Indonesia

The Context

Indonesia, with the largest economy in Southeast Asia, has evolved rapidly over the past decade into a dynamic and decentralized electoral democracy with a rapidly growing middle class. Steady economic growth has led to a gradual reduction in poverty, from 17 per cent in 2004 to 11 per cent in 2014.

Three out of five Indonesians live in rural areas, and farming is their main occupation. The agriculture sector contributed 8.5 per cent to GDP in 2016. While the sector's share of GDP has declined markedly during the last five decades, it still is the main source of income for one third of the population and 64 per cent of poor people. Progress is visible in rural areas, but poverty remains concentrated there — 13.8 per cent of rural people are classified as poor compared with 8.2 per cent of urban populations, as of 2014.

With its abundant fertile soils, Indonesia is a major global producer of numerous tropical products, offering strong opportunities to smallholder producers. A growing middle class is increasing the demand for more and diversified food products.

Yet millions of smallholder farmers, farm workers and fishers cannot leverage these opportunities due to limited access to finance, services and markets.

The Strategy

Over the last 35 years, IFAD and the Government of Indonesia have invested more than US$1 billion in rural people to strengthen inclusive and environmentally sustainable economic growth.
Our work concentrates on helping smallholder producers and marginalized groups to become more resilient, integrate into supply chains and gain access to services, technologies and finance. IFAD's projects have been successful in the most remote and vulnerable areas of the country, which also usually have the highest incidence of poverty.

IFAD's current results-based country strategic opportunities programme (2016-2019) aims to support inclusive rural transformation so rural people can achieve sustainable livelihoods. We work to achieve this by providing financing and technical support to develop models for replication and scaling up by the government and others. The emphasis is on empowering marginalized groups including smallholder farmers and fisheries producers, women and woman-headed households, marginal communities and ethnic minorities in selected geographic areas, and youth.

Our future investments will contribute to ensuring that:

• smallholder producers participate in remunerative agricultural markets;
• smallholder producers and their families are more resilient to risks;
• rural institutions deliver services that respond to the needs of smallholder producers.

Results-based country strategic opportunities programme (COSOP):
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