Examining the Impact of Financial Capital Access on Technical Efficiency: Empirical Insights From Carrot Farmers in Indonesia

Abstract

Objective: This study investigates the interplay between financial capital access and technical efficiency in small-scale carrot farming in Indonesia, focusing on the regions of Malang and Probolinggo in East Java. Methods: Employing a multistage random sampling method, data was collected from 100 farmers, and stochastic frontier analysis (SFA) was employed to measure technical efficiency. Results: The results highlight the positive and significant impact of financial capital access on farmers' technical efficiency. Farmers with enhanced access to financial resources, including credit and loans, demonstrated higher levels of technical efficiency. Additionally, the study identifies the positive influence of larger cultivated land on technical efficiency, allowing farmers greater flexibility and opportunities for adopting modern agricultural technologies. Conversely, greater distances to cultivation lands were found to negatively impact technical efficiency due to increased transaction costs and difficulties in accessing information and markets. Implication: These findings underscore the critical role of financial capital in shaping the success of small-scale carrot farming, emphasizing its implications for sustainable agricultural practices. The study's insights contribute to the formulation of targeted policies and interventions aimed at improving financial inclusion and reducing geographical barriers to enhance overall agricultural productivity and sustainability in small-scale farming communities.