Role of microfinance to support agricultural climate change adaptations in Indonesia: Encouraging private sector participation in climate finance

Ibnu BUDIMAN, Takeshi Takama, Laksmi Pratiwi, Erwin Soeprastowo


The demands of mitigation and adaptation policies are important to understanding a country’s climate change preparation by providing microfinance in the agricultural sector. This could be seen as a strategy to fight against the challenges of future food security. In 2014, Indonesia established climate change adaptation policies. This legislation aims to pave the way for making actions on climate change adaptation mainstream in national and local development planning. Public and private finance have supported the implementation of the climate actions. However, most funding is still used for mitigation. Adaptation finance needs support, especially in agriculture. This research paper studies opportunities for microfinance to play a role together with existing resources in supporting climate change adaptation in Indonesia.  The data was acquired and analysed through a literature review, analysis of case studies and interviews with stakeholders in the climate change-related financial sector. The central findings regarding the opportunity for microfinance to contribute to the existing schemes in Indonesian climate change adaptation finance for agriculture are worthy of the result. This study found that adaptation finance is mostly used for indirect activities. Meanwhile, local communities, and farmers in particular, need directly targeted measures to adapt to climate change. An alternative approach is providing microfinance, insurance and capacity development for farmers to produce high quality agricultural products. This would contribute to optimizing the agri-food value chain, which supports socio-economic development of stakeholders, especially farmers. Hence, microfinance appears to be one potential solution to support direct climate change adaptation actions for the agricultural sector. However, this may not be strong enough to finance the entire needs for agricultural climate actions. Adaptation is contextual, so it has to be grounded in the needs of local communities.  Microfinance needs public sectors support as well as other resources from the private sector. In the case of rapid response to disasters, which often destroy the agricultural sector, microfinance should be advantageous in supporting adaptation. However, in reality, it does not work, as it is prevented by regulations. So, this can be an area the public sector can support as a risk-taker as well as by providing initial funds and resources for scaling up efforts.

Key words: Adaptation, Agriculture, Climate change, Farmers, Indonesia, Microfinance

Data of the article

First received : 11 April 2016 | Last revision received : 23 November 2016
Accepted : 03 December 2016 | Published online : 23 December 2016

Full Text:



Adaptation Fund. (2015a). About Adaptation Fund. Retrieved from

Adaptation Fund. (2015b). Apply for funding. Retrieved from

ADB. (2015). Institutional Strengthening for Integrated Water Resources Management in the 6 Citarum’s River Basin Territory. Jakarta, Indonesia: ADB Indonesia.

ADB. (2016). Comparative Study on Five Community Based Climate Change Adaptation Projects in Indonesia, Mongolia, Philippines, South Africa and Timor Leste. Jakarta, Indonesia: ADB Indonesia.

AECOM, IGES. (2015). A Quick Guide to Climate Change Adaptation Funds. Adaptation Finance Knowledge Series (No. 2).

Alief, F. (2013). Tracking Climate Finance in Indonesia.

Baert, P. (1998). Social Theory in the Twentieth Century. New York: New York University Press.

Bappenas. (2013). Kerangka Kerja Indonesia untuk Nationally Appropriate Mitigation Actions. Jakarta, Indonesia: Bappenas.

BAPPENAS. (2014). National Action Plan for Climate Change Adaptation (RAN-API): Synthesis Report. Jakarta, Indonesia: Ministry of National Development Planning/National Development Planning Agency (Bappenas).

Bloomberg New Energy Finance (BNEF). (2013). Projects and assets database: Renewable energy projects and power plants. Retrieved from:

BNI. (2014). Program Kemitraan. Retrieved from

Bond, P. & Rai, A. S. (2008). Cosigned vs. group loans. Journal of Development Economics 85, 58-80.

CCROM. (2015). RAD API Pilot Area di Jawa Barat. Low-carbon Resilient Development. Bogor, Indonesia: CCROM.

Churchill, C. (2006) Protecting the Poor: A Microinsurance Compendium. Geneva, Switzerland: International Labour Organisation.

Chowdhury, A. (2009). Microfinance as a poverty reduction tool—A critical assessment (working paper No. 89). United Nations: Department of Economic and Social Affairs.

CPI. (2014). Landscape of Climate Finance in Indonesia. Retrieved from

Daley-Harris, S. (2007). Debate on Microcredit. Foreign Policy in Focus. Retrieved on December 2, 2008 from

Damassa, T., Fransen, T., Haya, B., Ge, M., Pjeczka, K., & Ross, K. (2015). Interpreting INDCs: Assessing Transparency of Post-2020 Greenhouse Gas Emissions Targets for 8 Top-Emitting Economies. Washington, DC: World Resources Institute. Retrieved from http://www.wri. org/publication/interpreting-indcs

Elfash, I. (2015, June 24). Sukses dengan PKBL BUMN. Kompasiana. Retrieved from: wirausaha/2012/12/03/sukses-dengan-pkbl-bumn-513151.html

Foucault, M. (1995). Discipline and Punish: the Birth of Prison. New York, NY: Vintage Books.

