Performance and access to finance in Indonesian horticulture

Abstract

Purpose Access to finance is an important condition for the development of agriculture and the farms’ performance. The purpose of this paper is to analyse the association between the technical efficiency of horticultural farms and access to finance from different finance providers. Design/methodology/approach Data were collected from 434 farmers who produce mango, mangosteen, chili and red onion in Indonesia. Data were subsequently analysed using data envelopment analysis and bootstrap truncated regression. Findings The results show that commercial credit from banks and in-kind finance provided through farmers’ associations have a positive association with the technical efficiency of some types of horticultural farms. Commercial credit from micro finance institution and flexible payment of inputs to the agricultural input kiosk generally have negative associations, especially with the technical efficiency of mangosteen farms. Subsidised credit from banks and in-kind finance from traders have both positive and negative associations with the technical efficiency of the horticultural farms. Originality/value This study adds to the existing literature by analysing access to finance from a broader range of finance providers and its relation to technical efficiency.