Effectiveness of Organic Fertilizer Subsidies on the Profitability and Sustainability of Farmers' Savings and Loan Cooperatives
DOI:
https://doi.org/10.69855/panggaleh.v2i2.739Keywords:
Organic Fertilizer Subsidy, Profitability, Business Sustainability, Savings and Loan Cooperative, Smallholder FarmersAbstract
This study examines the effectiveness of organic fertilizer subsidies and cooperative financial support in shaping the profitability and business sustainability of a farmers' savings and loan cooperative in West Sumatra Province, Indonesia. A quantitative explanatory design was applied to 115 farmer-members who had received the organic fertilizer subsidy through the cooperative's revolving fund scheme. Data were collected using a structured Likert-scale questionnaire and analyzed through validity and reliability testing, classical assumption testing, and multiple linear regression using two structural models. The results show that subsidy effectiveness and cooperative financial support jointly explain 32.6% of the variance in business profitability, while profitability together with the two exogenous variables explains 50.3% of the variance in business sustainability. Both subsidy effectiveness and cooperative financial support have a significant positive effect on profitability (p < 0.001), and profitability, in turn, significantly and positively affects sustainability (p < 0.001), confirming a partial mediation pattern. The findings suggest that organic fertilizer subsidies deliver their strongest welfare impact when channeled through cooperative institutions that simultaneously strengthen farmers' access to affordable credit and savings services. The study contributes to the literature by linking subsidy-policy effectiveness with cooperative financial intermediation and long-term sustainability outcomes, an intersection rarely examined jointly in prior research on Indonesian farmer institutions. Policy implications for subsidy targeting and cooperative capacity-building are discussed.
References
Ashari, R., Jamil, A., & Fitriani, R. (2023). The impact of fertilizer subsidies on agricultural productivity in Indonesia. Indonesian Journal of Agricultural Economics, 12(3), 145–162.
Aulia, D. D. (2025, September 20). Pupuk Indonesia confirms subsidized fertilizer highest retail price (HET) applies at distribution points. detikFinance. https://finance.detik.com/berita-ekonomi-bisnis/d-8121842/pupuk-indonesia-pastikan-het-pupuk-bersubsidi-berlaku-di-titik-serah
Candemir, A., Duvaleix, S., & Latruffe, L. (2021). Agricultural cooperatives and farm sustainability: A literature review. Journal of Economic Surveys, 35(4), 1118–1144. https://doi.org/10.1111/joes.12417
Center for Indonesian Policy Studies (CIPS). (2024). Reviewing Indonesia's fertilizer subsidy reform. Jakarta: CIPS Indonesia.
Chollet, C., et al. (2026). The sustainability performance of agricultural cooperatives: A systematic literature review. Annals of Public and Cooperative Economics. https://doi.org/10.1111/apce.70013
Cui, N., Ba, X., Dong, J., & Fan, X. (2022). Does farmland transfer contribute to reduction of chemical fertilizer use? Evidence from Heilongjiang Province, China. Sustainability, 14(18), 11514. https://doi.org/10.3390/su141811514
Daadi, B., & Latacz-Lohmann, U. (2021). Organic fertilizer use by smallholder farmers: Typology of management approaches in northern Ghana. Renewable Agriculture and Food Systems, 36(2), 192–206. https://doi.org/10.1017/S1742170520000228
Deng, L., Wan, P., Ye, F., & Zhao, J. (2025). Impact of agricultural subsidy on chemical fertilizer use: Empirical evidence of China's Organic-Substitute-Chemical-Fertilizer policy based on double machine learning. PLOS ONE. https://doi.org/10.1371/journal.pone.0334751
Fatika, Y. H., Umar, H., & Nirmalawati, D. (2025). Analysis of the effectiveness of the subsidized fertilizer distribution program in Indonesia. Journal of Doctoral Management (JDM), 8(2), 196–205. https://doi.org/10.22441/jdm.v8i2.33990
Gikonyo, N. W., Busienei, J. R., Gathiaka, J. K., & Karuku, G. N. (2022). Analysis of household savings and adoption of climate-smart agricultural technologies: Evidence from smallholder farmers in Nyando Basin, Kenya. Heliyon, 8(6), e09692. https://doi.org/10.1016/j.heliyon.2022.e09692
Guo, L., Li, H., Cao, X., Cao, A., & Huang, M. (2021). Effect of agricultural subsidies on the use of chemical fertilizer. Journal of Environmental Management, 299, 113621. https://doi.org/10.1016/j.jenvman.2021.113621
Gusnardi, Basri, Y. M., Nurmayanti, P., Indrawati, N., Sari, R. N., Resnanda, F. D., & Indrapraja, D. P. H. (2026). Collaborative governance and explorative ambidexterity as drivers of sustainable competitive advantage and cooperative sustainability in Riau. Quality - Access to Success, 27(212), 448–459.
