Biological assets as mudharabah-based loan collateral for smallholder farmers in Indonesia: a feasibility study

Lack source of fund is one of the critical issues being faced by smallholder farmers. Despite having teak trees in their yards, such trees as biological assets are not accepted as loan collateral for bank's loan. In average, smallholder farmers fulfil their daily needs by cutting down their teak trees of five years old for sale. This research explored the feasibility of postponing teak harvesting time and analyzed the financial impact. By postponing the harvesting time, it is expected that the growth of the diameter and height of the tree, thus increasing the volume, and the price increases will increase the value of the asset. The method being employed was enterprise budget in which the costs of maintenance, the growth of the trees, and the sales of the harvested trees over time were considered. For the valuation, a profit-sharing as a result of value increases due to harvesting delay is shared between the owner of the asset and the investor through mudharabah financing arrangement. The result suggests that the annual return for the investor (such as a bank) is well above the current interest on a loan, and, therefore, biological assets should be justified as collateral for a bank loan

Annual Equivalent Value, Benefit Cost Ratio, and Composite Performance Index as Valuation Appraisal Support of Teakwood Plantation

Teak (Tectona grandis L.f) is a premium high-value hardwood species being viewed as the most preferred species for investment opportunity. Recently, there has been a gradual move away from state control of teakwood plantation toward the participation of private enterprises. Several enterprises offer investment opportunity of teakwood plantation in which one of the main selling points being offered is a quick harvesting schedule. A quick harvesting time, however, might not provide the best outcome to the investors. This research exercise and compare the valuation appraisal of different harvesting schedules. The research focused on project planning, enterprise budget, financial projection, and valuation measurements to arrive at overall appraisal. To avoid any possible bias of individual investor's preference on common valuation criteria such as total investment, net cash flow (NCF), net present value (NPV), internal rate of return (IRR), profit on investment (P/I), and payback period (PBP), 3 otherS criteria namely benefit cost ratio (BCR), annual equivalent value (AEV), and composite performance index (CPI) have been applied to arrive at a more fair valuation. It is concluded that the longer the harvesting schedule, the better valuation outcome could be achieved, and therefore, investors should critically review any investment proposal in accordance to their preference on valuation criteria

GREENPRENEURSHIP AT THE BASE OF THE PYRAMID: A SMALL SCALE COMMUNITY-BASED AFFORESTATION PROJECT IN INDONESIA

Approximately 41% of the Earth’s land surface is covered by drylands thatsupports 36% of the world’s human population. In Yogyakarta Province, Indonesia53% of the province is covered by drylands in which the driest regency, GunungKidul that occupies nearly 47% of the province, is covered by 70% agriculturaldryland. Despite the phenomena of forest degradation activities for agriculturaldevelopmet by large corporation, nearly abandoned agricultural drylands such as inGunung Kidul Regency exists all over Indonesia. Such drylands have not attractedlarge investors nor government to develop into agricultural activities due toeconomic reasons. This research explored a community based afforestation projectbeing carried out by the support of social investors and academic researchers,virtually without involvement of the government. Among other, teak is one of onlyfew plantations that could grow in such dryland areas and being the corecompetency of local farmers. The basic arrangement between the investors andfarmers was mudharabah revenue sharing as an alternative to conventional pay-incashto land owners and smallholder farmers. The economic benefits of theprogram were valued by using enterprise budget method by considering the capitalinvestment and operating expenses in which cost inflation and teakwood pricesincreases were incorporated. This research proved that the community-basedteakwood afforestation activities along with mudharabah revenue sharing inmarginal drylands could fairly improve the wealth of all stakeholders in theprogram

The Role of Sukuk Financing for Sustainable Development of Smallholder Farmers

The greatest advance made by mankind was probably the agricultural revolution that has been developed into agricultural development along with population growth in the forms of agricultural expansion and agricultural intensification. The global land grab driven by the acquisition of land has caused radical changes in the use and ownership of land and has important implications for equitable and sustainable development in which local people have been moved to marginal locations. To ensure that the agricultural activities are sustained, a balance of three concepts of people, planet, and profit (3P) are critical to achieve long term social, environmental, and economic issues. One of recently popular instruments to fairly treat the people is an equity based Sukuk in which profit will be shared based on pre-agreed ratio between the investors and the people involved. In term of conservation of planet, strategy in selecting the agricultural commodities and the timing of harvesting are critical. An investment decision-making process by using agricultural appraisal process is established to ensure that the agricultural activities are financially profitable

www.globalsubsidies.org THE GLOBAL SUBSIDIES INITIATIVE FOSSIL FUELS – AT WHAT COST? GOVERNMENT SUPPORT FOR UPSTREAM OIL AND GAS ACTIVITIES IN INDONESIA

Government support for upstream oil and gas activities in Indonesi