or to a higher quality product at a lower cost for the public.
h) Judging from developments in industry, integration in agriculture might facilitate more orderly production and marketing of agricultural products. Real possibilities of gearing production to demand may be inherent in contracts between processors and farmers, or group of farmers.
i) Vertical integration probably has enlarged the number of farmers who can obtain financing. Some farmers unable to secure financing from other sources probably can obtain capital with which to work by means of contract.

Seldom if ever are advantages gained without a price, thus a number of disadvantages are also involved in integration, their importance, of course, depending upon the degree of integration provided by the contractual arrangements. Some of the disadvantages are:

i) With integration contracts which give full control to the integrator, the farmer gives up all of his freedom in making management decisions pertaining to the integrated enterprise. In such cases, he does not gain control of capital thus acquired, but merely has it to work with. With broiler-type contracts, for example, where the integrator retains title to the birds and provides operating capital, he has also makes the management decisions.
ii) The price a farmer pays for shifting some or all price and production risks and management to the integrator may be reflected in lower returns.
iii) Competition among suppliers has been a major stimulus to the rapid growth of vertical integration. Feed dealers, for example, use contracts as a method of increasing sales. Credit used as a sales tool may be overextended.
iv) Vertical integration may complicate farm business planning and related finances.
v) If contractual arrangements require the farmer to give highest priority to the vertically integrated enterprise, other enterprises may suffer and result in less net income than otherwise might be the case. In such event, credit to finance the nonintegrated enterprises may be more difficult to secure.

6. Borrowing
Borrowing means the ability to command capital or services currently for a promise to repay at some future time. In terms of money, borrowing involves obtaining a certain amount of funds to be repaid as specified in the note. The word “credit” comes from the Latin word “credo” meaning “I believe”. Hence, credit is based upon confidence. When one borrows money, the loan is based upon confidence in the future solvency of the person and in his repaying the loan as per agreement. In this sense, credit means ability to command the capital of another in return for a promise to pay at some specified time in the future.

When funds are obtained by borrowing, interest is paid for use of the capital; while, with a lease, rent is paid for use of the capital. Both borrowing and renting involve employment of capital for a period of time. However, the use of credit permits greater flexibility than renting. Credit can be used to acquire any type of resource or service needed by the farmer, while renting usually is employed to acquire use of fewer types of resources, the most common being farm real estate.

Borrowing involves more risk of losing owned capital than does renting. With renting, the maximum payment which can be demanded is the share or cash rent; this is somewhat comparable with the interest payment on borrowed funds. With share rental arrangements, the payment is automatically cut in case of low production or prices. With borrowing, however, the payment generally includes in addition to a fixed interest charge, part or the entire principal borrowed. If the principal is lost, the borrower may have to liquidate some of his own capital to repay loan.

Risks of crop failure and low prices are chief reasons against borrowing. If the crop and the price for it are highly uncertain – for example when yield and price of vegetables decrease – the farmer has little assurance under usual loan terms that can meet his obligations when they come due. It is the crop failure or the low price period which causes the debt distress which farmers want to avoid.

Sunday, December 14, 2008

Agricultural Finance 2 - Definitions of Terms

A
Agricultural finance: The economic study of the acquisition and use of capital in agribusiness.

Amortization: Repayment of a loan in a series of payments where each payment covers interest and principal.

Fully amortized: The periodic loan payments are sufficient to fully pay the entire principal balance over the term of the loan.

Partially amortized: The periodic loan payments make some reduction in the principal balance but are not sufficient to fully pay the entire principal of over the term of the
loan.

Amortization schedule: A table that details the payments, balance, interest paid, and reduction in principal for a amortized loan.

Annual percentage rate: The true interest rate for a loan or investment, usually referred to as APR.

Annuity: A series of equal, periodic cash flows over a finite period of time.

Annuity due: An annuity in which the cash flows occur at the beginning of each period.

Ordinary annuity: An annuity in which the cash flows occur at the end of each period.

Annuity-equivalent: A method used to compare investments with unequal time horizons.

