BAT Indonesia provides loans to tobacco farmers

JAKARTA (JP): Publicly listed cigarettemaker PT British American Tobacco (BAT) Indonesia expects to provide a total of Rp 1.9 billion (about US$253,000) in loans to tobacco farmers in Lombok, West Nusa Tenggara.

Company president Mark Anthony Jennings said on Tuesday that the funds would be channeled to 615 growers in 15 districts in Lombok under the company's partnership program.

He said the company's well-established connection with banks allowed BAT Indonesia to obtain loans on behalf of the tobacco growers.

"The company acts as a loan settlement agent, whereby the loans are repaid through the growers' sales of their tobacco to BAT Indonesia on an agreed price calculated based on the tobacco's quality," he said in a ceremony marking the tobacco harvest in Lombok.

Corporate communications manager Anton Susanto said the partnership, in which BAT acts as loan settlement agent, was started in 1976. But he said the company would mostly fund this year's program on its own because of high bank interest rates.

"It is likely that the loans to be disbursed this year will come from our pockets again since the interest rates offered by local banks are still too high for farmers," he told The Jakarta Post.

"Last year, local banks were reluctant to provide loans due to high interest rates set by the government. Farmers faced difficulties to obtain credits to finance their farming activities.

"So we decided to provide loans from our own money with interest rates far below the rates offered by banks."

He refused to disclose the amount of loans distributed to farmers last year.

Jennings said one of the most important aspects of the partnership was the company's role as a market guarantor, whereby the company purchases its partners' entire tobacco crop.

He explained that with the partnership scheme, the tobacco growers were ensured market guarantee for their harvest crop, and eliminating their concern about securing the necessary funds in order to resume their farming activities.

Jennings said the market and purchasing guarantee from BAT Indonesia removed uncertainty for the farmers and the risks from withholding their stocks indefinitely while awaiting a price increase.

Within the partnership scheme, BAT Indonesia acted as a technological facilitator by providing efficient technology.

He added that the company also played an important role in planning tobacco farmers' annual production targets based on the projected market potential and the farmers' farming capacity.

"The partnership has reaped mutual benefits, both for BAT and our partners, the growers," Jennings said.

Listed on the Jakarta Stock Exchange, BAT is one of the country's oldest cigarette producers, commencing operations in 1917. It remains one of the market leaders in the regular cigarette sector with brands including Lucky Strike, State Enterprise, Express 555, Kent, Benson & Hedges, Ardath and Commodore. (gis)