The wide scope of activities of the FA can be divided into
(a) The FA supplies services to its members. With the help
of training and cooperative methods, supply, marketing, extension
and credit services are rendered to members and sometimes
to other farmers as well.
(b) The FA is an agency to execute government policy. By
implementing schemes or by providing audiences to the staff
of different departments, the FA constitutes the local institutional
structure which is necessary to implement any policy.
Among the services supplied by the FA to its members, marketing
plays an important role. Coconut marketing is done in conjunction
with the State FA. The Area FA buys the produce from the farmers
and its lorry conveys it to Kuala Lumpur where the state FA
advises the driver to which shop to bring the freight. In
the case of eggs, the procedure is similar. Oil palm kernels
are bought and shipped to the factory. The price paid to farmers
is sometimes higher than the buying price of the factory so
as to compete with traders and keep customers.
As regards pineapples, the FA is only responsible for the
transport of the fruits to the factory in its lorries but
is not involved in other marketing activities. Other products,
like rubber and coffee, passion fruit and vegetables are not
dealt with by the FA, partly because there is no need, partly
because the limited funds of the FA do not allow it to enter
into new activities. As regards coffee, the General Manager
also expressed his feeling that there was a lack of competence.
The extent of marketing activities varies greatly and is
mainly determined by three factors
(a) The capital available to the FA determines the degree
to which the FA can work on merchandise instead of consignment
basis. As most peasants need cash down, the possible volume
of business is much higher in the first case.
(b) Marketing at least for several crops is linked with credit
because middlemen often only accept business for both activities
together. The marketing business of FAs depends, therefore,
on the credit activities and vice versa. If the FAs cannot
grant credit, the peasants have to go to the middlemen for
marketing and for credit.
(c) The possibilities for marketing vary with the different
crops and improve the greater the variety of the crops is.
In areas where rice is a monoculture, these possibilities
are almost non existent because of the monopoly system, except
that the FA is the local agent of the National Paddy Board.
Even then, the prospects are meager because of the fixed price.
The supply of inputs is centered on fertilizers und chemicals
which the FA usually obtains from the State FA. In order to
avoid overstocking, the Unit Chiefs submit the requirements
of their members and these amounts are distributed directly
to the unit storeroom. In the store room of the FA, the stock
is usually limited to the amount which is necessary to bridge
over delays in delivery. Everybody, even non-members, may
purchase inputs as the income of the FA from the profit margin
increases with the amount of sale.
Supply business usually works quite well and the business
profit from this activity is one of the most important income
producers for the FA.
In supply as well as in marketing business, the share of
the FA in the total turnover of its organic area is quite
limited. Some products are not dealt with at all and, as far
as others are concerned, the FA hardly exceeds 5- 10%. The
reasons for this are manifold; Many farmers, even among members,
have long standing business relations with certain private
traders and they do not want to break them off as they have
a feeling of moral obligation. Others are indebted to traders
and, therefore, obliged to sell to their creditor or they
need cash down at the time of marketing, whereas the FA sometimes
works an consignment basis only. On the side of the FA, the
limited capital restricts the scope of activities, especially
an merchandise basis, and, because of the limited staff, the
business volume cannot be extended. In spite of the limited
share in the total turnover, the involvement of the FA in
supply and marketing has had an impressive impact in these
fields. Its existence offered an alternative to middlemen
and forced these and forced these to adjust their prices.The
involvement of the FA in supply and marketing has had an impressive
impact in these fields.
This holds true for most Area FAs.
This effect on price stabilization was very much appreciated
by the members and raised the desire to step into business
with provisions. The FA currently owns two retail shops but
it is planned to hand them over to private persons. It proved
more difficult to organize profitable retail with dozens of
household articles which are usually purchased in small quantities
than to distribute fertilizers, etc.
Many Area FAs started provision shops, some in almost every
unit and sometimes there are as many as 25 per FA, It proved
difficult, however, to organize retail with paid personnel.
Some FAs stopped this business altogether, some limited it
to 8-10 of the most important consumption goods and others
rented the shops to private persons but included in the contract
a special clause to control the prices.
The credit business of the FA is relatively limited. The
association is involved in the grant of three different types
of credit; Out of their own funds, the FAs grant credit to
their members for productive purposes. The procedure is relatively
simple. The farmer fills in a small application form an which
he lists the goods required, the acreage they are needed for
and the time at which they are required (not the amount of
money!). This application has to be countersigned by the Unit
Chief and is then examined by Chief of the credit section.
