Searching for a better credit system to help improve farmers' income: A reflection from study on agricultural credit users in Lombok, Indonesia

There are some indicators that the program for provision of credit to agriculture producers by the Government of Indonesia has failed to achieve its objectives. Agriculture production and farmers' income have not substantially increased and a high proportion of loans have not been repaid. This paper attempts to provide some thoughts on how to not only improve the current system but also to help farmers to obtain a better standard of living. A survey seeking credit users' perspectives was conducted in Central Lombok, where the current KKP government credit scheme is provided to agriculture producers. Three villages within the regency were sampled, representing various repayment rates of government credit. Data were collected using face-to-face, semi-structured interviews with 65 farmers who had made use of government or other sources of agricultural credit. Additional information was obtained from key informants and secondary sources to supplement data from farmers. This study found that there was a little evidence of positive impact of credit on agriculture production and farmers' income, although credit has been highly demanded during most of farmers' lifetimes. To have a significant impact on farmers' livelihood, credit should be provided in larger amounts and be extended to wider purposes than farming only. Given the low socio-economic condition of farmers on Lombok, credit interest rate charged should be low, and be provided with simple application procedures. In addition, information on the objectives of credit provision and the lenders' requirements should also be made clearer to borrowers to avoid misunderstanding. This study also revealed that farmers' attitudes toward credit repayment were influenced by examples provided by government officers and other high profile public figures