CUESTIONES TÉCNICAS

The empirical findings in this study highlight the main issues that can be used as input to formulate or improve poverty alleviation policies. This section provides policy recommendations, based on the key findings in this study, such as promoting agricultural sector, increasing access to credit, promotion of human capital, stabilizing foods price and improvement in targeting and integration.

Promoting Agricultural Sector

The results in the poverty dynamics and credit access model show that agricultural households tend to experience chronic poverty and have limited access to credit from the formal financial institutions. It implies that the situation makes people working in the agricultural sector find it difficult to improve their welfare.

Policy formulation from the Indonesian government should also support the development of the agricultural sector since the agricultural sector is vital in providing food and nutrients for people. The support can give benefits for the workers and promote the sector to be profitable. The policies to promote agricultural sectors and promote the pro-poor growth in this sector are also confirmed by the Overseas Development Institute (ODI) (2004) and Organisation for Economic Co-operation and Development (2006) which note that promoting the agricultural sector can be important to reduce poverty, particularly rural poverty. The ODI (2004) also notes the need for support from the government to develop the sector and increase the farmers’ productivity. In association with that, the government should

protect the land for agriculture and prevent the land conversion from agricultural sector to other sectors. The subsidy and investment are also necessary to support the agricultural development in Indonesia. Subsidy helps to provide affordable agricultural inputs, such as fertilizer and equipment, to the farmers. Investment in the agricultural sector then can increase the technology adoption and efficiency of the sector in producing agricultural products. Stabilization in price of agricultural outputs is also needed by the farmers to reduce their risk in doing agri-business.

Increasing Access to Credit

The empirical finding from the poverty dynamics model suggests that credit is useful to reduce the probability of households to fall into chronic poverty. Furthermore, the credit access model shows that the agricultural households have limited access to formal credit.

Therefore, the government should ensure the access to credit of the poor and agricultural households. The credit programmes should be easy to access by rural and poor people. The institutions that execute the programmes should reach all rural areas and be located in

villages in Indonesia. Existing policies, such as the government’s micro-credit programmes (KUR), which provides collateral-free credit to support small business, should be continued. The government then can improve the programme and extend the program scope to the agricultural households as the target of the programme.

Promotion of Human Capital

The multidimensional framework shows, lack of education is one of the causes of poverty. Furthermore, the results from this study capture that education plays an important role in reducing poverty. Education and skills help people, especially the poor and women, to increase their standard of living. Education helps them to reach more opportunities, obtain better job, open access to credit, easily adopt new technologies and be more productive. In the long run, this can improve their health and welfare. Thus, the education development, both formal and informal, is needed to increase the capability and human capital in Indonesia.

In the case of agricultural households, education is necessary to prevent them from falling into poverty. Thus, poverty alleviation programmes can be conducted through education and skills development. For example, training to improve their skills in managing agri-business will be useful to help them adopting new technology, increasing efficiency and productivity, as well as developing the agricultural sector in the long run.

Stabilizing Food Prices

Stabilizing food prices is necessary to help the poor households in reducing their vulnerabilities and smooth their consumption pattern. The findings from impact evaluation of food-based and health care safety nets show that the programmes increase the

beneficiaries’ rice consumption. In the case of food-based safety nets, an increase in rice consumption is accompanied by increasing consumption of tofu and tempeh and decreasing consumption of meat and dairy products. Those outcomes can be related to the price of tofu and tempeh, which are relatively cheaper than meat and dairy products. This shows that tofu and tempeh are important commodities to meet the basic needs for protein of the poor households. In this case, the Indonesian government should ensure the price stabilization of

food, particularly tofu and tempeh. It can also prevent a decrease in the consumption of protein and nutritious food.

Improvement in Targeting, Integration and Monitoring

All policies constructed by the government will not be effective if they are not equipped by proper execution, such as strong targeting, integration and monitoring process. The poverty alleviation programmes must be well targeted for poor people. Thus, the government needs help from provincial and district governments to construct the profile of targeted people and households. This is needed to ensure that the programmes will always go to the right beneficiaries. Moreover, integration among central, provincial and district governments in terms of policy and implementation is important in the programme execution. The integration then allows the poverty reduction programmes to be delivered properly to the poor people. Monitoring by the central government during the execution is also important to minimise mistakes and mitigate obstacles which, in the future, can lead to improvements from the government in providing better poverty alleviation policies.