Impact of Smallholders´Access to Land and Credit Markets on Technology Adoption and Land Use Decisions

The Case of Tropical Forest Margins in Central Sulawesi- Indonesia

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This study examines the impact of smallholders’ access to land and credit markets and ist impact on the adoption of technologies as well as land use decisions in the vicinity of the Lore-Lindu national park, Central Sulawesi, Indonesia. The study focuses on upland areas which are devoted to cocoa and coffee because these agricultural activities contribute to the pressure on the Lore Lindu National Park. At the current level of forest encroachment, these activities threaten the existence of the Lore Lindu National Park. The adoption of technologies as an indicator of agricultural intensification can play an important role in reducing the pressure on the forest. A necessary condition to apply advanced technology is the availability of sufficient financial capital. However, most of the farm households in the vicinity of the Lore Lindu National Park are categorized as smallholders and face a lack of capital. Therefore the role of rural financial services to relax their liquidity constraint is important. In the analyses the rural financial services are divided into informal and formal credit institutions. The various econometrics model used in the analysis are: (1) the determinants of land possessions by households, by using a tobit model; (2) the determinants of households access to and participation in informal credit markets by using a probit model; (3) the determinants of technology adoption by using a two step and recursive model; (4) The determinants of the households’ credit constraint by applying a probit model; and (5) the impact of households credit constraint on land use decisions by using a switching regression model.