Indonesian farmers will soon have access to more loans that will enable them to begin a new planting season without having to sell all of their recently harvested produce first.
The extra funds will come from an increase in allocations to productive sectors such as agriculture, fisheries and manufacturing, from 22% to 40%, under a government lending programme for micro, small and medium enterprises.
The move is very significant for farmers, since they usually need to raise capital for the next planting season by selling all their produce, sometimes at unfavourable prices, said Dwi Andreas Santosa, an agricultural economy professor at Bogor Agricultural University in Bogor, West Java.
"They don't have enough funds, so they would immediately sell their produce wholesale to generate capital or they would borrow money from loan sharks," Mr Dwi told Asia Focus.
Darmin Nasution, the Coordinating Economic Minister, announced in January that the government this year planned to disburse 110 trillion rupiah (US$8.2 billion) in loans for micro, small and medium enterprises, known as KUR. The figure is an increase from last year's target of 100 trillion rupiah, of which 94.4 trillion was disbursed mainly to the trading sector at 66.2%, while only 17.3% went to agriculture.
Agus Martowardojo, the governor of Bank Indonesia, told lawmakers at the House of Representatives earlier this month that the loan disbursement to farmers should focus on those who produce inflation-triggering commodities such as chilies, shallots, rice or beef.
Mr Dwi said it the extra capital assistance would give farmers an opportunity to retain their harvests longer.
"By keeping their harvest in stock longer instead of selling it right away, they could wait until they see better prices to sell their commodities," he said.
But government programmes that mainly aim to increase production don't do much in the long run to meet the food security goals that the government aims to achieve, according to the Indonesian Farmers' Consultative Body (Bamustani), a coalition of four farmers' organisations.
"Such an approach only focuses on increasing commodity production, without empowering farmers through ownership of agricultural land, machinery or other means of production, or strengthening farmers' bargaining power to set selling prices and market access," said Henry Saragih, the chairman of the Indonesian Farmers' Union, which is a member of Bamustani.
Agusdin Pulungan of the Society of Indonesian Farmers and Fishermen (Wamti) urged the government instead to speed up its agrarian reform programme involving some 9 million hectares for small-scale farmers this year.
He said that 26.1 million households, or 43% of the national total, relied on the agricultural sector for their livelihood. Of the total, 14.62 million are small-scale farmers who own less than 0.4 hectares of land each.
"Without redistributing fundamental assets such as land, the goal of achieving welfare equity for farmers would be rendered useless," Mr Agusdin said.
To reform the sector, governments around the world could consider introducing smart regulations that focus on ensuring food safety and quality control, while avoiding burdensome and inefficient regulations for the agriculture sector, the World Bank said in a report released on Feb 7.
The annual "Enabling the Business of Agriculture" report, first released in 2015, presents data on legal barriers facing farmers, entrepreneurs and businesses operating in agriculture in 62 countries, but Indonesia is not among them.
It said that providing better conditions for microfinance institutions, improving water permit systems for irrigation and lowering transaction costs for farmers and firms engaged in domestic trade and exports were some of the policies governments could pursue to strengthen the agriculture sector.
"Government regulations affect agricultural development through several dimensions, including agricultural inputs such as seed, fertiliser, land and water, as well as access to financial services for small-scale and remote farmers," said Federica Saliola, programme manager with the World Bank Vice Presidency for Development Economics.
"Boosting agribusinesses requires public policies and regulations that foster growth in the agriculture and food sectors, improve the functioning of markets, and enable agribusinesses and food entrepreneurs to better meet the growing demand for food," she added.
Anggoro Budi Nugroho, an economist at the School of Business and Management at the Bandung Institute of Technology, said that even though the agricultural sector absorbed a large proportion of the workforce, Indonesia was no longer an agricultural country.
According to data from the Central Statistics Agency in November 2016, out of 125.44 million people in the workforce, 37.77 million or 30.1% are involved in agriculture. The agency classifies people in the workforce as those aged 15 and above.
Mr Anggoro said that agriculture was longer the largest contributor to GDP compared with other sectors such as manufacturing.
"However, ensuring the agriculture sector's sustainability by channeling more micro loans to farmers is crucial, because it empowers them, keeps them in the job, prevents them from falling into poverty and maintains stability in production of commodities that trigger inflation," he said.
"Besides, data shows that non-performing loans in the agriculture sector are low, compared with the trading sector where non-performing loans are high."