Candlenuts, chilli and chickens: Transforming Indonesia’s rural economy

Wilfridus Ngala, the mayor of Inegena, a village nestled amidst the central hills of Ngada district, on Flores Island, had a vision – to turn his community of 1,100 people, most of them subsistence farmers, into an agricultural powerhouse with its own food processing industry and exports.

Mayor Ngala’s idea might sound far-fetched but, a year after Inegena was chosen to as a recipient of support from the International Fund for Agricultural Development (IFAD, a UN agency) and Indonesia’s Ministry of Villages, Development of Disadvantaged Regions and Transmigration, there are many clear signs of progress in his community, with crops and vegetables grown in formerly barren lands, and chickens clucking along the formerly tranquil village roads.

“Our village now has a future, and many young people have decided to stay and participate in the new agriculture projects,” says Viktorinus Roja, who learned how to farm chickens last year, and has been elected the head of the village enterprise association. “A year ago, I was thinking of moving on to find work in a city. But I’ve decided to give Mayor Ngala a chance.”

Building long-term economic success

Inegena is one of 1,110 Indonesian villages supported through IFAD’s Integrated Village Economic Transformation Programme (TEKAD), which is funded jointly by the UN agency and the Indonesian government. In Ngada district, 20 communities are benefiting from TEKAD experts, who help villagers design business plans and long-term development strategies, and to submit funding applications to the 68 billion Indonesian Rupiah ($4.3 billion) national Village Fund, managed by the Ministry of Villages. The funding mostly comes in the form of a loan, which the government and the villages will need to pay back from the proceeds of the increased economic activity.

“Many times in rural Indonesia, money is not the issue. Insightful planning to build the basis for long-term economic success is,” says Harlina Sulistroyini, General Director of Economic Development and Investment at the Ministry of Villages. “Places like Inegena are proof of what small funding and big ideas can achieve jointly.”

The key, Ms. Sulistroyini adds, is for communities to focus on a single product where they have economic and market advantage. In the case of Inegena, the main commodity, and future cash-crop, is candlenuts which are used as a raw material in the cosmetics and pharmaceutical industries.

With TEKAD support, the villagers drew up a business plan to improve the harvesting and start local processing of candlenuts. Until recently, each farmer harvested the nuts, cleaned them manually and took them to the local market, but they now band together to fetch better deals from buyers. Equally importantly, villagers no longer need to make the one-hour journey to town and spend hours selling their produce – the buyers now come to the village.

The next step involves the purchase, with support from the ministry, of a machine to replace the manual labour now required to peel the nuts, and funding for a machine to extract the nut’s oil, Ms. Sulistroyini says.

Increasing production, finding markets

By selling the oil rather than the nuts, the village will be able to keep more of the revenues from the candlenut value chain. “We want to support villages with the vision and the potential,” she adds. “Inegena is a small village but one day it will go international – as long as they keep the focus.”

The villagers plan to have the oil extraction machine in place by late 2023, allowing them to process candlenuts harvested in neighbouring villages. “We are planning to become a local centre”, says Mayor Ngala.

While the village’s economic transformation plan focuses on candlenuts, there are other products where locals see potential: they used Rp152 million ($9,600) from the Village Fund to increase the cultivated area of the village by 50 per cent; fields formerly filled with shrubs have been converted into horticulture plantations, and most of the chilli, eggplants, and cabbage grown is sold at the local market.

Local farmer Bonevasius Redo has already managed to extend his bamboo house with the additional income he has earned during the last growing season. Thanks to the new opportunities at home, he was able to move back to Inegana, after many years working on an oil palm plantation on Borneo. He now earns around five million Rupiahs a month ($320), compared to just three million ($190) at the plantation. “We can now lead a life here by growing vegetables and chilli,” he says.

Chickens and food security

The aim of the chicken scheme, which convinced Mr. Roja not to move to the city, is primarily to improve food security and nutrition by providing a stable protein intake to the community – as well as income from selling the surplus. There are now 2,400 chickens in the village, up from a few hundred two years ago.

The goal of TEKAD is to provide support in economic transformation to interested villages in the five poorest provinces in Indonesia, including East Nusa Tenggara, where Inegena is located. By hiring and training local facilitators to work with the villagers, the programme ensures that there is buy-in from communities towards long-term planning.

“In order to create the foundations for development that is sustainable, villages need to spend money on projects that will have long lasting economic benefits, rather than simply spending the Village Fund’s money each year on ad hoc initiatives,” says Anissa Pratiwi, Country Programme Officer at IFAD’s Jakarta office. “This fundamental change in approach requires learning and capacity building at the village level.”

The change is sorely needed, as presently only 10 per cent of the Village Fund is used to support rural economic development. TEKAD helps to change that by increasing technical skills and the market information available to villages, along with guidance and oversight in planning and implementation of projects. The villages it works in have a combined population of over 1.6 million – making it one of the UN projects with the largest reach in Indonesia.

“We are using TEKAD not only to help the participating villages develop but to also show other communities in these regions an example for long-term, sustainable economic development,” says Ms. Sulistroyini.