C

ow farmers across the country can breathe a sigh of relief as the Agriculture Ministry and Bank Indonesia (BI) have jointly launched a special insurance program, aimed at providing protection for their cattle, which will eventually help manage inflation.

The program will be carried out by a consortium of insurance firms '€” consisting of PT Asuransi Jasa Indonesia (Jasindo), PT Asuransi Umum Bumiputera Muda, PT Asuransi Tri Pakarta and PT Asuransi Raya '€” and is offered in Boyolali in Central Java province and Yogyakarta during the initial phase.

According to Deputy Agriculture Minister Rusman Heriawan, the insurance is urgently needed in the livestock sector to help farmers run their businesses. '€œWe need to assist farmers to be able to provide a sufficient supply of beef as it is one of several commodities that directly affects inflation due to its high demand,'€ he said during the program'€™s launch at the BI office in Jakarta on Wednesday.

However, Rusman added thatfarmers had not received enough support from the banking industry to develop their businesses due to the lack of protection. '€œThis sector has the potential to boost the economy with around 12 million cows recorded across the country,'€ he said.

Soaring food prices '€” caused by insufficient supply '€” have often been attributed as one of the reasons behind rising inflation this year. In July, the country'€™s inflation rose to a four-year high on the back of rising prices, including beef, as revealed by data from the Central Statistics Agency (BPS).

Inflation stood at 3.3 percent in July, taking the year-on-year (y-o-y) inflation to 8.6 percent, the highest level since February 2009. Meanwhile, the y-o-y inflation for volatile food surged by 15.1 percent.

BI deputy governor Halim Alamsyah acknowledged the lack of financial support for the agriculture industry. The latest data from BI shows that the amount of loans channeled to the agriculture industry, including livestock, only represented a tiny 5.2 percent of the national loans portfolio as of August.

The agriculture loans stood at Rp 158.52 trillion (US$14.08 billion), while the total portfolio amounted to Rp 3.07 quadrillion. The August agriculture figure grew 25.3 percent y-o-y.

'€œBy encouraging the use of insurance, we try to minimize risks faced by the farmers and we will hopefully see higher banking involvement as a result,'€ he said.

Meanwhile, Jasindo managing director Sahata L. Tobing said that the consortium had insured between 250 and 300 cows from five farming groups since the program began. It insures the livestock against losses, accidents and deaths.

'€œFor their livestock to be insured, the livestock must be kept in barns as well as being in a healthy condition and all must have a clear ownership status,'€ he said.

The policy is valid for one year and the premium amount is set at around 1.5 percent to 2 percent of the total insured value, which stands at between Rp 10 million and Rp 20 million.