The effect of agricultural credit policy and cattle-raising business input productivity on farmer household welfare

Abstract

This study examined the allocation of agricultural credits by farmer households and the effect of changes in agricultural credit policies and cattle-raising business input. The study was conducted in Kupang and East Central Timor (Timor Tengah Selatan (TTS) Regencies, East Nusa Tenggara (Nusa Tenggara Timur (NTT) Province, which is cattle production center and where the largest number of farmer households received agricultural credit in NTT. The data were analyzed using the 2-SLS method and the results were then validated and utilized using simulation models. In simulation 1, the agricultural credit increase was 25%, in simulation 2 the cattle-raising business input productivity increase was 20%, and simulation 3 was a combination between simulations 1 and 2. The study results revealed that in order to stimulate the increase in productivity and cattle-raising business production, it was not enough to provide agricultural credit, but it must be followed by improvements in the productivity of the cattle-raising business input such as improvements in the quality feeder calves, feed, and veterinary drugs. The policy implications are that agricultural credit is needed and it stimulates the use of better livestock-raising business input.