Factors influencing farmers’ use of the warehouse receipt system in Indonesia

Endro Gunawan (Asian Institute of Technology, Bangkok, Thailand)
John K.M. Kuwornu (Asian Institute of Technology, Bangkok, Thailand)
Avishek Datta (Asian Institute of Technology, Bangkok, Thailand)
Loc T. Nguyen (Asian Institute of Technology, Bangkok, Thailand)

Agricultural Finance Review

ISSN: 0002-1466

Publication date: 5 August 2019

Abstract

Purpose

The purpose of this paper is to examine the factors influencing Indonesian farmers’ use of the warehouse receipt system (WRS) and their choice of private and public warehouses.

Design/methodology/approach

Primary data were collected through questionnaires administered to 500 farmers in two districts, Subang and Cianjur, in West Java Province in Indonesia. Binary logit regression was employed to examine the factors influencing farmers’ use of the WRS. Binary and bivariate probit regressions were employed to determine the factors influencing farmers’ choice of private and public warehouses.

Findings

The empirical results of the binary logit regression revealed that age, land ownership, selling price, the use of the warehouse receipt as collateral security and the availability of transportation facility positively influenced farmers’ use of the WRS, whereas education, income, farm profit and participation in farmers’ group negatively influenced farmers’ use of the WRS. The results of the binary probit regressions revealed that profit, availability of insurance and processing facility positively influenced the farmers’ decision to use the private WRS, whereas education, production, selling price and distance from the farm to the warehouse negatively influenced farmers’ decision to use the private WRS. Age, education, selling price and distance from the farm to the warehouse positively influenced the farmers’ decision to use the public WRS, whereas production and availability of processing facility negatively influenced the decision of farmers to use the public WRS.

Practical implications

This study highlights the importance of education and government assistance regarding the provision of facilities and price indemnified insurance for successful implementation of the WRS.

Originality/value

This study provides an empirical contribution to the existing literature on the development of WRS in Indonesia. In terms of methods of analysis, previous studies used purely qualitative and descriptive methods, whereas this study employed econometric techniques (i.e. binary logit, binary probit and bivariate probit regressions) to examine the WRS in Indonesia. In addition, whereas previous studies explored the WRS in general, this study investigated the farmers’ use of the public and private warehouses in addition to exploring the WRS in general. Finally, the finding that the average annual profit of non-users was significantly higher than that of the users of the WRS is striking, and this could be attributed to the current challenges of the implementation of the WRS, including high transportation and warehouse rental costs.

Keywords

Acknowledgements

The authors gratefully acknowledge the Government of the Republic of Indonesia that through the World Bank-funded Sustainable Management of Agriculture Research and Technology Dissemination (SMARD) Project provided the scholarship to the first author. The authors also acknowledge the assistance of the local staff in Subang and Cianjur districts and other government authorities in conducting this research. Despite their busy working schedules, the farmer respondents’ cooperation during the interviews and field surveys is highly appreciated.

Citation

Gunawan, E., Kuwornu, J.K.M., Datta, A. and Nguyen, L.T. (2019), "Factors influencing farmers’ use of the warehouse receipt system in Indonesia", Agricultural Finance Review, Vol. 79 No. 4, pp. 537-563. https://doi.org/10.1108/AFR-11-2018-0099

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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