Assets: Economic resources owned by a business and represents the total capital invested.

Capital asset: Non-current (or long term assets) owned by a business or by a person. An asset with an economic life greater than one year.

Current asset: Cash and any other asset that, in the normal course of operations, is expected to be converted into cash or consumed in the production process within one year or normal operating cycle.

Non-current asset: An asset having a useful life greater than one year. Usually not purchased for resale, but is to be used over time in the production of products or services.

B
Balance sheet:
A financial statement that reports the value of assets, liabilities, and owner
equity on a specific date.

Balloon payment: A lump-sum payment of principal due at the end of the term of a loan;
represents the principal due at the end of a partially amortized loan.

Basis: The difference between the original cost of an asset and it’s accumulated depreciation.
Book value: (see basis.)

Business risk: The uncertainty or variation in income or returns of a business over time due to the nature of the business.

C
Capital: A general term referring to the financial resources invested in a business. There are
two types of capital: debt capital and equity capital.

Capital asset: found under assets.

Capital budgeting: The process of planning expenditures on assets whose returns will extend
beyond one year.

Capital gain or loss: The difference between the book value or basis of an asset and the sale
price of the asset.

Capital lease: found under lease.

Cash flow budget: An informal financial statement prepared to forecast future cash flows; used in the planning process and to determine the need for an operating line of credit.

Cash flow statement: A summary of all cash transactions affecting the business during a given period. Transactions are classified as operating, investing or financing.

Certainty-equivalent: A method in a net present value analysis where the projected cash flows are reduced to a more certain value to account for risk.

Compounding: The time value of money process of finding the future value of a present sum or series of payments.

Compound interest: When interest is earned and converted to principal more than once during the time of an investment.

Conversion period: The interval between successive conversions of interest to principal.

Compound rate: The rate per conversion period that is charged on the outstanding balance at
the beginning of that period.

Corporation: A legal entity which, while being composed of natural persons, exists completely
separately from them. This separation gives the corporation unique powers which other legal entities lack. The extent and scope of its status and capacity is determined by the law of the
place of incorporation.

Cost basis: Original cost of an asset less accumulated depreciation.

Coupon rate (bond): The rate at which interest is paid on a bond.

Current asset: found under assets.

Current liabilities: found under liabilities.

D
Debt capital:
Refers to liabilities as listed in a balance sheet.

Deed-of-trust: A three party legal instrument that establishes a security interest in real property for a lender. The parties consist of the borrower, lender and trustee.

Deferred taxes: The estimated amount of income taxes owed if assets were liquidated at the
market value shown on the balance sheet.

Deferred taxes on current assets: The portion of deferred taxes that relates to income
which would arise by the sale of taxable current assets less taxable current liabilities.

Deferred taxes on non-current assets: The portion of deferred taxes that relates to the
taxable capital gain which would arise by the sale of non-current assets taking into
account the applicable cost basis.

Discounting: The time value of money process of finding the present value of a future sum or
series of payments.

Discount rate: The interest rate used for a specific asset-pricing problem.

E
Equity capital: The value of the owner’s investment in a business; the owner’s claim on assets of the business.

Net worth: same as equity.

Owner equity: same as equity.

Valuation equity: The portion of equity recognized as the difference between the market
value of non-current assets and their cost basis less deferred taxes on non-current assets.

F
Face value of a bond: The amount that will be paid at maturity; most bonds have a face value of $1,000.

Family living withdrawals: The total amount of money withdrawn from farm and nonfarm
revenues for personal consumption. Also is used as a proxy for unpaid operator and family labor and management.

Financial efficiency: The ability to control costs and utilize assets efficiently.

Financial risk: The risk associated with fixed financial obligations; refers to the loss of equity
capital under unfavorable business conditions when financial leverage is used.

Foreclosure: The legal process of recovering real estate collateral when the borrower is in default on a loan.

Fully amortized loan: found under amortization.

Future value: The value in the future of a present sum or a series of payments invested at a
given interest rate.

