Analysis The Growth of Microfinance in Upland Areas

¹ Research Center for Behavioral and Circular Economics, National Research and Innovation Agency, Jakarta, Indonesia
² Research Centre for Cooperative, Corporation, and People’s Economy National Research and Innovation Agency, Jakarta, Indonesia

^* Corresponding author: rikareviza@rocketmail.com

Abstract

Farmers in upland areas struggle with the accessibility of financial institutions. Due to their remote location and the absence of finance branch offices; therefore, The Ministry of Agriculture and the Islamic Development Bank (IsDB) are working together to resolve finance access difficulties by developing Agribusiness Microfinance Institutions (MFI) in upland communities. The study aimed to assess the agricultural sector’s potential and funding restrictions and examine the growth of microfinance in the Upland area. The study was conducted in Garut, Tasikmalaya, Lebak, and Subang districts in October and November 2022. Both primary and secondary data were included in the data set. The data were then descriptively and qualitatively analyzed. The findings indicate that the research area has the potential to expand microfinance based on the existing financial institutions established by the government in various programs. The fundamental issue with MFI is a need for more liquidity, the fulfilment of legality requirements, the role of local governments to arrange, microfinance financial management system plan, implementation of banks as microfinance fund distributors, and loan interest rates paid to farmers. Efforts are needed to speed up the microfinance development process in partnership with formal financing institutions dedicated to assisting farmers and business operators in providing capital.