Tropentag, October 5 - 7, 2004 in Berlin "Rural Poverty Reduction through Research for Development and Transformation"

Smallholders Access to Credit and its Impact on the Adoption of Agricultural Technology: Evidence and Lesson from Agriculture Practices in the Vicinity of Lore Lindu National Park, Central Sulawesi, Indonesia

Georg-August-Universität Göttingen, Institute of Rural Development, Germany

Abstract

A number of recent studies have assessed the impact of the access to credit on household income and consumption. However, there are few studies that analyse the impact of credit access on agricultural production and technology adoption and that control for the endogeneity of credit access and related borrowing. The evidence of these studies is mixed, and a number of methodological issues remain.
In Central Sulawesi, Indonesia, a number of technological and cropping changes have taken place the past 20 years. While we find that in most of our 12 sample villages HYV rice varieties and hand tractors have been introduced, there is great household-level variation in the adoption of these and other technologies. For example, the use of fertiliser – apart from irrigated rice is relatively low when compared to more input-intensive systems found in Java. Formal credit is mainly provided through two main sources: the village banks of BRI, a state-owned bank, and the government-run agricultural credit programme KUT.
Many studies indicate that informal credit is mainly used for consumption purposes. In the case of the rural areas in Central Sulawesi Province, 51 percent of the households have access to credit, with not more than 15 percent financed by formal loans and the rest from informal sources. In general, loans borrowed from both institutions are rarely used to finance agricultural activities. The poorest use the borrowed loans for food and consumption activities, accounting for 60 percent, while only 1 percent use than for agricultural activities. Respecting the less poor households, borrowed loans are used either for food and consumption or agricultural activities, 34 percent and 31 percent, respectively
This paper examines based on the evidence in the vicinity of the Lore Lindu National Park using socioeconomic households survey data that was collected in 2000 and 2001 through standardised, of formal questionnaires from 293 randomly selected households out of 12 villages in rural Central Sulawesi. This study is part of the Collaborative Research Centre 552 “Stability of Rain Forest Margins”
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Keywords: Access to credit, Indonesia, technology adoption

Contact Address: Nunung Nuryartono, Georg-August-Universität Göttingen, Institute of Rural Development, Waldweg 26, 37073 Göttingen, Germany, e-mail: nnuryargwdg.de