A lack of data is a significant bottleneck for financial institutions and development organizations. The same is true for knowledge about a targeted sector, especially when working in agriculture and agri-finance.

Swisscontact’s Sustainable Cocoa Production Program (SCPP) in Indonesia, aiming to assist 130,000 cocoa farmers by 2020, tackles those two topics through training financial institutions about the cocoa sector and cocoa financials and shedding light on the financial situation and perception of cocoa farmers. Through an advanced program management database, SCPP is able to identify critical and interesting data relations. Baseline data of 17,429 farmers and first conclusions were compiled into a baseline report. This blog post highlights some findings from the report.

One of the most important outcomes of our data analysis is the categorization of farmers into professional, progressing and unprofessional categories,[1] and subcategorizing them into small, medium and large in terms of farm size. This leads to different approaches in targeting farmers, especially in the sense of formal Access to Finance (A2F). Unprofessional farmers produce less than 500 kg of dry cocoa beans per hectare in a year, equivalent to a monthly income of USD 80-100/month. They could increase production by two thirds through proper pruning, sanitation and denser planting, with strict replacement of old trees. There would be no need for heavy agri-input investments at this stage of development. Cash flow wise, it would be more advantageous for these farmers to go to the farm daily for regular maintenance. For progressing (500-1000 kg/ha/year) and professional (>1,000 kg/ha/year) farmers, the situation looks different. These farmers could achieve much higher production through better planting material and/or better farm inputs as their yields prove that basic agriculture practices are applied. For that segment, A2F is crucial. A2F in this regards includes both savings and loans.

The majority of farmers have a medium sized farm (1-2 ha, 44.59%), while many have small farms (<1 ha, 41.79%) and only 13.62% are considered large farmers (>2 ha). 12.29% of the farmers are considered professional and 31.43% as progressing.

Categorization of Farmers by Professionalism and Farm size

Professional farmers have higher production per hectare than unprofessional farmers. Therefore, they have a higher cash flow per hectare and would obviously be preferred over unprofessional farmers for business loans.

Industry interest focuses on the 43.72% of professional and progressing farmers, considering training cost and production potential. That is a trade-off to stakeholders from the development-cooperation side, which view farmers with a low production as a target group to improve the livelihoods of poor farmers.

Yields and Tree of different Farmer Categories

Professional Cocoa Farmers have 17.97% more trees per hectare (860 vs. 729) and a 4.05 times higher yield per tree (1.50 kg/tree vs. 0.37 kg/tree) compared to unprofessional farmers, leading to 4.8 times higher production per hectare (1,293 kg/ha vs. 267 kg/ha).

Yield differences between best and worst farmers

It also can be seen that the top 10% of the farmers have on average 1,177 kg/ha, a much higher farm yield than the bottom 10% with just 205 kg/ha.

Access to formal loans for cocoa farmers is low. Only 1.91% of the farmers have outstanding loans with banks, whereas overall 17% of the Indonesian population borrows formally.[2] This is in line with SCPP estimations that 16% to 18% of the farmers would be eligible for a loan. 5.31% of the cocoa farmers have experience with bank loans. 39.77% of the farmers don’t want a loan. 96.18% of the farmers consider a loan to be a big responsibility and 88.79% worry about how to repay a loan. Loan use (formal and informal loans) is not perfect with a significant share of clients using loans for school fees or daily needs.

Loan Use

Farmers below the age of 25 are significantly underrepresented in access to formal loans, while they are heavily overrepresented in the overall loan experience. This could be due to multiple reasons. One reason could be the lack of collateral (as shown later on the data of land titles), or mistrust of young people. The data indicates that banks focus on farmers between 35 and 54 years of age.

Formal Loan Experience by Age

97.24% of the farmers want to learn how to save and 85.75% trust banks to keep their money safe. 84.72% of the farmers own a mobile phone or at least have access to it.

40.24% of the farmers don’t save at all, while 44.41% save in-cash and 15.34% save in-kind or invest in another business. These latter two could be bricks, gold, chickens etc. The saving rate of key farmers[3] is 69.83%, compared to the average of 59.75%.

