Press Release

Urgency for farmers to have rights to finance & technology for Asia to progress in SDG’s

RBF | Mar 15, 2017

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The 4th Responsible Business Forum in Jakarta, Indonesia, ends its second and final day with recommendations on how to help achieve food and nutrition security in Asia, home to 60 percent of the global hunger.

Throughout the two-day forum, smallholder farmers, land right issues and unequal land distribution have been a recurring theme and one of the most discussed topic among stakeholders, with key policy makers emphasizing the importance of addressing the issues.

Speaking on land rights issues and farmers, Indonesia’s Minister for Agrarian and Spatial Planning, Sofyan Djalil, explains, “Transformation must be accelerated since it will lift most of the subsistence Indonesian farmers today into prosperous commercial ones tomorrow. Current statistics indicate that there are 28.9 million people listed as subsistence farmers, while there are only 2.1 million categorized as skilled farmers. Yet for government to accelerate this transformation, it must face three major challenges. These are imbalance in the resource allocation of factors of production, namely land and skilled farmers, imbalance in the variety of crops planted, and inefficiency in post-harvest processing and logistics”

The problem with land resources stems from the fact that food production is concentrated in Java island, where it has the most fertile soil, the best irrigation network, as well as having the highest proportion of skilled labor force in the nation, he explains.

“The distribution system for food products are more developed than those in outer Java owing to the relative closer distance from sources of production to the final market. However, Java is the most densely populated island, posing a serious constraint to improvement of farmer’s quality of life. Individual land ownership is less than 0.3 hectare per capita,” he says.

These problems have prevented Indonesia’s agriculture sector to reach its full potential. 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.

Another major issue discussed during the forum is access to finance, which ties into the land rights issues 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.

“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 Chairman Muliaman D. Hadad says at his opening speech.

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

“It is not surprising given the high profile of the environmental and social impact that is well documented,” says Elizabeth Clarke, Business and Biodiversity Programme Manager at the Zoological Society of London, who leads the session. The session on palm oil comes up with nine recommendations, centering around tenure, access to finance and dealing with low productivity. Clarke says that it is important that the recommendations take into account voices from all stakeholders, including smallholders. Thankfully, smallholders from all around Indonesia are invited into the forum and are given the opportunity to share their voices during the sessions. “There is an importance of inclusion and voice and trust and respect. We were lucky to have Pak Sofyan, a palm oil farmer from Sumatra,” she says.

Issues facing smallholder farmers and a need for a more nutrition sensitive agri food system has been a running theme in most sessions at the Responsible Business Forum. Fast-growing consumer markets in Asia, and China in particular, have driven demand for cocoa, and the world market has been in deficit for several years, pushing up the price of the commodity. The smallholder farmers upstream of the supply chain make only a tiny fraction of the profits, and often miss out on price rises in the wholesale market.

Between 80 to 90 % of global output is produced by smallholders, like Muslimin, one of the 10 smallholder farmers that joined discussions at RBF Jakarta this year. Muslimin has grown cocoa on one hectare of land in Sulawesi, Indonesia. It was, he says, a very good farm, but over the years has been beset by problems. Overuse of chemical fertilisers has damaged the soil, production is declining, and climate change has meant that once regular seasons are now unpredictable.

For the past year, farmers like Muslimin has been receiving education under a programme, Cocoa Life, run by Swisscontact, Cargill and Mondelez, and his yields are now rising. “It’s very simple,” he says.  “If production is better, I have a better income.

Speaking on the role and responsibility of business in transforming global food systems Peter Bakker, President of the World Business Council for Sustainable Development, highlights the gravity of the situation that smallholders are facing. “There are 500 million smallholder farmers in the world, half of them can barely survive in their business. Not one actor can fix these things alone. We need to come together,” he says. The session focused on innovative and interconnected programs systems by linking business, science and policy and driving change – covering all aspects of the value chain from consumers through to distribution, processing and production.

By the end of the forum, stakeholders drew recommendations on how to improve sustainability and the welfare of smallholders in seven different sectors: aquaculture & fisheries, cocoa, coffee, dairy, grains, palm oil and rice, after being divided into different brainstorming sessions. Palm oil sessions were among one of the most well attended sessions at RBF. The Next RBF Jakarta will reconvene in March next year.

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