Irawan, D. R. (2025). Analysis of savings and loan unit income in assessing Return on Assets (ROA) at Angkasa Pura Employees Cooperative, Pontianak (Diploma Thesis, Accounting Program, Politeknik Negeri Semarang).
Jamil, A., Fatimah, S., & Muhafidin, D. (2023). Challenges in fertilizer subsidy governance in Indonesia. Journal of Public Policy, 8(2), 89–104.
Juliantono, F. (2025, September 4). Govt bolsters village cooperatives' role in fertilizer distribution. ANTARA News. https://en.antaranews.com/news/378277/govt-bolsters-village-cooperatives-role-in-fertilizer-distribution
Lee, H. P., & Kamarulzaman, M. R. (2025). Factors influencing cooperatives' performance: A case of the Malaysian school cooperative movement. Journal of Cooperative Studies.
Ma, L., Yang, H., & Li, T. (2025). Crossing the river by feeling the stones: Leveraging livelihood capital and cooperation to boost farmers' engagement in carbon markets. Energy Policy, 198, 114474. https://doi.org/10.1016/j.enpol.2024.114474
Mang'ana, K. M., Hokororo, S. J., & Ndyetabula, D. W. (2024). An investigation of the extent of implementation of the financial management practices of Agri-SMEs in developing countries: Evidence from Tanzania. Sustainable Technology and Entrepreneurship, 3(1), 100049. https://doi.org/10.1016/j.stae.2023.100049
Ministry of Agriculture of the Republic of Indonesia. (2023). Agricultural sector employment statistics in Indonesia. Jakarta: Ministry of Agriculture.
OECD. (2023). Indonesia: Agricultural policy monitoring and evaluation 2023. Paris: OECD Publishing.
Osorio, C. G. (2023). Update on fertilizer subsidy policy in Indonesia: Perspectives and challenges. Taipei: FFTC Agricultural Policy Platform.
Pies, M. P. (2017). Institutionalization and changes in organizational practices: A study of governance mechanisms in solidarity credit cooperatives (Doctoral dissertation, Universidade Municipal de São Caetano do Sul). https://repositorio.uscs.edu.br/handle/123456789/552
Putri Awallinda. (2025). Financial ratio analysis to measure financial performance at Samitra Dwija Mulia Savings and Loan Cooperative (2022–2024) (Diploma Thesis, Accounting Program, Politeknik Negeri Semarang).
Regulation of the Minister of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia No. 06/Per/M.KUKM/V/2006. (2006). Guidelines for assessing the financial health of savings and loan cooperatives.
Setiawan, B., Mardiharini, M., & Yusrin, A. (2021). The effectiveness of fertilizer subsidies on rice farmers' income in Indonesia. Indonesian Agribusiness Journal, 9(1), 45–58.
Wei, G., Kong, X., Wang, Y., et al. (2022). Will joining cooperative promote farmers to replace chemical fertilizers with organic fertilizers? International Journal of Environmental Research and Public Health, 19(24), 16647. https://doi.org/10.3390/ijerph192416647
Widyastutik, W., Aminah, M., Panjaitan, D. V., & Cahyadi, E. R. (2026). The role of fertilizer subsidies in rice productivity and profitability: Evidence from Indonesian smallholder farmers. Signifikan: Journal of Economics, 15(1). https://doi.org/10.15408/sjie.v15i1.50435
Zainudin, E., Setiawan, F. A., & Napitupulu, D. R. W. (2025). The contribution of savings and loan cooperatives to financial inclusion in Indonesia. TATOHI: Journal of Legal Studies, 5(7), 326–330.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Perspectives on Advanced New Generations of Global and Local Economic Horizons
This work is licensed under a Creative Commons Attribution 4.0 International License.
