Farmers will be able to put up their produce as collateral for loans, under a new collateral system launched by the government.
The new system, known as the warehouse receipt system, is designed to widen farmers' access to credit so they can increase their output, needed to stem soaring commodity prices.
The warehouse receipt system has already begun operating in several farming areas, head of the Commodity Futures Exchange Supervisory Board, Titi Hendrawati, said Friday.
The first project was launched in Jombang, East Java, on March 26 and another project will commence in Indramayu, West Java, on April 16, she said.
Four more projects are scheduled for Kudus and Banyumas in Central Java, Majalengka in West Java and Gowa in South Sulawesi.
The warehouse receipt system will enable farmers and cooperatives to use their produce as collateral in securing credit from financial institutions.
Under the system, farmers will be able to store produce such as cacao, coffee, rice and corn in designated warehouses, where it will be kept as collateral for soft loans.
The farmers will be able to choose to wait for commodity prices to rise before paying back the loans, potentially enabling them to sell the commodities at higher prices.
Using the produce as collateral is deemed more profitable for farmers than selling it at the time of harvest, when prices tend to fall because of oversupply.
"To implement the system, we have signed partnership agreements for the warehouses with several companies, including PT Pertani, PT Petindo Daya Mandiri and PT Bhanda Ghara Reksa," Titi said.
The warehouses will be authorized to administer and verify the value of the collateralized produce.
Titi said Bank Mandiri, Bank Rakyat Indonesia, Bank Jateng and Bank Jabar already had the necessary standard operating procedures in place to implement the system.
"The system is also expected to help stabilize commodity prices and provide input for the government to estimate the amount of commodity stock," she said.
The supervisory board was appointed by the Trade Ministry to manage and supervise the system. (uwi)
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