G
GAAP: Generally accepted accounting principles. Concepts, philosophies, and procedures that
guide accounting practices and standards for different industries.

Gross revenue: The total of all revenues received for goods produced for sale or for serviced
rendered in a specific period of time from business activities.

H-I
Income statement: A statement summarizing income and expenses during a period of time,
usually a year.

Internal rate of return: The discount rate at which the sum of the present value of the cash
inflows equals the sum of the present value of the cash outflows (the discount rate which gives a NPV of zero); the compound rate of interest earned by an investment.

Interest: The expense incurred or the revenue generated from lending money.

J-K-L
Lease: A contractual agreement between a lessor and lessee for the use of an asset, with the
lessee paying rent to the lessor.

Capital lease: A long-term contractual arrangement in which someone acquires control of an asset in return for rental payments and usually runs for several years and cannot be canceled without a penalty.

Operating lease: A short-term lease in which the rental payments are usually based on the time the lessee uses the asset.

Leverage: The degree to which a business is financed by debt capital; the extent to which debt
capital is combined with equity capital to control assets.

Liabilities: Future financial obligations which requires the payment of money to someone else;
same as debt.

Current liabilities: Obligations which must be paid during the next 12 months.

Current portion of non-current liability: That portion of the principal of a long term debt that is scheduled and due to be paid within 12 months.

Non-current liabilities: Obligations due after one year or whose original maturity was beyond one year.

Lien: A claim or encumbrance on property.

Liquidity: A measure of the ability of a business to meet financial obligations as they come due. Also, the ease with which assets can be converted to cash without disrupting an ongoing
business.

M-N
Market Value: The estimated amount of cash you would receive for selling an asset today, after deducting all expenses of the sale.

Maturity date (bond): The date when a bond will pay the face value.

Net income: The total of net farm income plus net non-farm income after income and social
security taxes, but before family living withdrawals.

Net income from operations: Gross revenues minus operating and interest expenses.

Net present value: A capital budgeting method that is the discounted future cash flows minus
the initial cost of the investment.

Net worth: found under equity.

Nominal interest rate: The interest rate "as stated"; includes the real rate, inflation expectations and risk premium.

Non-current asset: found under assets.

Non-current liabilities: found under liabilities.

O-P
Operating lease: found under lease.

Ordinary annuity: found under annuity.

Owner equity: found under equity.

Owner withdrawals: Payments made to the owners of a business from the accumulated
earnings from the business.

Partially amortized loan: found under amortization.

Partnership: A type of business entity in which partners share with each other the profits or
losses of the business undertaking in which all have invested.

General partnership: The most basic form of a partnership, in which all partners manage
the business and are personally liable for its debts.

Limited partnership: A form of partnership in which certain "limited partners" relinquish their ability to manage the business in exchange for limited liability for the partnership's debts

Patronage Dividends: Represents the portion of a cooperatives’ net income or net savings
which is distributed to its members based on their proportional patronage of the cooperative.

Payback method: A capital budgeting method that gives the number of years required to
recover the initial investment amount.

Points: Loan fees that are viewed as prepaid interest and raise the APR of a loan. One point is
1% of the loan amount.

Present value: The discounted value today of a future sum or series of payments at a given
discount rate.

Principal: The balance of a loan; the amount owed.

Promissory note: The primary legal document in a loan contract; a written promise of the borrower to repay a loan.

Q-R
Real interest rate: Includes only the systematic and regulatory risks and is meant to measure
the time value of money. Real rates = Nominal rates minus inflation.

Repayment capacity: A measure of the ability of a borrower to pay principal and interest on
the non-current liabilities and meet all other financial obligations.

Revenue: Cash inflows or other enhancements of assets of a business.

Gross revenue: The total of all revenues received for goods produced for sale or for serviced rendered in a specific period of time from business activities.

Value of farm production: A term unique to farm income statements; a measure of the value an agricultural operation has added to products sold; determined by subtracting the cost of feeder livestock and feed purchased from gross revenue.