He mainly assesses whether the amounts required are necessary
for the acreage under cultivation. Besides, he checks the
farmer's credit• history. 'If he is satisfied, the application
is approved and the goods required are given in kind to the
farmer. In 1972, the FA granted credit amounting to 6000$
to 25 members.
In most FAs, the credit activities are more intensive and
amount, in some cases, to more than 50,000$ out of own funds.
These credits are granted to more than one third of the members.
In most cases, the credit granted to one member is limited
to 300$ or to five times the share capital of the member,
except in cases where there is a collateral.
Interest is 10% per season. Often, no additional interest
must be paid for overdue loans. The recovery rate decreases
as time goes by. When nothing serious happens to a member
in a case of non- repayment, others start to become negligent
too. FAs do not consider it worthwhile to take legal action
as many credits amount only to 50 or 70$ and it is considered
more important not to frustrate members than try to recover
a small sum. However, FAs have made the experience that this
not only destroys the credit moral but caused losses in their
working capital. Even with a recovery rate of 90% over ten
seasons, overdue loans amount easily to 10,000$ and one FA
had not less than 35,000$ of overdue loans. This had led to
a reduction in credit business and, in one case, on the General
Manager's suggestion, the Board of Directors decided that
no more credit would be granted to members out of the own
funds, but only by the Agricultural Bank (which is secured
by a collateral). This of course, means the end of credit
service to members. Recovery always proves to be better when
marketing is done by the FAs because they reclaim out of the
profits and pay only the rest to peasant.
In the rice growing area, to reduce the risks, it is customary
for FAs to grant no credit for land preparation and transplanting
but they accept applications for credit only about one month
after transplanting, when the harvest, and therefore ability
to repay, is reasonably assured. Those who need credit for
the whole production process (including land preparation and
transplanting) are referred to the Agricultural Bank. As this
bank requires a collateral, the process takes long and interest
is slightly higher. Thus, the policy of the FA is discriminating
against the poor. Those who can afford to pay the first part
of the production process out of their own means obtain credit
from the FA. Those who cannot do so are referred to the bank
because the risk they represent is too great.
Farmers can also obtain credit from the Agricultural Bank.
The FA is no agent of the Bank and, therefore, its participation
is limited to examining the applications and forwarding them
to the Bank Office. The procedure takes long, requires 2-3
months and involves a collateral or similar guarantees. The
amount of credit can be higher than that from the FA. In 1972,
only three members applied for credit from the Agricultural
A number of FAs are agents of the Agricultural Bank and thus
earn income from the commission they receive for their services,
but this involves greater risks because the agents have to
guarantee the credit of their clients. As a collateral is
required when applying for credit from the Agricultural Bank,
the risk is limited, however, while the Bank benefits from
the FA's detailed knowledge of conditions and requirements
of members. Bank credits mediated by FAs reach up to 30,000$
per season and FA. According to the general experience, more
credits are applied for than taken. As the procedure takes
two months, peasants apply for credit at an early date just
in case they need it. For instance, if their fields are affected
by insects and have to be sprayed, they need credit for insecticides
and, to have it at their disposal, they apply well before
they know whether they will need it. If their fields are not
affected, they do not need the credit. It is not possible
to apply only when credit is needed because, in case, of an
attack of parasites, the credit is required at short notice.
This procedure involves much unnecessary work for the staff.
Another possible source of credit is the Planters' Loan Board
and the FA assists in the same way as for the Agricultural
Bank by examining the applications and intermediating between
farmer and board. In 1972, 17 farmers obtained credit amounting,
in most cases, to more than 1,000$ for each farmer.
The limited number of credit cases 45 from these sources
altogether is not typical. This is due mainly to the type
of the agriculture. The peasants from this area of tree crop
farming are somewhat better off than their fellows in other
regions. Besides, this type of farming does not require regular
crop loans for the cultivation every season as, for instance,
in areas where rice is cultivated. Finally, much credit is
provided by middlemen. Farmers address themselves to them
for credit as well. Especially in the case of vegetables and
other crops not marketed by the FA, the farmer has no alternative
than to apply to the middlemen for credit. Sometimes, farmers
have to Lake credit from the middlemen because they are already
indebted and, therefore, are bound to a certain middleman.
For certain larger projects, credits are provided by the
State FA or the State FA negotiates with private banks. For
instance, sprayers for insecticides for members are paid with
a credit from the Chartered Bank granted after negotiation
by the State FA.
The savings business of the FA is just at the initial stage
and savings, so far, consist mainly of non claimed dividends.
