Microcredit and technology adoption

Abstract

Purpose The purpose of this paper is to analyze the impact of microcredit and agronomic technology on farm households’ prosperity, and to determine important factors affecting farmers’ access to microcredit and technology adoption in Indonesian intensive farming. Design/methodology/approach The focus of the study was farmers engaging with chili-based agribusiness in rural areas. Data for this study were compiled from a survey that interviewed 250 farm households. Samples of the study were randomly selected from chili farming community in three regions of Java during 2013–2014. Data were analyzed using structural equation modeling (SEM). Findings Microcredit provided positive direct and indirect impacts on household prosperity. Microcredit indirectly impacted the well-being through the mediation of technology adoption. Farmers’ characteristics and agribusiness environment determined farmers’ decision to access microcredit and adopt advanced technology. Microcredit and technology have enhanced farmers’ well-being through pathways that enabled farmers to develop farming scale. Practical implications The government should offer more alternatives to advanced technology and flexible procedures of access to credit at the same time to ensure sustained pathways of rural economic growth in Indonesia. Originality/value This paper applied a SEM to a proposition of simultaneous causal interrelations among microcredit, technology and farmers’ prosperity.