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Improving Living Standards Of Small Producers In Lombok Indonesia: Entrepreneurship Can Be The Key

There were indications of failure of Indonesia’s agricultural credit program in terms of its inability to increase agricultural production, farmers’ income, and repayment level. This paper analyses the impact of credit provision on farming activities and proposes strategies for improving livelihood of agricultural producers in Lombok, Indonesia. The analysis is based on two periods of survey conducted in Central Lombok, where the current KKP government credit scheme is provided to agricultural producers. Three villages within the regency were sampled, representing various repayment rates of government credit. Data were collected using face-to-face, semi-structured interviews with farmers who had made use of government or other sources of agricultural credit, and with key informants. This study confirmed that credit used by farmers in Lombok had little noticeable impact on increasing agricultural production (11%) and on income (5%). This marginal impact of credit use may be related to the current credit provision system in which credit is made available in limited amounts and intended for a single purpose. The repayment levels of individual farmers were quite satisfactory, in the sense that the majority of farmers have repaid their loans in full. However, their reasons for repayment were not directly related to the levels of income they earned. Rather, farmers made credit repayments for reasons for maintaining eligibility for future credit distribution, borrowers’ positive personality (especially to avoid embarrassment), and providers’ collection efforts. The little noticeable impact of credit, and farmers’ reasons for making credit repayment, point to the need for the current system to be altered, to allow for provision of larger amounts and for multiple purposes. This move requires equipping farmers with entrepreneurship ability so that they can seek and make use of business opportunities. There is a need for education and extension programs that focus on identifying business opportunities on which credit may be used more profitably in the long term rather than just for short term seasonal survival as well as on how to run the identified businesses properly and profitably. This knowledge may help farmers to improve their living standards and allow credit provision to have a more significant impact than the current system. Keywords: agricultural credit, credit impact, entrepreneurship, Lombok, Indonesia.

Author(s): Cameron D. (1), Russell I. ( 1), Sjah T. ( 1)

Organization(s): Department of Agricultural Socio-economics Faculty of Agriculture University of Mataram (1), The University of Queensland Gatton (2)

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