Galab, S., Fenn, B., Jones, N., Raju, D. S., Wilson, I., & Reddy, M. G. (2006). Livelihood Diversification in Rural Andhra Pradesh: Household Asset Portfolios and Implications for Poverty Reduction (Working Paper 34). Oxford, England: Young Lives.

GCF. (2015). Readiness Inventory. Retrieved from

Hammill, A., Matthew, R., & McCarter, E. (2008). Microfinance and climate change adaptation. IDS bulletin, 39(4), 113-122.

Hulme, D., & Mosley, P. (1996). Finance against Poverty. London, UK: Routledge.

Hussain, A. B. (2015). Disciplinary Technologies of Microfinance Institutions in Bangladesh: Comparison of BRAC and BRDB Programs. Kassel, Germany: Kassel University Press GmbH.

ICCTF. (n.d.). Welcome to ICCTF. Retrieved March 11, 2016 from

JICA, (2015). JICA Bottom of Pyramid Programmes. Jakarta, Indonesia: JICA.

Klein, R., Okubo, Y., Michealowa, A., Behrens, A., Huq, S. & Ayers, J. (2008). Financing climate change policies in developing countries. Retrieved from

Levin, G. (2012). Critique of microcredit as a development model. Pursuit- The Journal of Undergraduate Research - the University of Tennessee, 4(1), 9.

LIP. (2015). About Living in Peace. Tokyo, Japan: LIP.

Maulidia, M. & Jauhari, L. (2014). Enhancing Private Sector Engagement in Climate Change Action: Analysis of CSR Schemes for Climate Finance in Indonesia. Commissioned by National Council on Climate Change Indonesia and supported by Gesellschaft für Internationale Zusammenarbeit.

Mercy Corps. (n.d.). Organization Profile. Jakarta, Indonesia: Mercy Corps Indonesia.

MICRA. (n.d.). Microfinance Innovation Center for Resources and Alternatives. Jakarta, Indonesia: Micra Indonesia.

MoF (Ministry of Finance). (2012). Indonesia First Mitigation Fiscal Framework. In support of the National Action Plan to Reduce Greenhouse Gas Emissions. Jakarta, Indonesia: Government of Indonesia, Ministry of Finance. Retrieved from: stories/Indonesia_MFF_report. Pdf

Monash University. (2007). How to write the case study. Retrieved from

Morduch, J. (2006). Micro-insurance: The Next Revolution? In A. Banerjee, R. Benabou & D.Mookherjee (Eds.), Understanding Poverty. Oxford, England: Oxford University Press. p. 337-56

Moser, C. (1998). The asset vulnerability framework: reassessing urban poverty reduction strategies. World Development 26(1), 1–19.

Moser, R. M. B, & Gonzalez, L. (2015). Microfinance and climate change impacts: The case of Agroamigo in Brazil. RAE-Revista de Administração de Empresas, 55(4), 397-407.

Mumbunan, S., Ring, I., & Lenk, T. (2012). Ecological fiscal transfers at the provincial level in Indonesia (No. 06/2012). UFZ-Diskussionspapiere. Retrieved from:

Prasetyawan, Teddy. (2015). Kesiapan Indonesia menuju COP21 Paris. Retrieved March 18, 2016 from

Schalatek, L., Bird, N. & Brown, J. (2010). Where is the money? The Status of Climate Finance. Climate Finance Policy Brief No.1. Heinrich Böll Foundation North America and Overseas Development Institute.

Schipper, I. & Pelling, M. (2007). Disaster Risk, Climate Change, and International Development: Scope and Challenge to Integration.

Scoones, I. (1998) Sustainable Rural Livelihoods: A Framework for Analysis (IDS Working Paper 72). Brighton, England: IDS.

Tänzler, D. & Maulidia, M. (2013). Status of Climate Finance in Indonesia: Country Assessment Report, Strengthening Public and Private Climate Finance in Indonesia. Final Report funded by CDKN and prepared by Adelphi and GIZ. Retrieved from: INDONESIA-Country-Report_3Dec2013.pdf

UNDP. (2015). Strategic Planning and Action to Strengthen Climate Resilience Programmes. Jakarta, Indonesia: UNDP Indonesia.

UNFCCC. (2015). Paris Outcome. Retrieved from

Utami, A., Kurnia, C., Samadhi, N. & Austin, K. (2015). Details of Indonesia’s Climate Plan Remain Hazy. Retrieved from

World Bank. (2012). Adaptasi terhadap Perubahan Iklim. Jakarta, Indonesia: Bank Dunia Indonesia.

Yunus, M. (2003). Banker to the Poor: Micro-lending and the Battle against World Poverty. New York, NY: Public Affairs.


  • There are currently no refbacks.

Comments on this article

View all comments




 Google Scholar H5 index 5 


The contributions of the peer reviewers for the journal are acknowledged in the 


Sponsoring Organisations

Logo Agrarekologie Uni Kassel