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15 March 2017
Lack of financial access hinders agriculture development

By Peter Guest, Global Initiatives

The government of Indonesia emphasizes the importance of sustainable financing and private investment in achieving food security in the country and in Asia during the second day of the 4th Responsible Business Forum at Jakarta.

Currently 35 - 40 percent of Indonesia’s population are farmers. Yet, the agriculture industry’s contribution to the gross domestic product (GDP) remained low, below 15 percent.

Lack of access to finance, low seed quality and fertilizer and land issues are some of the major problems faced by farmers.

In Indonesia, most of the farmers do not have land certificates, making it difficult for farmers to obtain formal financing. As a result, they chose to source money from money lenders.

“Therefore, formalizing land ownership is a part of opening access to finance. It’s easy to bring your land certificate to the bank as collateral but without land certificate, it’s difficult,” Indonesia’s Financial Services Authority (OJK) chairman Muliaman D. Hadad says at his opening speech.

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After ensuring that farmers have land certificates, it is important to create a business model that involves all related parties in financing, which the government of Indonesia is doing at the moment, according to him.

The government also plans to utilize technology in providing wider financial access for farmers.

“Digital finance is very important and financial technology should be part of this agenda,” Muliaman explains. “Therefore, financial access to farmers and plantations, which have been provided through loan sharks for ages, will be available through banks.”

The Agriculture Ministry’s secretary-general, Hari Priyono, says that foreign and private investment are also important in ensuring financial inclusiveness for farmers.

Pryono RBFJakarta

“We encourage the involvement of the private investment. We do hope to encourage foreign investment. I believe that through this forum, we will share our knowledge and experience,” he says.

Ultimately, the problem revolving financial access not merely stem from farmers and industry players.

“We have to see beyond them, such as the complexity of the business. So we have to find comprehensive solutions,” Muliaman says.

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