Micro-credit as catalyst for improving rural livelihoods through agribusiness sector in Indonesia

Abstract

Purpose This paper aims to analyse a simultaneous role of micro-credit in intensive farming to improve rural prosperity and to determine factors affecting farmers to access micro-credit and to adopt technologies. Design/methodology/approach This paper uses a concept of technological change as the underlying theory. The analysis is conducted using structural equation modelling based on data compiled from a survey that interviewed 220 of farm-households. Samples of the study were randomly selected from chili farming community in three regions of Java in 2013-2014. Findings The results show that micro-credit provides positive direct and indirect impacts on rural prosperity. The indirect effect of micro-credit was due to a mediation of technology adoption. Farmers’ personalities and agribusiness environment determined farmers’ decision to access micro-credit and to adopt the technology. Practical implication Policymakers should introduce more advanced technology and provide credit facilities at the same time to ensure technology adoption and welfare improvement of the community. Originality/value Using structural equation modelling enables analysis of simultaneous regression models. Along with technology here, micro-credit played roles as catalyst and reagent in improving rural livelihood.

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