Politics behind restructuring of KUT

Politics behind restructuring of KUT

Chief economic minister Rizal Ramli's plan to carry out a
haircut on the interests and principal of farming credit, known
as Kredit Usaha Tani (KUT), is an unrealistic, political maneuver
that will not educate farmers, according to researchers Endang
Suhendar and Nurul Widyaningrum of the Akatiga center for
research on social issues in Bandung, West Java. Excerpts of the
interview follow:

Question: How do you view the plan to restructure the farming
loans?

Endang: What's obvious is that the plan will not do much in
term of educating (the farmers). I think what (the government)
needs to study is how it can better distribute loans to farmers.
(This plan) only shows a repeat of old mistakes by other, new
players.

Are you questioning the distribution of the credit?

Endang: The scheme since the beginning has been operating on
mistaken assumptions -- which are also applied on other credit
schemes such as Bimas, KUK and others. There is always a strong
political overtone in all those credit schemes. It was like that
during (former cooperatives minister) Adi Sasono's tenure.

Because of mistaken assumptions and approaches, credit has
been distributed as charity. (Those who distributed) the credit
probably could predict which of the loans would turn sour. But
because of the strong political overtone, they proceeded with the
credit schemes anyway.

Is treating loans as charity the only flaw?

Endang: No. Actually, even the mode of credit distribution
(should also be questioned) as they seem to have been imposed on
farmers. For instance, in southern Bandung, farmers were forced
to plant potatoes if they wanted to receive loans because the
funding allocated for the region was only for potato plantation.

In Majalaya, farmers wishing to obtain a loan had to plant
chilies because the authorities only allocated funding for chili
farming. This was carried out despite unsuitable climate and poor
market prices for chilies.

During Adi Sasono's term, non-governmental organizations were
appointed as "executing agents" for farming loans while the
banks' task was only channeling the loans. What do you think
about this?

Endang: This is an example of a rushed policy. The government
forced itself to involve non-governmental organizations and
cooperatives in the implementation of the farming credit schemes,
while there were only a limited number of NGOs and some were of
poor quality. Consequently we then had a mushrooming of NGOs.
Many of the NGOs were not even qualified to be included in the
program.

Now that the amount of bad debt has risen, the NGOs are then
blamed.

What would be a better mechanism for farming credit?

Nurul: It's no wonder we now have bad farming debt. That's the
consequence of the (earlier) approach. What we need to do now is
rethink (the policies) in order to avoid repeating mistakes.

Agriculture is a neglected sector. Many institutions and
agencies have been established and involved in other sectors, but
not agriculture. Banking, for instance, has not been included
much in the agriculture sector.

We need to strengthen the role of the local agencies. Policies
at the national level may still fail to touch many of the
problems in the sector. By involving local institutions, we will
be providing incentives so that many more people would be
attracted to agriculture. This is important as local institutions
usually have a better understanding of the characteristics (of
local agriculture sector).

How should we deal with bad farming debts?

Endang: We still have to trace the distribution and find out
what went wrong where, from the implementing agencies down to the
farmers. We are sure that farmers actually do have the means and
the good will to repay their debt.

That's why they must still be asked to be accountable for
those debts. (Rayhan Fasya)