fbpx 54216-001: Dairy Farmer Support and Food Security Project | Asian Development Bank

Indonesia: Dairy Farmer Support and Food Security Project

Nonsovereign (Private) Project | 54216-001 Status: Active

The project will help PT Cisarua Mountain Dairy (CMD) sustain its operations through the COVID-19 crisis by providing financing for working capital and operational expenditure. Due to global logistic disruptions, CMD needs to increase its inventory levels of imported materials to ensure adequate buffers for sustained operations. The US dollar appreciation versus Indonesian rupiah has been weighing on the cost of imported materials, further increasing liquidity needs for building up those inventories. In addition, CMD has started experiencing delayed payments from some of its customers, which have been more severely affected by the crisis. As a result, the cash conversion cycle of the company is expected to increase significantly and cannot be financed from the company's operating cash flow alone. The liquidity support will allow CMD to sustain business operations, enabling stable production and timely payments to farmers, suppliers, employees and sales agents.

Project Details

Project Officer
Donges, Carine Sophie Private Sector Operations Department Request for information
Country
  • Indonesia
Sector
  • Agriculture, natural resources and rural development
 
Project Name Dairy Farmer Support and Food Security Project
Project Number 54216-001
Borrower/Company PT Cisarua Mountain Dairy
Country Indonesia
Location Nation-wide
Type or Modality of Assistance
3950 Loan Ordinary capital resources USD 15.00 million Committed
Strategic Agendas Inclusive economic growth
Drivers of Change Private sector development
Sector / Subsector

Agriculture, natural resources and rural development / Livestock

Gender Equity and Mainstreaming Effective gender mainstreaming
Responsible ADB Department Private Sector Operations Department
Responsible ADB Division Office of the Director General, PSOD
Responsible ADB Officer Donges, Carine Sophie
Project Sponsor(s)
Description The project will help PT Cisarua Mountain Dairy (CMD) sustain its operations through the COVID-19 crisis by providing financing for working capital and operational expenditure. Due to global logistic disruptions, CMD needs to increase its inventory levels of imported materials to ensure adequate buffers for sustained operations. The US dollar appreciation versus Indonesian rupiah has been weighing on the cost of imported materials, further increasing liquidity needs for building up those inventories. In addition, CMD has started experiencing delayed payments from some of its customers, which have been more severely affected by the crisis. As a result, the cash conversion cycle of the company is expected to increase significantly and cannot be financed from the company's operating cash flow alone. The liquidity support will allow CMD to sustain business operations, enabling stable production and timely payments to farmers, suppliers, employees and sales agents.
Objectives and Scope The project will provide essential liquidity support to CMD to sustain its operations and thus the livelihoods of 2,142 employees, about 3,300 dairy farmers, and over 1,500 direct sales agents during the coronavirus disease (COVID-19) crisis. It will support rural livelihoods more generally, sustain gender inclusion, and contribute to food security with the production of affordable nutritious dairy products, mitigating the fallout from this unprecedented health, economic, and social crisis.
Status of Operation/Construction The project will not involve the expansion of the existing facilities or the development of new sites.
Linkage to Country/Regional Strategy

The project is aligned with Strategy 2030, which calls for ADB to (i) scale up its financing for agribusinesses and (ii) promote gender equality in at least 75% of its committed operations by 2030 (operational priority 2). The project is also aligned with the Operational Plan for Private Sector Operations 2019 2024, which aims to expand the share of food brands in the portfolio because transactions in this downstream subsector have the highest return on capital, the lowest level of risks, and the potential to drive and structure upstream subsectors, and to impact a large number of farmers and consumers. Finally, the project is fully aligned with the objective of ADB's country partnership strategy, 2020 2024 for Indonesia to achieve higher, more inclusive, and environmentally sustainable growth.

The project is aligned with ADB's $20 billion response package to the COVID-19 pandemic. As part of this emergency package, ADB's Private Sector Operations Department has been focusing on the provision of working capital and operational expenditure financing. These loans aim to support the continuity of operations of companies that are financially strong but face temporary liquidity issues in the COVID-19 context. The FAST project will complement the recently approved COVID-19 Active Response and Expenditure Support Program extended by ADB's sovereign assistance program in Indonesia under the Countercyclical Support Facility COVID-19 pandemic response option. The project is consistent with Strategy 2030's Operational Plan for Priority 1 (addressing remaining poverty and reducing inequalities) by improving the standards of living of dairy farmers and sales agents. It is also consistent with three of five elements of Priority 2 (accelerating progress in gender equality) by seeking to economically empower women, enhance gender equality in human development, and strengthen women's resilience to external shocks. Finally, the project is aligned with Priority 5 (promoting rural development and food security), which calls for (i) improving rural services, attracting private sector investments, and generating jobs in rural areas; (ii) improving farmer profitability; and (iii) enabling ADB's nonsovereign operations to provide direct support to agribusiness clients.

Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects ADB has categorized the project in compliance with ADBs Safeguard Policy Statement (2009) (SPS) as category C for environment. The project will support working capital and operation expenditure, it is anticipated to have minimal environmental and social impact in addition to CMD's existing operation. ADB has undertaken due diligence. The environmental and social measures, the institutional capacity and commitment of CMD to manage the projects social and environmental impacts are deemed adequate. Based on gaps and improvement opportunities identified, CMD will implement corrective actions. An environmental and social monitoring report will be submitted to ADB on an annual basis.
Involuntary Resettlement ADB has categorized the project in compliance with ADB's Safeguard Policy Statement (2009) (SPS) as category C for involuntary resettlement. The project will not involve the expansion of the existing facilities or the development of new sites. No land acquisition is required.
Indigenous Peoples ADB has categorized the project in compliance with ADB's Safeguard Policy Statement (2009) (SPS) as category C for Indigenous Peoples. The project will not directly or indirectly affect Indigenous Peoples as the project will only support working capital and operation expenditure.
Stakeholder Communication, Participation, and Consultation
Timetable for assistance design, processing and implementation
Concept Clearance 20 May 2020
Credit Committee Meeting 17 Jun 2020
Approval -
Last PDS Update 09 Mar 2021

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Title Document Type Document Date
Dairy Farmer Support and Food Security Project: FAST Report Faster Approach to Small Nonsovereign Transactions Jul 2020
Dairy Farmer Support and Food Security Project: Initial Poverty and Social Analysis Initial Poverty and Social Analysis Jun 2020

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

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