IFAD provides $100m for Indonesia irrigation project

The UN developmental finance institution will use a combination of debt and equity in its contribution to a $853m effort to improve irrigation for the southeast Asian nation’s 24 million smallholder farmers.

In its largest project to date, the International Fund for Agricultural Development (IFAD) last month reached an agreement with the Government of Indonesia to fund and implement a project designed to improve irrigation in the Southeast Asian nation of 258 million.

The Integrated Participatory Development and Management of Irrigation project (IPDMIP) is a collaboration between IFAD, the Asian Development Bank (ADB) and Indonesia’s government. The project is designed to help the country’s 24 million smallholder farmers meet challenges stemming from high transport and logistics costs, erratic weather patterns and a lack of rainfall, according a statement from IFAD.

IFAD will provide a $98.5 million loan and $1.5 million grant for IPDMIP. The ADB is providing $600 million in financing for the project and further contributions of an undisclosed size are coming from the Indonesian Government and other unnamed sources.

IFAD country director for Indonesia Ron Hartman told Agri Investor in an email that population and economic growth in Indonesia are fueling food demand that the country has not been able to meet, despite the government’s focus on food security and self-sufficiency.

He wrote that Indonesia has a history of unsustainable investments in irrigation that failed to integrate farmers properly and placed a focus on building infrastructure that was not maintained properly over time.

“By putting the farmer in the center of our approach and combining infrastructure with location-specific support packages, we expect to achieve improvement in productivity and livelihoods,” Hartman wrote.

Hartman noted that IPDMIP hopes to rehabilitate 2.2 million hectares of land that will be used to grow rice, vegetable and other higher-value products.

The IPDMIP will aim to further improve yields in the country by facilitating farmer-to-farmer knowledge dissemination, crop intensification and diversification methods and improving access to high quality seeds.

In addition, the program will aim to improve financial literacy among participant farmers and encourage them to leverage both mainstream sources of credit and more innovative options including digital financial service and agricultural micro-insurance.

“IFAD believes that farming is a business and our projects actively seek to build farmers capacity to improve productivity and access markets, always with the ultimate goal of improving livelihoods,” Hartman wrote. “Investments by the private sector can form an important complement to public investments.”