Households' Debts Among Rural and Agriculture-based Households in Indonesia

Abstract

Household debts reflect financial insecurity for households to maintain their standard of living because it reflects the financial commitment that must be paid to other parties. However, the share of debts among different household classes, especially among agriculture and rural households in Indonesia still needs to be discovered. This research investigates the distribution of households’ debts in rural areas in Indonesia by utilizing data from the Indonesian Family Life Survey (IFLS) Wave 5 (2014). This research shows that households in rural areas have lower average debts than those in urban areas. At the same time, households in rural areas outside Java Island have higher average debts than their counterparts in Java Island. Two significant contributors to households’ debts are household size and household head educational attainment, where both variables show a positive and significant effect. The government must focus on rural development, including agricultural-based households, creating small but financially strong households, and increasing food self-sufficiency. Keywords: agriculture, debts, households, rural