Effect of Smallholder Rubber Farmer Participation in Cooperative on Credit Access Choice and Marketing Channel in Indonesia

Abstract

Smallholder is the major contributor to Indonesia's rubber production. Unfortunately, the low productivity encourages farmers to cut rubber trees and convert the land into more profitable, such as oil palm plantations. To overcome the problem, rubber rejuvenation is necessary. However, it needs more capital while low productivity leads to low income. The decline of income indirectly indicates the low welfare level of smallholder rubber farmers. Indonesia smallholder rubber farmer faces two main problems in developing the plantation, those are unprofitable price and difficulty in accessing the capital for investment. Rubber prices are related to the marketing channels used. Collector/toke as one of traditional marketing channels generally tends to give price under the average and unprofitable for smallholder farmers. Besides, the narrow land tenure, low production, incomes, and asymmetrical information become farmer obstacles to access credit from formal institutions. Cooperative as one of rubber agribusiness institutions existing around rural society can become the solution to solve those problems. Unfortunately, the smallholder farmer participation level in cooperatives is still very low. Thus, it needs to analyze the effect of cooperatives on the credit access choice and marketing channel used by smallholder rubber farmers. This research aims to find out: (1) the role of cooperative for smallholder rubber in Indonesia, (2) the effect of smallholder rubber farmer participation in cooperative on the credit access choice decision in Indonesia, (3) the effect of smallholder rubber farmer participation in cooperative on natural rubber marketing channel used in Indonesia. This research uses mix method in which the quantitative approach used to show the statistical value of this research and the qualitative approach is used to enrich the research explanation. The total sample used is about 45,606 samples taken from plantation household survey (SKB Data). The role of the cooperative is analyzed through descriptive statistics, while the effect of smallholder rubber farmers' participation in cooperative on the decision of credit access and marketing channel used analyzed by logistic regression. The result shows that: (1) Cooperative has four main roles for smallholder rubber farmers, such as agricultural credit provider, production facilities, processing product, and marketing channel. The majority of members utilize cooperative as a marketing channel with the percentage is about 56% while 44% prefer selling to other marketing channels. (2) The participation of smallholder rubber farmers in cooperatives has a positive and significant effect on the decision to access credit. Other factors that influence the decision to access credit are education level, harvested area, income, costs, and marketing channel used. (3) The participation of smallholder rubber farmers in cooperatives also has a positive and significant effect on the decision to sell rubber through cooperative. Accessing credit is another factor influencing that decision, while distance perception is negative but significantly affecting the decision to sell through cooperative.