Recently, however, about 4,600$ have been deposited by 42
members. The total amount of savings is about 10,000$.
The work of the extension section is performed in two different
ways. In a group approach, at meetings of the Small Agricultural
Units, the staff tries to explain the advantages of crops
like oil palm, passion fruit, etc. which, according to government
policy, are to be extended. Farmers are informed an such matters
as pesticides, fertilizers, etc. as well. However, the number
of such meetings hardly exceeds two per year. The limited
staff prevents an intensification. As much time at these meetings
is devoted to FA matters, the extension work is limited. Therefore,
the bulk of extension activities is connected with the supply
business. Whenever farmers buy fertilizers or chemicals, they
are advised an the proper application of the product.
In most FAs, the bulk of extension work is related with supply
business. A number of FAs try to organize courses for their
members. These courses last one day to two weeks, but attendance
is poor and sometimes nil. It seems that peasants are not
convinced that they can learn things which are really worthwhile
from the :staff. Some FAs have organized youth demonstration
plots. These usually meet with a good response from the members
s ons. Sometimes, FAs organize bus tours to visit other FAs
and thus provide an opportunity to exchange views with members
of other FAs.
The FA has a specialist in home economics and classes with
demonstrations in cookery, childcare and vegetable cultivation
are held regularly and are well attended, especially by the
young women. The production of handicrafts (weaving, sewing,
knitting) has been started, but because of the lack of market,
had to be stopped after some time.
In recent times, a number of FAs have introduced home economics
and this usually meets with the great interest of the young
women. Shortage of trained staff is the limiting factor.
The main activities of the FA as agent to implement government
policy are connected with a number of projects. Such a project
is the expansion of passion fruit cultivation in which the
FA participated with an additional area of 5o acres in 1971
and of 30 acres in 1972. The project is subsidized by the
government which pays for raising the plants, for fertilizers,
wire and labour. To that end, the FA formed small working
groups of members in several units. These agreed to participate
and to cultivate together a certain piece of land an which
they were to grow passion fruit.
In accordance with the government policy to extend the tree
crop area and replant it with improved clones, the FA participated
in the cultivation of seedlings. The State FA accepted tenders
to deliver these seedlings to the Department of Agriculture
and the Area FAs actually produces them. In the case of oil
palms, the seedlings are raised near the FA building by hired
labour so as to prevent farmers from changing the improved
seed for the ordinary type. Coffee seedlings are cultivated
by small working groups in the small agricultural units, and
the amount was about 60,000 a year in recent times.
In the government extension policy concerning oil palm, the
FA is involved as local salesman for seedlings and gives the
necessary advice an the techniques of cultivation. Because
of the price situation, this project is very popular with
In order popularize poultry keeping for egg production, the
FA organized a model poultry farms with 1,400 birds at a farmer's
place, This project was supported by a credit of 5,OOO$ granted
by the State FA. As soon as the project has proven its profitability,
it is intended to expand it by selling shares to interested
Such projects are very popular. Their number varies with
the possibilities offered by natural conditions and even more
with the activity and imagination of the General Manager and
his staff, Some general managers have rendered great services
to their FAs. Most of these projects concerned the diversification
of farming. In the tree crop areas, the planting of cocoa,
new oil palms, passion fruit, etc. is popular. Some projects
aim at the rehabilitation of old tree areas or try to introduce
vegetable production. Same FAs try to introduce the cultivation
of groundnuts in rice areas during the dry season or suggest
goat, cattle or poultry rearing. FAs participation in these
projects includes advisory service, land clearing with FA
tractors, raising of plants, granting credit for the expenses
and organizing the marketings.
The nature and number of such projects indicate the competence
of the General Manager. Here, the outstanding General Manager
has a field to prove his ability.
There are other projects which are not directly improving
agriculture an members farms, but aim at providing additional
work and income. Some FAs, for instance, raise seedling for
the government or for contractors. The peasants are usually
organized in small working groups for this purpose. If part
of such seedlings are planted an their own farms, this improves
the agricultural production of the members as well.
Apart from such projects, the FA assists government departments
by organizing their activities and providing audiences for
traveling officers at meetings in the units. The Land Office,
the Veterinary Department, the Health Department, etc. find
in the FA the local structure through which they can perform
their activities, disseminate information, etc. Similarly,
institutions like the Agricultural Bank, the Planters' Loan
Board, use the FA as their official or unofficial local agent
end avoid the expenses of an own office and benefit from the
familiarity of the FA with the local conditions and the situation
of the individual farmer.