Access to finance and expertise is helping fisher folk, cocoa farmers, and others in Indonesia's Aceh and North Sumatra link to major markets for their products.
Banda Aceh, Indonesia – In the wake of the 2004 Indian Ocean tsunami that devastated his province of Aceh, Indonesia, Rahmat Rizal changed direction. Hoping for a better life, he left his work in the construction industry to become a fisherman.
He learned quickly that despite the new endeavor, his struggles would continue. Fishermen are among the poorest people in Aceh, and the job is getting tougher as climate change warms the ocean, forcing fish deeper in search of cold water beyond the reach of hand-lines.
Aceh’s waters are rich with tuna, some of it good enough to satisfy the highly selective Japanese sushi market. Tuna caught by hand line is coveted in Japan, but fishermen like Rahmat haven’t had the equipment or the know-how to handle and store the fish to ensure top quality. They also lack access to finance and connections to cashed-up customers that could allow them to make the most of their catch.
“We’ve learned how to handle the fish so it can be exported,” says Rahmat, as he cleans his equipment on a dock at Ulee Lheue port in Banda Aceh, the province’s capital. “Before, we didn’t know anything about how to gill, gut, or bleed the fish so it can be sold as grade A. We’d just beat it with a club and throw it in a box full of dirty ice.”
Access to finance and expertise
Lack of access to the finance and expertise needed to produce quality products is a common problem in Aceh. The huge potential of its agricultural products is hamstrung by an absence of capital to fund expansion and the knowledge needed to deliver quality.
“There are so many products that could become big industries. We need to empower people by helping them to start their own businesses.”
Almost all employment in the province of about 4.5 million people is generated by small businesses, but the amount of credit available for working capital is just a quarter of the national average. The cost of credit is high and most small producers lack collateral. Agriculture is viewed as a risky sector, so banks generally avoid lending to it.
“There are so many products that could become big industries, but we don’t have the backing so it all goes to waste,” says Amhar Abubakar, head of the Aceh Development Board in Banda Aceh. “We need to empower people by helping them to start their own businesses.”
The governments of Aceh and North Sumatra partnered with the Asian Development Bank and the Japan Fund for Poverty Reduction in 2013 to help address these issues with a technical assistance project called Improving Access to Finance in Aceh and North Sumatra. The project provided loans and technical training to some of the provinces’ poorest residents, including fishermen, farmers, and others.
For fishermen in Aceh, the goal was to move up the value chain with a focus on two key products: tuna and shrimp.
Connections to new markets
The project links local fishermen like Rahmat—who were mostly untrained and living on or below the poverty line—with Aceh processing company Nagata Prima Tuna and a fisherman’s association. Nagata now buys and processes their tuna, sidestepping agents in nearby Medan who paid one price for all grades mostly for the canned fish market. Training has been provided to the fishermen on how to prepare their fish for the grade A tuna export market.
“I will pass this on to my children. It makes me happy to pass on a good income.”
The impact has been dramatic. The grade A tuna catch is up by 20% and the incomes of participating fishermen have increased by 30% to around 5 million Indonesian Rupiah ($375) a month, says Almer Haves of Nagata Prima Tuna. Rahmat estimates his take from a good haul has doubled in the year he’s been selling to Nagata.
Nagata now exports Aceh tuna to Japan, South Korea, Thailand, Viet Nam, the United States, and Singapore. It ships a container of tuna every 20 days, compared to every 45 days not so long ago. “It’s been very good for the fishermen,” says Almer.
Building new businesses
Pidie Jaya Regency, a couple of hours’ drive east from Banda Aceh, is one of the poorest parts of the province. It’s also where Muhammad Gade, 58, has spent most of his life growing cocoa beans. Until recently, he and other farmers instinctively sold their harvest to traders for around 12,000 Rupiah a kilo.
He was being shortchanged. “I was never clear about the market price and got cheated all the time,” he recalls. “Now I’m never deceived.”
Like nearly 50 other farmers in Pidie Jaya, Muhammad now sells his beans to a cooperative that ADB helped to set up through a Japan Fund for Poverty Reduction grant a year or so after the tsunami to help small enterprises with microfinance. Part of the $2.5 million grant was used in 2010 to establish Aceh’s first chocolate processing plant, provide working capital, and train staff on how to maintain quality and market the product.
The result is Socolatte, a growing business focusing on cocoa powder and chocolate products. Irwan Ibrahim, who runs the co-op which runs the plant, pays over market prices to his farmers to encourage them to produce better quality beans.
“If the market is paying 40,000 Rupiah a kilo I will pay 45,000 Rupiah,” says Irwan, seated at the small Socolatte shop that sells drinking chocolate and sweets in bright foil wrappings. “Demand is now outstripping supply. We started with 5 employees and now we have 30.”
More knowledge, better crop
The co-op trains farmers in best practice production methods and varietal selection. The volume of Muhammad’s crop has risen by half a ton each year. He has taken to heart the training on tree care, trimming branches and spreading leaves around the base to protect roots from the harsh sun. His five dogs chase away the monkeys which like to feast on the beans.
The trees at his hillside plantation are bigger and yield better fruit. “Before I earned around 4 million Rupiah a month and now I get at least 6 million,” says Muhammad.
His friend Yusuf Ibrahim has also benefited. “My family used to eat only what we could afford,” he says. “Now we have options.”
Aceh’s small businesses still face challenges, but now there is hope as well. The fishermen of Ulee Lheue look forward to the day they can afford larger vessels to compete with bigger operators and better lines to reach quality fish at deeper depths. Socolatte wants to expand into foreign markets like South Korea and attract venture capital to buy more equipment.
Cocoa farmer Muhammad has a simpler goal. “I will pass this on to my children,” he says, gesturing at the trees at his plantation. “It makes me happy to pass on a good income to them.”
John Larkin is a Senior External Relations Specialist in ADB’s Department of External Relations. Learn more about ADB’s work in Indonesia and follow our Indonesia Resident Mission on Twitter.
