Access to Credit and Farm Productivity: Heterogeneous Effects Across Credit Sources in Indonesia

Abstract

ackground: Seasonal horticultural farmers in Indonesia face high production risks, seasonal cash flow constraints, and limited access to productive financing despite the sector’s importance for rural income and high-value agricultural supplies.
Purpose: This study examines the impact of credit access on the economic productivity of seasonal horticultural farmers, with particular emphasis on heterogeneous effects across credit sources.
Design/methodology/approach: This study distinguishes informal credit, formal nonbank credit, and formal bank credit using nationally representative microdata from the 2018 Horticulture Cost Structure Survey covering 41, 167 farmers. Inverse probability-weighted regression adjustment (IPWRA) is applied to estimate the average treatment effect on the treated, while propensity score matching (PSM) is used as a robustness check.
Findings/Results: Credit access significantly improves farm productivity, but the magnitude differs by source type. Formal bank credit generates the largest and most robust productivity gains, followed by formal non-bank credit, while informal credit shows no statistically robust effect after selection adjustment. However, only 5.2% of farmers have access to credit.
Conclusion: Expanding suitable formal credit can unlock substantial productivity in the horticulture sector.
Originality/value: This study provides source-specific evidence of the impact of agricultural credit using nationally representative horticultural data.

Keywords: credit access, farm productivity, horticulture, Indonesia, IPWRA