Jacobs Journal of Agriculture

Review Article
Entrepreneurship in Economic Development of Malaysian Smallholder Farmers
Muhammad Firos Mustaffa1, Kuppusamy Singaravelloo2 and Azmah binti Haji Othman3

1
Department of Administrative Studies & Politics, Faculty of Economics & Administration University of Malaya, Malaysia
2
Department of Administrative Studies & Politics, Faculty of Economics & Administration University of Malaya, Malaysia
3
Department of Development Studies, Faculty of Economics & Administration University of Malaya, Malaysia

*Corresponding author: Muhammad Firos Mustaffa, Department of Administrative Studies & Politics, Faculty of Economics
& Administration University of Malaya, Malaysia; E-mail: phdum2017@gmail.com

Received Date: 12-23-2018

Accepted Date: 01-30-2019
Published Date: 02-01-2019
Copyright: © 2019 Muhammad Firos Mustaffa
Abstract
Agriculture is the fundamental pillar of human life in terms of food, financial and economic sources. Agricultural activity
can become a business when the production of agricultural produce of farmers or traders not only exceeds the necessity
of self-sufficiency but also when it is able to make a profit from its domestic markets and foreign exports. Agriculture
entrepreneurship is seen as a business that augurs well to the entire community of the world, helping to bridge the so-
cio-economic gap in societies, address poverty problems, create employment opportunities and contribute to the coun-
try’s economic growth. In a way, modern agriculture has created agropreneurs who have largely been associated with the
development of new techniques of modern technologies and machinery in producing agriculture products supplying on
a large scale into the market. The Malaysian government encourages smallholder entrepreneurs to optimize new agro-
nomic practices, modern farm management, use new machinery and latest technologies and intensified Good Agricultural
Practices (APBs) or also known as Good Agricultural Practices (GAP). However, with the current drop in price in commod-
ities has affected almost all the smallholder communities. Again, in attempting to overcome this problem, the government
intervention introduced multiplicity entrepreneurship by not only focusing on agriculture product objectively to increase
their income and well-being. This paper intends to evaluate whether the multiplicity entrepreneurship implemented
by the Malaysian smallholder farmers is effective to increase income and their quality of well-being, as well as poverty
eradication in a rural area and the hinterland. The discussion emphasizes the serious need for modernization in agricul-
ture through such entrepreneurship that is guided by government policies. The multiplicity entrepreneurship such as
in servicing, manufacturing, food and beverage activities implemented to support the smallholder shape their economic
growth and release them out of the poverty trap has been given high priority by the government. Talent, skills and ability
of entrepreneurs in carrying out innovation in products in the market are also deliberated in this paper. This paper also
examines the causes of unexpected failures on multiplicity entrepreneurship development among smallholder farmers.
Keywords
Agriculture entrepreneurship; Multiple entrepreneurship; Smallholder farmers

Cite this article : Muhammad Firos Mustaffa, Kuppusamy Singaravelloo, Azmah Binti Haji Othman. Entrepreneurship in Economic Development of Malaysian
Smallholder Farmers. J J Agriculture 2019; 5(1): 015.
Jacobs Publishers
Introduction
Poverty issues have been in the limelight globally for
so long. This is often cited to be due to the lack of ability
to manage money, low-income levels, inability to acquire
the basic goods and services, and poor material posses-
sions. The Asian Development Bank declared that Malaysia
recorded 0.6 percent population below poverty line index
(PLI) in 2016, the largest from smallholder’s farmers [1].
Poverty is quite synonymous with smallholder’s farmers
due to lack of ability to optimize output from their farms
and effectively. Despite significant modernization in the
sector, a contribution of the agriculture sector including in
forestry and fishing, to the national economy still remains
very low at around 10 percent in Asian countries [2]. Asia
has shown keen interest on large scale rubber plantations
as a huge agriculture cluster but lacked financial resources
that stunted the industry in the 21st century [3]. Other key
issues like transportation, networking facilities and supply
of fertilizers have become major contributors to the failure
of agricultural cultivation in most of the Asian countries
[4]. Realizing the importance of developing and promoting
the wellbeing of smallholders, the Malaysian government
since Independence had established various regulations,
programs and policies [5]. Large scale improvement in
plantation policy involving smallholder farmer’s wellbeing
was implemented in 2014, which resulted in 542,000 tons
of rubber production in Peninsular Malaysia that benefit-
ted 182,500 smallholder farmers [6]. This compares with
423,000 tons only in 2010.
