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Jakarta Post
The Jakarta Post
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OJK to overhaul funding access for small-time farmers

  • Tama Salim

    The Jakarta Post

Jakarta | Mon, February 16, 2015 | 06:14 am

The government has promised to overhaul the limited access to funding for farmers and other small-time actors in the agriculture, livestock and fisheries sectors, all of whom are key to achieving food security in the country.

The Financial Services Authority (OJK) promised to nominate the most appropriate funding scheme for the micro businesses, starting with the fisheries sector next month, according to OJK chairman Muliaman D. Hadad.

Previously, Maritime Affairs and Fisheries Minister Susi Pudjiastuti reached out to the OJK to find a lending scheme that would allow fishermen easier access to funding from financial institutions.

Muliaman said that agriproduct and livestock farmers in the regions also had similar problems in gaining access to funding due to an existing stigma that they were '€œnot bankable'€.

Farmers and the like are often held back by highly complicated administrative procedures and a lack of physical access to banks in the regions, as well as unsuitable financial products.

'€œLoan disbursement in the fisheries sector, for instance, is a problem because banks are wary of high nonperforming loans. It turns out that a certain funding mechanism with certain characteristics was needed,'€ Muliaman said during a panel discussion at the Jakarta Food Security Summit in South Jakarta, on Friday.

He said that fishermen needed to be insured against illness and bad weather, factors that affect productivity and thus an individual'€™s ability to pay back loans.

For this reason, Muliaman suggested that a loan disbursement and insurance package would be suitable for such circumstances. '€œThese kinds of characteristics are also latent in the food-crop industry,'€ he added.

The OJK chief cited the success of the plasma-core partnership model used in the palm-oil industry, which provides smallholder oil-palm growers access to funding and mentorship from corporate '€œowners'€. Muliaman also suggested the cooperatives business model as an alternative solution.

'€œIt'€™s also important to provide access through infrastructure development, like the application of branchless banking for remote areas,'€ he added.

According to data provided by banking institutions, the OJK expects a 20.3 percent increase in loan disbursement in the food-crop sector this year, up from last year'€™s credit growth of 19.5 percent year-on-year (y-o-y), equal to adding Rp 43 trillion (US$3.37 billion) to the Rp 212 trillion in total credit issuances in the sector in 2014.

Meanwhile, Finance Minister Bambang Brodjonegoro said that it was important that the government also implement poverty alleviation programs to support farmers and fishermen, as it is widely acknowledged that they account for some of the poorest people in the country'€™s population.

In order to improve the livelihood of farmers, Bambang said the government would implement several lending schemes that would gradually help smallholder farmers become more independent with funding.

'€œWe want to use the existing lending schemes, which will also be improved upon. A scheme like the food and energy resilience loans [KKPE] is currently not linked to any government institution, so we'€™ll have it reviewed next year,'€ he explained.

The government would allocate a total of Rp 25.8 trillion for its food-security program in the revised 2015 state budget, up from Rp 18.9 trillion in the original budget, according to Bambang. President Joko '€œJokowi'€ Widodo wants the country to become self-sufficient in key crops within his five-year tenure.

The Indonesian Chamber of Commerce and Industry'€™s (Kadin) deputy chairman for agribusiness, Franky O. Widjaja, appreciated the government'€™s proactive approach to the food-security issue, saying that it just needed to improve its implementation to anticipate any problems along the way.

'€œIn terms of allocated funds, the concept is really good and comprehensive. We need only to keep up the communication [with the government],'€ Franky said.