The focus of this study is to examine the households’ socio-economic characteristics that
influence poverty reduction and the households’ access to credit. This study is also
concerned with the impact evaluation of food-based and health care safety nets on
households’ consumption. Chapter 1 presents the discussion about background, aims and
Chapter 2 explores the definition, measurement and cause of poverty with the discussion on the linkage of poverty reduction and access to credit as well as social safety net programmes. The literature review in this chapter notes that poverty shows deprivation in the multidimensional aspects such as lack of income, education, health, food and nutrition, shelter, power and human rights. In order to alleviate poverty, knowing the cause of poverty is important. The cause of poverty is divided into two levels, those are, country and household level. At the country level, high poverty incidence is related to low economic performance, lack of human resources, poor governance and inhospitable climate. At the household level, the characteristics of the household (e.g., location, assets ownership and access to credit) and household head (e.g., age, gender, educational levels and areas of employment) affect their risk of falling into poverty. Based on previous studies, chapter 2 also presents the theoretical and empirical findings about poverty reduction through access to credit and safety net programmes.
Chapter 3 examines the determinants of poverty dynamics at the household level in the Western Provinces of Indonesia. The two-stage estimation (probit and then multinomial logit
model) are used as the method with households’ socio-economic characteristics as the determinants variables. In this chapter, the poverty status transitions are identified into four categories, those are, chronic poor, transient poor (-), transient poor (+) and non-poor. The empirical results show that areas of employment play an important role in poverty condition of the households. Involvement in the service employment sector by a household head
increases the household’s probability to be in the non-poor group. Working in the
agricultural sectors is insignificant in affecting the households’ poverty status transition. However, there is an indication that the household headed by an agricultural worker, particularly in the case of Western Indonesia and urban households, tends to be chronically poor.
The educational level of the household head is found to be another important factor in reducing poverty. The household heads who have primary, secondary or tertiary level
education successfully increase the households’ probability to escape from chronic poverty.
In the case of rural households, the household heads with secondary and tertiary level
escalate the households’ chance to be non-poor. Tertiary level is found to be the most important educational level for the agricultural households since these household heads with
Financial assistance received by the households, which is indicated by credit access, affect
the households’ poverty status. It can increase the household’s probability to escape from
chronic poor condition. Other assistances from the government, which are food-based and
health care safety net programmes, fail to affect households’ poverty status transition to be
non-poor, but these programmes are still vital and need to be provided. Moreover, the impact of the food-based and health care safety nets programmes on poverty reduction through consumption expenditure is analysed in Chapter 5.
Chapter 4 investigates the households’ socio-economic characteristics that may affect the
households’ access to credit in Western Indonesia. The two-stage probit method is applied to examine the determinants of access to credit. The credit types, in this chapter, are divided into three types, those are, credit obtained from the formal and informal financial institutions and credit intended to fund business activities.
The empirical findings show that creditworthiness of households who apply for a loan is
important. A household’s probability to secure formal, informal and business credit increases
if the household head is the one who asks for credit. This variable is also significant for the agricultural households. The area of employment is vital to help households in obtaining credit. A household that is headed by an agricultural worker has lower probability to get credit from the formal institutions. However, it increases the household’s chance to obtain
informal credit. It implies that a household which relies on the agricultural sector has limited access to formal credit. In the case of agricultural households, a female household head has
lower creditworthiness and decreases the household’s probability to secure formal and business credit. Available support from family members also increases a household’s
creditworthiness and helps to secure loan from the formal institution.
The educational level of the household head is found to be an important factor that affects
the households’ access to credit. In the case of Western Indonesia, as years of schooling of
the household head increases, it helps them to get formal credit. In contrast, it reduces the
household’s probability to obtain informal credit. This implies that educated households
have more access to formal institutions. However, the years of schooling does not significantly assist the household to get business credit. For the agricultural households, education has a weak impact in reducing the probability of the households to obtain informal credit and increase the probability to get agri-business credit. The results suggest that the educational level of the household head escalates the creditworthiness of agricultural
households. It shows that the more agricultural households are educated, the more they can prove to the lenders that they can run an agri-business.
In the case of Western Indonesia, assets ownership increases the households’ probability to
secure formal and business credit. In contrast, it decreases the probability of the households in obtaining credit from the informal sector. For the agricultural households, the assets
ownership may increase the households’ probability to secure formal loan. The assets
ownership also reduces the households’ probability to get informal credit. The results reflect
that households with assets ownership tend to obtain credit from the formal sector. Assets
represent a household’s ability to repay the loan and can be used as collaterals. They play an
essential role to increase the households’ creditworthiness and help them to secure formal
and business credit.
Chapter 5 evaluates the impact of food based (Raskin) and health care (Askeskin) social safety nets on Indonesian household consumption expenditure. The propensity score matching (PSM) is utilized to evaluate the effect of those programmes. The empirical results suggest that the Raskin programme significantly increases the beneficiaries’ consumption expenditure on rice, tofu and tempeh. This implies that an increase in the consumption of rice leads to an increase in the side dish consumption, which are tofu and tempeh, as they are cheaper alternatives of protein sources. Raskin also significantly encourages the beneficiaries that rely on the agricultural sector to buy more rice and less meat and dairy products. This outcome is related to the higher price of meat and dairy products.
In the case of Askeskin,there is not enough evidence to conclude that the programmeaffects consumption expenditure of its beneficiaries. However, a weak positive effect was found in
the case of households in Western Indonesia that increase its beneficiaries’ consumption
expenditure on rice, tofu and tempeh, household items and meat and dairy products. The programme also may decrease their spending on medical services and vegetables and fruits. In the case of agricultural households, there are weak impacts where the Askeskin
programme tends to reduce its beneficiaries’ health care expenditure and increase their household items consumption expenditure.
Overall, the empirical results obtained in this study provide the formulation of policies to support the poverty alleviation programmes in Indonesia. The policy recommendations are presented in detail in the next section.