Farmers and finance : experience with institutional savings and credit in West Java

<p>This study deals with an experimental savings and credit scheme developed for vegetable farmers in West Java, Indonesia, by a technical cooperation project between the governments of Indonesia and The Netherlands. Key elements were:<br/>a) An organizational structure with three levels: the project as financial institution, village cooperatives, and groups of approximately 50 farmers.<br/>b) Emphasis on financial viability through an interest rate of 5.4 percent per month on the short-term loans provided and through the combination of savings and credit services.<br/>c) Location of the savings and credit services in the groups.<p>The review and analysis of the scheme after seven years of operation shows that all costs of the scheme can be covered by the interest receipts and that the savings of the group members resulted in a considerable build-up of own capital in the groups; the scheme is thus financially viable. Further was demonstrated that it is possible to reach farming communities with diverse financial potential all over the vegetable production areas in West Java. These achievements are largely the result of the incorporation of groups in the organizational structure, which results in easy access, members' preparedness to save, and a reasonable cost level through the use of management capacity available in the local communities.<p>The discussion of the experiences of the scheme in the context of the provision of financial services to farmers in developing countries in general, results in the formulation of seven essential factors regarding the environment in which financial institutions operate and regarding the operation of financial institutions providing services to farmers