Interest-Free Unsecured Micro Credit Innovation for People’s Oil Palm Plantation in Bangka Regency

DOI

10.2991/978-94-6463-086-2_131How to use a DOI?

Keywords

Innovation; Micro credit financing; Oil palm; Interest-free unsecured loan

ABSTRACT

The economic structure of Bangka Regency is dominated by the agricultural sector. The Central Bureau of Statistics reported that in 2019, the agricultural sector contributed 19.54 percent to the GRDP, which later increased to 20.44% in 2021. The dominance of the agricultural sector in this regency is mainly attributed to its area predominantly consisting of rural areas. Based on the pattern, agriculture and rural areas are closely related with poverty. In fact, the highest contributors of Bangka Regency’s poverty rate are 6 rural sub-districts that make agriculture, specifically oil palm, as the main pillar of the community and regional economy. The problem lies in the fact that most of these oil palm farmers are bound in a one-way deal with a partner company. The contract farming system that utilizes a principal agent means that the farmers do not have control over their factors of production. Consequently, farmers have weak bargaining power over their lands, agricultural financing, selling price, labor, and even in terms of risk management. This situation has led to “institutionalized” poverty in Bangka Regency, making it a particularly challenging issue to solve. However, if the issue remains unaddressed, the farmers' welfare will only become worse, the poverty rate will increase even more, and the regional economy will be more contractual, thus widening the gap of income inequality. With this rationale, the Government of Bangka Regency has implemented a policy to address the issue in an integrative manner. The Interest-Free Unsecured Micro Loan innovation is an effective policy that has been proven to be able to answer all of the fundamental problems. The immediate benefits received by the farmers include regaining their control over production factors and having better bargaining power, control over more land, easy access to finance their agricultural business, more productive labor, and more proportional involvement in risk management. The Interest-Free Unsecured Micro Loan in the oil palm sector program in Bangka Regency was proven to be able to boost the improvement of the regional economy as indicated by an increase in the farmer exchange rate and an improvement in the Gini ratio.

Copyright

© 2023 The Author(s)

Open Access

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TY  - CONF
AU  - Pan Budi Marwoto
AU  - Darol Arkum
AU  - Hermanto Siregar
AU  - Aviliani
PY  - 2022
DA  - 2022/12/28
TI  - Interest-Free Unsecured Micro Credit Innovation for People’s Oil Palm Plantation in Bangka Regency
BT  - Proceedings of the International Conference on Sustainable Environment, Agriculture and Tourism (ICOSEAT 2022)
PB  - Atlantis Press
SP  - 996
EP  - 1000
SN  - 2468-5747
UR  - https://doi.org/10.2991/978-94-6463-086-2_131
DO  - 10.2991/978-94-6463-086-2_131
ID  - Marwoto2022
ER  -