Rubber plantation was the biggest contributor of
an industrial crop to the economy since the 1960s until
2015 [17,3]. About 827,400 hectares of land in Peninsular
Malaysia, 794,060 hectares in Sabah and 833,471 hectares
in Sarawak have been commercially cultivated for agricul-
ture products in 2016 [3]. Other cash crops are oil palm, tea,
pepper, coconut, pineapple and other fruits. Government
intervention helped smallholder farmer communities to
replant, open new land and improve production standards
including on tapping latex. With these, quality of rubber
production and helped raise the price of the commodity [8].
However, the landscape of rubber smallholding changed
extremely due to a drop in the global price of the com-
2
modity in 2012, resulting in the return of poverty among
smallholder farmer communities who were caught unpre-
pared. This continued to date as Siti Murni and Kuppusamy
(2018) found almost 90 percent of smallholder farmers are
still categorized into crude poverty in their study of rubber
smallholders in four states of Malaysia [9].
Agricultural Entrepreneurship
In the effort to address low income among smallhold-
er farmers, cash crops agriculture such as durian, jackfruit,
mangosteen, rambutan, papaya, banana, melons, pineapple,
chilies, groundnut, sweet potatoes, longan and rose-apple
fruit trees were introduced to gain quick results. The vast
expansion of land cultivated for these crops was widely im-
plemented using better techniques and advanced technolo-
gies. However, rubber plantation cultivation was continued
in parallel with the hope of a rebounce in the price of the
commodity in the future. Rubber trees grow easily but its
quality of latex is affected as its nutrition cycle gets stunt-
ed by inconsistent tropical weather conditions. In 2009, the
outreach programmes are known as entrepreneurship de-
velopment under the National Key Results Area (NKRA) of
the Government Transformation Plan (GTP) allocated a to-
tal of RM1.66 billion to raise the living standards of low-in-
come rural households.
The government’s allocation of RM30 million to the
Ministry of Agriculture and Agro-Based Industry under the
2017 Budget for the development of agricultural programs
encompassed high technology consumption applications in
the production of fruits and vegetables, improving the sup-
ply of quality seeds, price stabilization through direct sale
of farm produce, the marketing of fish and the improvement
of agricultural training institutions. Moreover, the govern-
ment had continued to provide agricultural subsidies and
incentives totaling RM2.4 billion. With this subsidy, the gov-
ernment hoped that it will ease the load of the farmers and
ensure this community could be sustained in the agro sec-
tor.
The Malaysian Cabinet has also approved the Na-
tional Food Agro-Based Policy (2011-2020) on 28 Septem-
ber 2011 replacing the National Agriculture Policy. Among
the priority areas of the policy are to develop the livestock
industry, modernize the fisheries industry, strengthen the
Jacobs Publishers
rice industry, promote agro-tourism, improve the agro-
based industry, drive the growth of high-value industries
and strengthen the vegetable, fruit, coconut, palm oil and
rubber industry. Some agricultural fairs such as the Malay-
sia Agriculture, Horticulture and Agro Tourism (MAHA) or-
ganized by the Ministry of Agriculture and Agro-based In-
dustry are held annually to promote agricultural products
grown in Malaysia to the people. MAHA also showcased the
success of the agricultural and agro-based industries as well
as livestock from within and outside the country in terms of
technology and innovation. MAHA is also a platform for ex-
posing youth to agriculture as well as introducing Malaysia
as a hub for agriculture and agro-based industries for for-
eign and private investors. Therefore the government agen-
cies and government-linked companies such as Malay Peo-
ple’s Trust Council (MARA), The Federal Land Development
Authority (FELDA), Federal Land Consolidation and Reha-
bilitation Authority (FELCRA), Rubber Industry Smallhold-
ers Development Authority (RISDA), Federal Agricultural
Marketing Authority (FAMA), Small Medium Enterprise
Bank (SME) and Malaysian Rubber Board (MRB) gave pri-
ority on empowering the agricultural sector’s step up of en-
trepreneur financing schemes, grants and strengthened the
effectiveness of programmes [4]. Even though many steps
were taken by the government to tighten this agriculture
sector by developing smallholder entrepreneurs, it tended
to fail due to weather effects, lack of innovation, networking
support, dissemination of information on new equipment
and capability of this smallholder farmer to adopt improve-
ments and the changes. As a result in 2017, 87 percent of
smallholder farmers in Malaysia which received govern-
ment fund under agropreneurs programme was still in
e-Kasih, a registry system categorizing those under poverty,
i.e. earning a household income of below RM760 per month
[10] for direct government assistance.
