Indonesia: Farmers to Enjoy Micro Loan Boon Next Year

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Dec 2016
Indonesia, December, 07 2016 - On Tuesday, President Joko “Jokowi” Widodo called on his Cabinet to design a micro-credit program specifically designed for the agriculture sector to increase the amount of financing farmers could receive. He acknowledged that the current micro-credit program was too broad.

Indonesian farmers can expect to find a micro-credit program specifically designed to fulfill their financing needs next year.

On Tuesday, President Joko “Jokowi” Widodo called on his Cabinet to design a micro-credit program specifically designed for the agriculture sector to increase the amount of financing farmers could receive. He acknowledged that the current micro-credit program was too broad.

According to the President, the Rp 100 trillion (US$7.5 billion) allocation in this year’s micro-credit program has barely been enjoyed by farmers. Instead, the wholesale and retail trade sectors has reaped most of the financing program.

“By July 31, 2016, up to 65 percent of micro-credit was distributed to the wholesale and retail trade sectors, while only 15 percent was distributed to the agriculture and forestry sectors,” he said during the opening of the closed-door meeting.

The Cooperatives and Small and Medium Enterprises Ministry also noted that the government had disbursed 71 percent of its Rp 100 trillion lending target to 2.95 million debtors. Alongside 28 existing banks and multi-finance firms, the government has also appointed several cooperatives to act as lenders for the program.

Jokowi, a former furniture businessman, assured that the micro-credit allocation in next year’s budget would remain between Rp 100 trillion and Rp 120 trillion, but requested a specific agriculture program that would be created based on the characteristics of the priority commodities.

The government has been trying to boost the agriculture sector and has increased the amount of funds to be used for facilities and infrastructure in the Agriculture Ministry’s budget next year, to around Rp 16.6 trillion.

Although the ministry has recorded that the amount of agricultural land has reached 36.8 million hectares, Jokowi complained that a lot of it was not being used to its full potential, citing a lack of irrigation or retention basins.

Coordinating Economic Minister Darmin Nasution said the micro-credit program had from the beginning been designed to be loose to offer flexibility. “We want to check this flexibility, whether or not their living wages have been calculated well, whether the people on the field get paid right after they have harvested,” he said.

Meanwhile, the Financial Services Authority (OJK) was upbeat that a specific loan for farmers could be created by next year. OJK chaiman Muliaman D. Hadad said it was logical to design such a program for farmers as, unlike those in the wholesale and retail sector, they did not reap instant results.

“The agriculture sector needs a grace period to pay off installments. Furthermore, it must be in the form of investment and not only capital. That is, what needs to go into the scheme,” he said, adding that the government may end up creating different schemes based on certain commodities.

One of the commodities that the Jokowi administration is trying to boost is tropical fruit production, which farmers tend to avoid in favor of high-yielding commodities such as palm oil due to the time needed for a return in investment.

Poor infrastructure has also driven up logistics costs for years.



Source : The Jakarta Post
 

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