62.02% of all surveyed farmers think they are disciplined enough to save. However, 39.84% out of those do not have any savings at all (24.71% of total), while 60.16% do have some savings (37.31% of total). Out of the 37.98% who think they are not disciplined enough to save, 42.07% have savings (15.97% of total).[4]

First indications on saving behavior show that farmers use their income from cocoa for daily needs, due to the relatively regular income throughout the year, while savings are built with income from other crops, which farmers receive once or twice a year in relatively larger amounts.

Cocoa Farming Savings

69.15% of farmers don’t have a bank account. From the ones who have, 6.34% don’t use the account actively.[5] Farmers with accounts have them in Bank Rakyat Indonesia (BRI, 88.9%), Bank Negara Indonesia (BNI, 3.5%) and other institutions [7.6%, mainly cooperatives, Bank Danamon, Bank Central Asia (BCA), Bank Mandiri and Bank Muamalat]. 83.29% of the farmers don’t have any idea about interest rates and fees for their account.

Bank Accounts

Most interesting is that farmers with loan experience with traders get on average 9.06% higher prices than farmers with loan experience with banks. The average price difference between farmers with loans from traders and farmers without loan experience is 5.61%. This would indicate that the theory that the price of a loan is hidden in the purchase price is wrong. It is unclear as to why this is the case. It is possible that higher prices are paid to avoid side-selling and to ensure repayment of the loan, or a special relationship in the sense that only good friends/clients receive a loan (and higher prices). It is also noteworthy that farmers who stated that traders are rich get higher prices than farmers who don’t think so (difference 3.40%).

Access and knowledge about agricultural insurance is low. Only 5 out of 17,429 farmers are aware of the existence of insurance to protect the crop and income.

The data analysis led to a number of activities such as sharing data of progressing and professional farmers with banks to increase access to loan for eligible farmers. Pre-conditions include signed written consent of the farmer to share data, an expression of interest on a loan, and being based in a location within the operational area of a bank. In addition, farmers are supported in low-cost land registration so that they are certain about the land status, which might lead to higher investments, and have proper collateral. A (still ongoing) saving pilot with 3,000+ farmers was initiated, using behavioral science insights. The objective is to increase savings. The initial idea for the pilot program was built on two questions, where do farmers get money and where would they be able to save money? The answer would be at a cocoa trader’s place and thus cocoa traders were included in the pilot as branchless banking agents. Results are expected by the end of 2016.


[1] Another option would be to categorize them into traditional, semi-intensive and intensive.

[2] IFC: Mobile Banking in Indonesia, p.39

[3] Key farmers are group leaders of the farmer groups trained by SCPP. They get additional training to facilitate the Farmer Field Schools.

[4] There is a very slight difference between the 40.24% and the (24.71%+15.97% =) 40.68% because some slightly different baselines, where farmers were excluded, if they didn’t answer the particular question.

[5] Defined as at least one transaction within the last 12 months

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Comments (2)

Prof. (em.) Dr. Hans Dieter Seibel

I have known Dirk, the author of this study, for over ten year; our paths first crossed in Aceh after the Tsunami, and we stayed in contact. Given this personal relationship and my engagement as rural finance practitioner with Bank Indonesia and GTZ/GIZ in 1987-1991 ("Linking banks and self-help groups"), I read Dirk's paper with great interest. I must say I am absolutely thrilled, both from a development practitioner's and academic viewpoint, pertaining in particular to intervention strategies for farmers with different farm sizes and levels of professionalism. I will be looking forward to the next report one or two years from now: with regard to changes in savings behavior and self-financing, access to credit and credit use, and, most importantly, changes in productivity and income and their determinants. Congratulations, Dirk!

Hans Dieter Seibel (seibel@uni-koeln.de)

Dirk Lebe

Dear Dieter,

thank you for your kind and very motivating words. The results of the post above is actually just a scratch at the surface. We have much more data to be analyzed. ;-)

The report will be updated as soon as about 50,000 baseline and 10,000 postline datasets are available to have a larger baseline sample and see first indications on change.

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