Multiplicity Entrepreneurship
Malaysia is among economies in the Asian region
with funding and physical infrastructure provided broadly
to support the entrepreneurship programme. Multiplicity
entrepreneurship is important especially in small and me-
dium-sized enterprises (SMEs) as this gives ‘life’ to sustain
and diversify the business. Now, the definition of multiplici-
3
ty entrepreneurship has changed widely in tandem with the
evolution of the business landscape. The Malaysia govern-
ment introduced the multiplicity entrepreneurship through
many fields such as servicing, manufacturing, food and bev-
erage in 2009 to the smallholder farmers which increased
their income and sustained their cost of living. The national
budget in 2016 allocated RM40 billion through RISDA which
focused on a given fund to smallholder farmers to start
small scale businesses, and not just on agriculture products.
The government always encourages the involvement of the
low-income people especially Bumiputeras in multiplicity
small scale entrepreneurship and avoid being trapped in
the poverty category. Various ministries and agencies are
involved in the multiplicity entrepreneurship ecosystem to
create sharing and ensuring aspirations to generate suc-
cessful entrepreneurs for 2020 vision. Agencies such as
SME, MARA, National Institute of Entrepreneurship (IN-
SKEN), National Entrepreneurship Council Berhad (PUNB),
Center for Development and Entrepreneurship Research
(CEDAR) and Malaysian Global Innovations and Creativity
Center (MaGIC) provided concerted support and consulta-
tion in business as well as training of this target group.
Some programs were unique because they did not
just focus on the development of small scale business, but
also on human capital development. This augured well for
entrepreneurs, as they not only increased their business vi-
ability but also improved their knowledge in business man-
agement. This includes the Program SME Industry-Training,
Tunas Bumiputera Youth Entrepreneur (TUBE), Programme
SME capabilities, Entrepreneurship and Cooperative Train-
ing Programs and Entrepreneurial Incubators Woman
(EIW). Under the Eleventh Malaysia Plan, entrepreneurship
has been identified as one of the national priority areas.
The assistance looked at integrating and reducing entrepre-
neurship overlapping activities, a collaboration between
agencies that provide entrepreneurial and SME support
programs to entrepreneurs in urban and rural areas. The
support involves government agencies such as SME Corpo-
ration, TEKUN Nasional, and Amanah Ikhtiar Malaysia (AIM)
to provide a wide array of business development opportu-
nities to entrepreneurs in small scale business start-ups.
To address these goals, micro-entrepreneurs will also be
Jacobs Publishers
linked to banking institutions and finances for easy access
to financing. Large companies include government-linked
companies (GLCs) will be given incentives to increase their
contribution in realizing entrepreneurs, especially in ICT,
biotechnology and green agro-technology. Meanwhile, SME
Corporation Malaysia has also been mandated to stream-
line multiplicity entrepreneurship initiatives to those in
Bottom 40 (B40) households, in partnership with various
ministries and agencies. This is done through businesses
such as smart partnerships with research and development
(R & D) institutions to help SMEs improve quality of prod-
ucts, improve compliance with standards as well as improv-
ing access to the market.
