Social capital and rural development in eastern Indonesia

• NSW Department of Primary Industries, Australia
• University of Mataram, Indonesia
• Udayana University, Indonesia
• Assessment Institute for Agricultural Technology (NTB), Indonesia
• Assessment Institute for Agricultural Technology (Bali), Indonesia

Smallholders require improved access to agribusiness including through social organisations that improve efficiency by facilitating coordination - social capital. In Indonesia, smallholder empowerment in agribusiness is an agreed priority. The aim is to evaluate the role that community characteristics, in particular social capital, play in alleviating poverty through improving the ability of smallholders to link with agribusiness. Specific objectives are to understand the nature of, and differences between, community and agribusiness links in Bali/Lombok, to define the role of social capital in, and assist the development of, these linkages. A case study approach contextualises and interprets findings that will be published and presented at various fora before developing policies aimed at reducing transaction costs in these linkages. Capacity building will result in better accounting for social capital, leading to more efficient development programs in the medium-term.

Public and private sectors in Indonesia commonly use farmer groups as a structure through which they invest resources and implement development programs. This has, however, met with varying success - sometimes specific programs have successfully provided welfare and productivity improvements while in other instances with seemingly similar groups these programs have proved unsuccessful. The contribution of this study was to build on this work and evaluate the role that social capital plays in facilitating cattle smallholders' access to market opportunities. It identified the characteristics of cattle groups and the leadership that predisposes them to be of more help to their members in accessing cattle market opportunities.

Bali and Lombok were selected as case study areas as they are important cattle-producing regions that have different social and cultural characteristics. Preliminary results and information from a qualitative analysis were used as a basis for a survey of group leaders (30 in Bali and 30 in Lombok) which aimed to gain a better understanding of the factors that influence a groups' ability to participate in the market. It was found that a group is more likely to provide marketing support (potentially giving group members greater ability to select and use their preferred selling technique) if:
cattle are the most important source of income to the group members
the group's main activity relates to cattle production and productivity
the group has access to a greater number of government assistance programs
the group has a more formal structure
there are greater levels of trust between group members
group members are more likely to address their cattle-related problems through self-reliant collective action
the leader is more educated and owns more land
the leader has fewer personal linkages with other government, political and industry stakeholders
the leader has confidence in his/her ability to lead, is trusted by group members, and is strongly motivated by success and finding solutions to problems.

After establishing the key qualitative finding that farmers preferred selling their cattle on-farm, a second model was estimated to identify the social capital, leadership and other characteristics of cattle groups predisposing members to sell their cattle on-farm rather than at public cattle markets. Estimation of this model was also a means of examining whether the stated preferences of farmers at the focus groups to sell on-farm were consistent with their revealed preferences as identified through econometric analysis. It was concluded that a group is more likely to sell at the market if:
cattle are the major source of income to group members
the main activity of a group is to improve cattle production
groups are located close to cattle markets
farming is the main occupation of the group leader.

Based on the qualitative and quantitative analysis the following conclusions can be made;
Social capital matters and can be modelled; specific characteristics of the group and the group leader will influence a group's provision of marketing support and the choice of selling method.
Under current institutional and cultural norms, farmer groups have a stated preference to sell on-farm (45 out of 60 in the last 12 months). Those that prefer to sell at the market tend to have more of a focus on cattle price and productivity and are using group and leader strengths to sell cattle this way.
All stakeholders see cattle groups as important factors in integrating smallholders into the cattle market.
Within most groups, cattle are not primarily managed and marketed to maximise profit, therefore, selling decisions are influenced by other social and economic demands.
Groups successfully accessing cattle market opportunities tend to have high levels of member trust and ability to interact as a group with other stakeholders. They tend also to have leaders who are focused on group dynamics and trust and who have the ability and desire to lead the group in meeting its aims.
Even though farmer groups in Bali and Lombok appear to be culturally and economically different the group and group leader characteristics that influence market selection are the same.

Findings from the study are being published and presented at various fora before developing policies aimed at reducing transaction costs in these linkages. Capacity building will result in better accounting for social capital, leading to more efficient development programs in the medium-term.