Risk premium: The cost of bearing risk included in an interest rate or discount rate.

S-T
Simple interest: Only the original principal earns interest over the life of the transaction; the
product of the principal, time in years, and annual interest rate.

Simple rate of return: The total net income provided by an asset divided by the initial investment cost or the average investment cost.

Sole proprietorship: A business which legally has no separate existence from its owner. All
debts of the business are debts of the owner. It is a "sole" proprietor in the sense that the owner has no partners. A sole proprietorship essentially means a person does business in their own name and there is only one owner

Solvency: The degree to which all assets exceed all liabilities; the ability to repay all financial
obligations if all assets were sold.

Statement of owner equity: The financial statement that summarizes changes in owner equity between the beginning and ending balance sheets of an accounting period.

Time value of money: The universal preference for a dollar today versus a dollar at some future point in time.

Terminal value: The expected value of an investment at the end of the planning horizon.

U-V-W-X-Y-Z
Valuation equity: found under equity.

Value of farm production: found under revenue.

Warranty deed: The instrument that transfers title in real property; the seller is guaranteeing
that the title is free and clear of any encumbrances.

Weighted average cost of capital: The cost of capital which is the cost of debt capital and the cost of equity capital weighted by the proportion of each in the capital structure of the
business.

Yield to maturity (bond): The annual percent return a bond will give the investor when held to maturity, takes into account the interest paid and any capital gain or loss.

Zero coupon bonds: Bond that do not pay periodic interest payments; the only return is the
capital gain between the purchase price and the face value.

Friday, December 12, 2008

INTRODUCTION TO AGRICULTURAL FINANCE

What is agricultural finance? Some, for example, may define agricultural finance as the study of the financing and liquidity services credit provides to farm borrowers. Others may define agricultural finance as the study of those financial intermediaries who provide loan funds to agriculture, and the financial markets in which these intermediaries obtain their funds. In fact, several agricultural economists identified a number of studies focusing on such additional topics as rural banking, insurance, income distribution, farm financial management, and taxation. Finally, the study of agricultural finance can be broaden even further to account for all economic and financial interfaces between agriculture and the rest of the macroeconomics, including the effects that changes in national economic policies have upon the economic performance of agriculture and the financial position of farm operator families.

Understanding financial concepts and the practical applications of finance is essential for anyone interested in pursuing a career in the agribusiness or agricultural production sectors. Many of the important managerial problems in agriculture involve finance. However, most agricultural production firms are significantly different from corporations, and more closely resemble small, owner-operated businesses. Management of farm business requires a wide range of information on physical and financial performance. Sometimes, however, much of the information needed is recorded only in the mind of the farm operator or in an informal, irregular kept ledger. There is also the tendency by some to judge the financial performance of a farm business by the amount of money he has in the bank. Each of these measures, however, provides a potentially misleading picture of the financial performance of the farm business and the financial strength of the farm operator. Study on Agricultural Finance will cover topics on the financial institutions, lending programs and other financial issues affecting agriculture.

Farm Financial Management
The functions of financial management are traditionally defined to include the investment decision, financing decision, and the dividend decision. Together, these decisions largely determine the rate at which the farm business grows over time. Because most farm business is sole proprietorships, financial management in agriculture encompasses the proprietor withdrawal decision (i.e. the withdrawal of funds to finance personal consumption and nonfarm investments) instead of the dividend decision.

The investment, financing, and proprietor withdrawal decisions are not made independently. For example, the decision to invest in a new piece of farm equipment cannot be made independently of the financing or withdrawal decisions. Furthermore, the financing decision is directly influenced by the farm operator’s decision to withdraw part of his current net farm income to finance personal consumption and nonfarm investment.

Effective investment, financing, and withdrawal decision making requires a comprehensive farm financial accounting system. For example, an accounting system is needed to help identify the level and timing of financing needed to facilitate the farm operator’s current production and marketing plans. Such an accounting system should also provide information pertaining to the farm operator’s present financial position and the efficiency and profitability of his current operations.

