Dimas Bagus Wiranatakusuma, Rafif Fairuztama, Jumadil Saputra

Examining the Significant Factors Inhibiting Agricultural Sector Growth during COVID-19 Pandemic in Indonesia

Introduction

Examining the significant factors inhibiting agricultural sector growth during covid-19 pandemic in indonesia. Examine factors inhibiting Indonesian agricultural growth during COVID-19. Analyzes banking & macroeconomic variables; finds financial deepening & intermediation impacts. Recommends productivity, skills, and tech.

Abstract

The agricultural sector has emerged as a critical economic pillar in Indonesia. Limited research has been conducted on Indonesia's agricultural development. However, there exists a body of literature that thoroughly integrates the agricultural sector with banking and the macroeconomic environment, especially in the context of the period preceding and during the covid-19 pandemic. This study seeks to explore various factors that hinder the growth of the agricultural sector by examining specific banking and macroeconomic variables. This research employs quarterly data from 2010 to 2024 and analyzes it utilizing a multiple regression methodology. In pursuit of this objective, the analysis incorporates the growth of agriculture's GDP share relative to total GDP, the financing of agriculture alongside total time deposits in Islamic banks, the margin of Islamic banks within the agricultural sector, the relationship between agriculture's financing and GDP, as well as considerations of inflation and food prices. Empirical evidence indicates that only financial deepening (GCPGDPP) and banking intermediation (GFinPDT) have a significant impact on agricultural growth (GGDPRGDPT). An increase in financial deepening adversely affects growth. This discovery suggests that the agricultural sector in Indonesia requires enhancements in productivity, necessitating the advancement of professional managerial skills and the adoption of technology among farmers. Furthermore, considering the considerable influence of banking intermediation on agricultural growth, it is essential that financial deepening is aligned with entrepreneurial skills capable of producing high-value-added products. The study presents a significant contribution to the growth of the agricultural sector in Indonesia by highlighting the importance of enhancing banking sector financing alongside the development of improved professional managerial skills within the agricultural industry.

Review

This study tackles a highly relevant and timely topic by examining the factors inhibiting agricultural sector growth in Indonesia, particularly within the context of the COVID-19 pandemic. The abstract clearly articulates the research gap, proposing an integrated analysis of banking and macroeconomic variables influencing this critical economic pillar. Employing a multiple regression methodology on quarterly data spanning from 2010 to 2024, the research identifies financial deepening and banking intermediation as significant determinants of agricultural growth. A key finding is the adverse impact of increased financial deepening on growth, which the authors attribute to a need for enhanced productivity, professional managerial skills, and technology adoption among farmers. The study's focus on practical policy implications, such as aligning financial deepening with entrepreneurial skills and improving managerial capabilities, represents a valuable contribution to the discourse on sustainable agricultural development in Indonesia. However, the abstract presents several areas that warrant closer scrutiny. The data period, "2010 to 2024," raises concerns regarding the availability of complete quarterly data for the entirety of 2024 at the time of study. Furthermore, while the title emphasizes the "COVID-19 Pandemic," the abstract does not explicitly detail how the pandemic's specific effects are isolated or analyzed within the broader time series model, such as through dummy variables or structural break tests. The finding that financial deepening "adversely affects growth" is counter-intuitive and requires a more profound theoretical and empirical exploration of the mechanisms at play. While the abstract suggests a lack of productivity and skills, it does not elaborate on how increased access to finance might *hinder* growth rather than simply failing to stimulate it, implying potential issues like misallocation or excessive debt without adequate returns. Additionally, the initial statement about "Limited research has been conducted on Indonesia's agricultural development" is immediately followed by "However, there exists a body of literature that thoroughly integrates the agricultural sector with banking and the macroeconomic environment," which appears contradictory and needs clarification. Despite these points, the study offers significant insights into the intricate relationship between the financial sector and agricultural development in Indonesia. Its emphasis on enhancing banking sector financing coupled with the development of professional managerial skills among farmers provides actionable policy recommendations. For future iterations or subsequent research, it would be beneficial to explicitly model the impact of the COVID-19 pandemic, perhaps through event studies or regime-switching models. Further investigation into the specific channels through which financial deepening might adversely affect growth is also crucial, perhaps by disaggregating financial instruments or exploring issues of financial literacy and absorptive capacity within the agricultural sector. Expanding the scope to include non-financial inhibitors such as climate change, infrastructure, and supply chain inefficiencies could also enrich the understanding of agricultural sector growth constraints.

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