Jakarta – Delays in planting some 413,343 hectares of rice in a number of areas have resulted in a drain of farmers' income sources.
According to the general secretary of the Joint Movement for Micro-Finance Development (Gerakan Bersama Pengembangan Keuangan Mikro, Gema PKM) and the chairperson of the Bina Swadaya Foundation, Bambang Ismawan, the present crash landing of the farmer's economy also happened in the 1950s and mid-1970s.
In order to handle this problem he said, a miro-finance foundation is needed which build a bridge between banks and farmers to provide emergency funds. The channeling of the funds would continue to use banking principles.
In this case, Bank Indonesia and the Poverty Alleviation Committee (KPK) can pressure banks to work together because both institutions have a memorandum of agreement to do so.
"The situation being experienced by farmers is extremely difficult. This kind of situation occurred at the end of the 1950s and mid-1970s", said Bambang who's foundation has experience in developing miro-financing in a number of regions, he told Kompas on Monday.
He added that the nature of this bitter situation being experienced by farmers is one of extremely limited work opportunities, where the farmers' working capital has run out and farmers are finding it difficult to obtain capital to restart their businesses.
Bambang revealed this matter in response to farmers in particular areas who are tending to sell their assets and become ensnared in debt in order to be able to cover the costs of food as a result in the delay in planting. A report from the Department of Agriculture noted that the planting of at least 413,343 hectares of rice in Java is late.
Bambang said that during a similar occurrence in the 1950s, farmers from Gunung Kidul went as far as selling their door handles and roof-tiles just to pay for food. In the 1970s, farmers in Karawang, which is a centre of rice production, were forced to obtain emergency food aid.
The impact of the late planting, although it is yet to be characterised as an emergency, is already chronic requiring emergency steps (a crash program) to assist farmers. However Bambang did not agree that this should become a project which just tends to waste funds without reaching its target.
For this he suggested that the recapitalisation of farmers be developed by channeling bridging credits from banks to farmers. In this case a micro-finance institution is required to become a bridge so that farmers can be "bankable" and can access bank credits.
Such a program was carried out in the years 1978 to 2000 by a number of banks, Bank Indonesia and other micro-finance institutions. The program was referred to as the Bank and Non-government Organisations Relations Program with the level of credit returns reaching 97.2 per cent within the specified period. However this program ended due to the economic crisis.
"It could also be carried out now because there is a memorandum of agreement between Bank Indonesia and the Poverty Alleviation Committee which can become an umbrella for significant funding amounting to 40 trillion rupiah which is at present being held by the banks which can be channeled to farmers or other poor groups", repeated Bambang.
The memorandum of agreement was signed by the governor of Bank Indonesia Syahril Sabirin and the minister for the Coordination of People's Prosperity Jusuf Kalla on April 22, 2002.
The memorandum states that Bank Indonesia may pressure public banks and People's Credit Banks to increase the channeling of micro-credits, small and medium, in accordance with the business plans of each bank to alleviate poverty though the principles of care and concern. Bambang said that farmers who are forced into these conditions tend to seek loans from the informal market, that is from neighbours with an interest rate as high as eight per cent per month.
[Translated by James Balowski.]