Financial Accounting System
An accurate and comprehensive set of financial statements is essential to sound financial management. Such an accounting system should at a minimum include a balance sheet, an income statement, a statement of change in owner equity, and a cash flow statement. These statements can provide an informational input to the production, marketing, investment, and financing decisions that must be made annually by the farm operator. For example, the information contained in these statements can be used to evaluate the annual performance of the farm operator’s business. This could be done by comparing the profitability and efficiency ratios computed for his business in the current year with similar ratios he has achieved in previous periods or with other farm businesses having similar types of operations.

Organization and Growth of the Farm
To maximize the profits generated by the farm business in the current period, the operator must be able to identify the appropriate combination of products to produce and inputs to use. In the longer run, the farm operator must also be able to determine how large the farm should be and understand what factors determine how fast he can reach this size. Some of the externally imposed factors that can constrain the rate of growth of the farm are external credit rationing, taxes, and government regulations. The farm operator can also internally constrain the rate of growth of the firm by rationing his use of credit or by withdrawing a larger part of net farm income to finance personal consumption expenditures or non-farm investments.

Investment and Financing
The concept of the time value of money underlines much of investment theory. For example, the present value of the annual net cash flows generated by an investment over its economic life must be taken into account when choosing between alternative investment projects. Several capital budgeting methods frequently used in financial management will be discussed in Chapter 5.

The presence of business and financial risk must also be taken into account when evaluating alternative investment projects with differing level of risk. The farm operators’ risk-return preferences (i.e., whether they are averse to risk, indifferent toward risk, or prefer risk) can have an effect on the ranking and acceptance of alternative investment projects available to them. To reduce their exposure to risk, farms operators can adopt one of several different strategies. These strategies include product diversification, sequential marketing of farm output, insurance, and forward contracting using either futures market contracts or cash forward contracts.

Legal Considerations
There are several forms of legal documents that farm operators should be familiar with when borrowing or leasing. These contracts document the rights and obligations of the borrower and lender, or lessor and lessee. It is important that the borrower and lessee understand the performance expected of them as set forth in these contracts.

Lenders, on the other hand, are concerned with the security of loans to protect themselves in the event that the borrower defaults on a loan. In some cases, the lender will accept a cosigner of a note. In other cases, however, a security agreement documenting the property the lender has a security interest in is used. A security interest gives the lender rights to those assets the borrower has pledged as collateral. The lender is also concerned about the borrower receiving a clear title to the property being purchased, particularly in the case of real estate.

There also legal considerations unique to leasing. For example, a legally enforceable lease must contain the names of the parties involved, a description of the property, the time period involved, and the timing and form of compensation. Farm land is typically leased on a cash rent, crop-share, or livestock-share basis. Machinery, on the other hand, is leased either through an operating lease or a financial lease.

Taxation
To maximize after tax profits, farm operators must have a working knowledge of tax laws and the options available to them. Gains or losses associated with the sale of specific types of assets and the effects of minimum tax and self-employment tax will be discussed. The differences in the tax laws as they apply to sole proprietorships, partnerships, or corporations are also identified.

Financial Intermediaries Serving Agriculture
The financial intermediaries serving agriculture provide an important service by channeling funds from savers to borrowers in the amounts necessary to finance production expenses and capital expenditures. The funds used by these financial intermediaries come from variety of sources. These funds are then made available to agriculture under a variety of terms.

It is important for students studying Agricultural Finance to study the regulatory environment that each of the financial intermediaries serving agriculture must operate in, where these lenders obtain their funds, and the terms of the loans they make. These institutions are divided into four groups for discussion purposes: commercial banks, Farm Credit System, government lenders, and other financial intermediaries. The changing relative importance of these institutions over time is examined as is the joint participation between several of these institutions sometimes employed to meet the loan demands of larger farm operators. Finally, the performance of these financial intermediaries will be evaluated in terms of the efficiency and equity of their lending activities.


Source: Penson, John B. and Lins, David A. (1980). Agricultural Finance. New Jersey: Prentice Hall.