Determinants of diversification by cocoa smallholders in Sulawesi

Abstract

PurposeThe aim of this study was to evaluate determinants of four diversification practises by cocoa smallholders in West Sulawesi, Indonesia: (1) growing other crops, (2) keeping livestock, (3) off-farm work for wages (4) off-farm self-employment, and the impact of diversification on welfare of community members.Design/methodology/approachHousehold interviews (n = 116) conducted in two subdistricts (Anreapi and Mapilli) of Polewali-Mandar District, West Sulawesi, provided quantitative data on household characteristics, crop and livestock production, income sources, expenditure and credit access. Two villages per subdistrict were included in the study, each producing cocoa as the main crop but differing in their proximity to a market town. Logistic regression was applied to identify determinants of diversification by households. Multiple linear regression (MLR) models evaluated the impact of diversification practices and other explanatory variables on two proxies of welfare (or household wealth): per capita value of durable assets (household assets other than land or livestock) and per capita expenditure for each household.FindingsMean per capita cocoa production in the sample was low (51 kg dry beans/annum). The mean dependency ratio (proportion of household occupants age <18 and >64) was 35%, with an average of five occupants per household. Household heads were predominantly male (95%), averaging 46 yo and 7 years of formal education. Most households (72%) depended on loans, but only 24% accessed formal loans. Significant determinants of diversification practices were access to formal credit for self-employment and subdistrict for livestock, with Mapilli subdistrict households more likely to keep livestock. Household predictors in the MLR accounted for 28% variation of the dependent, per capita value of durable goods. Off-farm self-employment and raising livestock significantly improved welfare, but growing other crops or off-farm work for wages had little effect. Other household variables demonstrated to have significant positive effects on welfare were education of the household head, proximity to a market town and land area per household.Research limitations/implicationsThe study was restricted to a relatively small sample size (n = 116). Studies including panel data or larger numbers of households could enable the identification of further determinants of diversification.Practical implicationsThe study demonstrates that diversification has the potential to improve rural livelihoods, but that obstacles, especially formal credit access, may deter poorer households from diversifying their income sources.Social implicationsPrograms and policies that facilitate access to formal finance by smallholders could encourage diversification into small business and improve livelihoods in cocoa-dependent communities.Originality/valueIn the light of the decline in cocoa farm productivity in West Sulawesi, the study demonstrates the potential benefits, as well as limitations, of income diversification by smallholders.

Organic cocoa farmer’s strategies and sustainability

“…Concerning economic and financial capital, the results obtained for insurances and loans show that the probability of multi-crop livelihood strategies having insurance and loans is than de mono-crop strategies as well as the proportion of income from agricultural sources. In general terms, these results are compatible with those found in Irfany et al (2020)'s study, which displayed that cocoa producers, predominantly males, depended on loans, despite the fact that only a few have accessed formal loans. To Ankrah et al (2023), reducing loan interest rates can foster financial inclusion.…”

“…This does not seem compatible with the study of Irfany et al (2020) where social class does not influence livelihood strategies. However, the result obtained could be related to the fact that an increased social class perception allows for a belief of being under better economic conditions which is in turn beneficial to the production of organic cocoa in multi-crop (LS3).…”

“…The explanation for that could be related to the fact that which enables them to build better assets, increase economic sustainability and could start becoming integrated production systems (Gebru et al, 2018). Additionally, off-farm self-employment is one of the variables that significantly improves welfare but has lower probability of existing in mono-crop (Irfany et al, 2020). However, in the existing results concerning off-farm the employment, the greater the number of off-farm work members, the greater the probability of selected LS3 (multi-crop) and the lower the probability of having LS1 (mono-crop).…”

Geographical distribution of emerging cacao mosaic disease caused by cacao mild mosaic virus (Badnavirus tesellotheobromae) in Indonesia

“…However, compared to the previous decade, cocoa production has declined by up to 50% (Neilson et al., 2020). The decline was caused by several factors including lack of capital resources, poor estate maintenance, lack of nutrients, inefficient production (Irfany et al., 2020), and high prevalence of pests and diseases, for example, cocoa pod borer, Helopeltis, cherelle wilt, vascular streak dieback (VSD), black pod rot, and emerging cacao mosaic disease caused by badnavirus (Ariningsih et al., 2020; Marelli et al., 2019; Muhardi et al., 2020).…”