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Role of microfinance to support climate change adaptations on agriculture in Indonesia

The demands of mitigation and adaptation policies are important to understanding a country’s climate change preparation through micro financing in agricultural sector. This could have been seen a strategy to fight against the challenges of future of food security. In 2014, Indonesia has established climate change policies in adaptation. It aims to provide direction for mainstreaming climate change adaptation actions into national and local development planning. Public and private finance have supported the implementation of the climate actions. However, most funding still used for the mitigation. Adaptation finance needs support, especially in agriculture.

This research paper studies about opportunities of the microfinance role together with existing resources in supporting climate change adaptation in Indonesia. The data was acquired and analysed through a series of literatures, case studies and interviews with stakeholders in a climate change related financial sector. The central findings regarding the opportunity to improve the existing schemes in Indonesian climate change adaptation finance for the agriculture are worthy of the result. This study found that the adaptation finance is mostly used for indirect activities. Meanwhile, the community especially farmers need direct measured activities to adapt with the climate change. An alternative approach is providing the microfinance, insurance and capacity development for farmers to producing high quality agriculture products. It prepares new value chain contributing to socio-economic development in the area. Hence, the microfinance appears as one of potential solution to support the direct climate change adaptation actions as well as adaptation measure on the agriculture sector. However, it may not be strong enough to finance whole needs on agricultural climate actions.

Adaptation is contextual, so it has to be grounded. The microfinance needs public sectors support as well as other resources from private sectors. In theory rapid response for disaster, the microfinance should be advantage as supporting side of adaptation which often destroys the agriculture sector. However, in reality, it does not work as it is prevented by regulations. So, this can be an areas public sector can support as a risk taker as well as initial fund and scalling up.

Full paper will be published in Future of Food: Journal on Food, Agriculture and Society. Volume 4 Number 3.

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