The simultaneous effect of credit on sustainable food crop production and agricultural economic growth in Indonesia

Abstract

In general, Indonesian farmers still face limited capital in their production. Therefore, credit is needed as additional capital, which is expected to help increase their agricultural business, especially rice production. This study analyzes how credit influences rice production and agricultural economic growth simultaneously. Secondary data are a time series over 12 years (2010-2021) from BPS Statistics Indonesia and Bank Indonesia. The Statistical Analysis System/Econometric Time Series (SAS/ETS) program version 9.4 is used to estimate this study using two-stage least squares (2SLS). The results show that credit simultaneously influences rice production sustainability and economic growth in the agricultural sector through credit interest rates. A simulation model that combines an increase in agricultural credit distribution of 20% and an interest rate of 5% has a greater impact on increasing rice production and economic growth in the agricultural sector compared to a simulation model that only provides a credit interest rate of 5% or 3%.