President Prabowo Subianto issued a Presidential Regulation (PP) to erase the debts of Micro, Small, and Medium Enterprises (MSMEs) in the agriculture, plantation, livestock, fisheries, and marine sectors, along with other MSMEs.
Many parties, including the Minister of Agriculture and legislators from the DPR, have expressed support for Prabowo’s initiative. However, what is the academic perspective on this populist policy?
The Head of the UGM Center for Rural and Regional Studies (PSPK UGM), Professor Bambang Hudayana, acknowledged that this program would benefit farmers and MSMEs. However, he noted that the core issues faced by farmers and MSMEs go beyond debt.
“This decision only addresses part of the problem, not the whole. The government must also structurally address the root causes,” said Professor Hudayana on Thursday (Nov. 14).
The professor emphasized that this policy on paper needs to be grounded in reality. In his view, most farming activities in Java are conducted by small-scale farmers, often called “gurem” farmers.
The debts incurred by these farmers are not in the hundreds of millions of rupiah but are usually limited to operational costs and capital.
Unfortunately, the number of small farmers is vast, with the professor estimating their number in the millions. Worse, the government often overlooks these farmers.
“It’s difficult for the government to target such a large and unregistered group, and it’s equally difficult for them because they don’t receive fair treatment,” he remarked.
According to Professor Hudayana, most of the debts held by farmers and fishermen are with informal institutions. Based on his research, small-scale entrepreneurs tend to be more diligent in repaying short-term loans.
For instance, many of them prefer to take on debt in the form of goods like fertilizer and pay it back in installments during the harvest season. The majority of these loans are made through farming groups or cooperatives.
“Very few take out large loans from formal institutions for such small-scale farming,” he explained.
Professor Hudayana urged that small-scale farmers receive more government support, as they are the most vulnerable to welfare issues.
According to him, the backbone of agriculture lies in reliable irrigation, affordable and accessible fertilizer, and easy access to seeds.
He believes that more substantial assistance in these areas, or increased subsidies, would provide significant help and be more effective in reaching smaller groups.
He also called on the government to promptly conduct comprehensive data collection and make use of academic research findings.
Additionally, Professor Hudayana highlighted the need for specific strategies to monitor and facilitate the sustainability of these small businesses.
“Saving farmers, fishermen, and other MSMEs is not just about debt cancellation; it’s more complex and needs to be addressed at its core.”
He elaborated that effective aid implementation should target the right recipients. He gave an example of a deserving beneficiary: UD Pramono, a dairy milk trader in Boyolali who has accumulated tax arrears amounting to IDR 671 million due to the COVID-19 pandemic.
If this business goes bankrupt, dairy farmers will lose a place to supply their milk.
“Cases like this need help. However, it’s not the farmers themselves but the small business operators who may be in greater distress. Therefore, the problem must be addressed at its root,” he said.
Professor Hudayana also called for close monitoring of the implementation of this plan. Aid projects are often vulnerable to mistargeting and can become breeding grounds for corruption.
With large budgets, unscrupulous individuals could take advantage of the situation at every level. From the recipient’s side, the consequence could be addiction and dependency.
“This project should be a one-time initiative, not something to be repeated over and over, to avoid fostering a beggar mentality towards the government,” he added.
He stressed once again that the most appropriate approach is to create a conducive business environment and to reach small-scale business actors by ensuring easy access to capital and markets.
“The government must act swiftly and change direction. Avoid a charity approach, but rather focus on strengthening infrastructure and business institutions to support entrepreneurship,” he concluded.
Author: Bolivia
Editor: Gusti Grehenson
Post-editor: Afifudin Baliya
Photo: Kabarbisnis and Kompasiana