Agricultural value chain financing: a case study in Ciamis District, West Java Province

Abstract

Smallholding farmers frequently deal with shortage of working capital to cover farm costs. Given the applied terms and conditions, a lot of farmers unable to access the current People’s Business Credit (KUR), while a holistic value chain financial support is required to achieve sustainable food production. Limited capacity of formal rural-based financial institutions encourages the local money lenders to take opportunity of financially support the farmers. In response to this issue, a case study was conducted in Ciamis District, West Java Province. Primary data was collected using an interview technique. Data were organized, processed, an interpreted using a descriptive type of analysis. The study revealed that the rice farmers need an inclusive credit support from pre-planting to post-harvest and marketing of their products. Farmers require working capital to continue their farm activities and to support value chain financing of the agribusiness. Although the existing local micro financial institutions showed good performance, however they lacked fund and access to formal financial institutions such as banks or CSR soft loans. Government is suggested to strengthen the existing local micro financial institutions by linking them to sources of funds and to support business to business relations for better service to smallholding farmers. Inclusive value chain financing implies that farmers, micro financial institutions, and local governments are strongly integrated to achieve better farm performance. Ministry of Agriculture has a strategic role to take initiative to strengthening an inclusive agricultural value chain financing on the existing local micro financial institutions.