Marketing efficiency, informal credit, and the role of government loan programs: cassava trade in Indonesia

• Published in: The Journal of developing areas 1986-04, Vol.20 (3), p.369-378
• Main Authors: Unnevehr, L.J. (University of Illinois, Urbana), Zain, D
• Format: Article
• Language: English
• Subjects: ADMINISTRACION; ADMINISTRATION; AGRICULTURE (INCLUDING HUNTING AND GATHERING); Capital investments; Cassava; Commercial credit; Commodities; COMMODITY MARKETS; CONCURRENCE SUR LES MARCHES; CONCURRENCIA DE MERCADOS; COSTOS; COSTS; COUT; CREDIT; CREDITO; Economic aid; Economic models; Economic Policy; EFFICIENCY AND EFFECTIVENESS; FINANCIAL SERVICE, BANKS, INSURANCE SYSTEMS, SECURITIES, EXCHANGES; Government; Government loans; Government Policy; Government Regulation; Indonesia; Informal; International trade (cassava); Investment credit; JAVA; LOANS; MANIHOT ESCULENTA; MARCHE DES PRODUITS DE BASE; MARKET COMPETITION; Market Economy; Market segmentation; Marketing; MARKETING SYSTEM; MARKETING TECHNIQUES; MERCADOS DE PRODUCTOS BASICOS; MODELE; MODELOS; Monetary policy; PRESTAMOS; PRETS; Programs; RESOURCE ALLOCATION; Statistical analysis; Systems; TECHNIQUE DE VENTE; TECNICAS DE MERCADEO; Trade; Wholesale trade; Working capital
• ISSN: 0022-037X; 1548-2278

The structure of informal credit relations in the cassava trade on Java, Indonesia, is examined to demonstrate how: 1. credit market imperfections can lead to commodity market imperfections, and 2. government credit programs can increase marketing efficiency by offsetting some informal credit limitations. Cassava is the major source of farm household income from food-crop production in mountainous south-central Java. The market structure differs for dried and fresh cassava. Where formal credit is unavailable, informal credit arrangements have developed to provide working capital. These arrangements ease the mobilization of marketed supply, but they have limitations: 1. On-lending from large to small traders does not equalize access to credit terms. 2. Informal credit contracts do not provide for fixed capital investment. 3. These contracts are linked to specific products. Benefits of government loan programs are due to their availability in rural areas, not to low interest rates.