Indeed, in the first place, the government pro-
grammes aimed at increasing income and develop a sus-
tainable economic growth in the country. A total of RM226
million was spent on multiplicity entrepreneurship pro-
gramme with 11,300 smallholder farmers enrolled in en-
trepreneur’s programme from 2009 until 2017 and a fur-
ther RM200,000 was allocated for this program in order to
move the target group from poverty [11]. Among them, only
748 (6.61%) of the smallholders have succeeded to become
active RISDA business entrepreneurs by offering laundry
services, domestic travel and tours, teaching, and being in-
surance agents, produce tangible goods, automobile work-
shops, clothes, craft products, operate small food stalls and
catering services [11]. Therefore only less than 7 percent
of the smallholder communities have been taken out of the
poverty line and the rest still remained poor in the e-kasih
system [12].
Entrepreneurship Development
Entrepreneurship Development covers programs
to create new entrepreneurs, create business opportunities,
capital funding, training programs, marketing and product
promotion, business premises, manufacturing facilities,
branding and labeling as well as develop and develop exist-
ing entrepreneurs. Basically, smallholders are highly asso-
ciated with poor education, low skills, living in rural areas,
most inflicted with poverty, a majority is aged 50-60 years
and still cultivate agricultural activities in Malaysia. Most of
their children migrated to the urban areas for better income
and are rarely concerned about helping parents to cultivate
agriculture. Venkataraman (2000) stated that entrepre-
4
neurs must have good personality skills and energetic to
be successful [13]. Gartner (1989) considers that family
support is one of the success factors on entrepreneurial de-
velopment [14]. Meanwhile, self-efficacy indicates the high
level of difficulty needed to perform the entrepreneurship
activity such as belief in their ability to succeed. Sieh (1990)
in her research on Malaysian entrepreneur’s development
find entrepreneurs facing financial problems, lacked skills
and knowledge [15]. Similar views by RISDA (2017) agreed
that basic entrepreneurship education on technical and
financial aspects is strongly needed to develop their skills
and knowledge [11].
Several authors have highlighted the importance of
knowledge of the system or technology in order to elevate
marketing [16,17]. While an opportunity is a condition that
can benefit or bring success to someone who grabs it wisely,
it will only benefit those who are competent. Entrepreneur-
ship development must be able to guide risk-taking to com-
pete in the market. New products to meet the requirement
of customers must be based on demands and the chances
of being rejected must always be considered to be success-
ful entrepreneurs. Overall, entrepreneurship development
must incorporate high self-efficacy, good attitude, innova-
tive, creative, social network-based knowledge, risk-taking,
quick tapping on opportunities and highly motivated, to be-
come successful entrepreneurs.
Conclusion
Development and modernization of the agricultural sec-
tor are now seen as vibrant as it is given special emphasis
and focus. There are various driving factors for smallhold-
er farmers to embrace the decision to move from agro-
preneurs into multiplicity entrepreneurship. The drop-in
commodity price has affected their lives. However, the
multiplicity entrepreneurship has not been completely
successful to drive them out of poverty. Formal education
level, business experience and frequent entrepreneurship
education and training programs are among the key factors
that affect the multiplicity entrepreneurship of smallholder
farmers. There is a need for smallholder farmers to accept
the application of innovations and adopt changes to raise
their standard of living, agricultural productivity and indus-
trial growth. Attention should also be given to multiplicity
entrepreneurs rather than single business alone as efficien-
Jacobs Publishers
cies and economies of scale can be improved through multi-
plicity entrepreneurship strategy. The transformation from
the conventional agriculture entrepreneurs into multiplici-
ty entrepreneurs will ensure the economic stability of this
community. Effective marketing of agricultural products
in the local market can offer more incentives to the small-
holder farmers in rural areas. New technology adopted by
the smallholder farmers must be supported by consistent
training and guided techniques by the government. Close
monitoring by the authorities is required which otherwise
would lead to failures among the smallholder farmers. In
general, smallholder farmers lack technical knowledge and
the time needed for young entrepreneurs to indulge in the
agropreneur sectors that incorporates creativity and inno-
vation to cultivate better goods and products. Attracting
young and dynamic labor and other resources have played a
vital role in raising productivity in the economy. Therefore,
it is imperative that a revisit to the impact of the multiplici-
ty entrepreneurship development on reducing poverty and
increasing household incomes among smallholder farmers
be carried out.
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