Tree Collateral Loan as a Sustainable Financing Instrument: Evidence from Smallholders’ Livelihood Changes in Gunungkidul, Indonesia
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forestry microcredit, smallholder forestry, sustainable livelihood capitals, propensity score matching, forest policy impacts
Abstract
Tree-collateral loans have been introduced in Indonesia to ease liquidity constraints faced by smallholder forest farmers, who often resort to premature harvesting. This study evaluates the impacts of the forestry microcredit called pinjaman tunda tebang (PTT) scheme on household livelihood assets in Gunungkidul District, Yogyakarta. Data were collected from a survey of 180 households (90 borrowers and 90 non-borrowers). To reduce selection bias, propensity score matching was applied, yielding a balanced sample of 134 households (44 borrowers and 90 controls). The average treatment effect on the treated was then estimated across ten indicators representing financial, physical, human, social, and natural capitals. Results show that financial capital improved most, with borrowers more likely to diversify income, operate side businesses, and fall into higher monthly-income brackets. Natural and physical capitals showed modest differences, including larger forestland and higher-perceived infrastructure access, but these may reflect pre-existing assets rather than causal program impacts. By contrast, human and social capital were weaker, with borrowers participating less in training, reporting lower technical adequacy, and engaging less in farmer-group meetings. These findings highlight that while PTT is effective as a liquidity instrument, its transformative potential depends on integration with training and collective empowerment. For broader impact, rural microcredit must be coupled with extension services and group strengthening to align financial access with long-term rural livelihood resilience.
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