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Since their establishment in West Kalimantan, credit unions (CUs) have been imagined not merely as financial service providers in rural areas, but also as mechanisms of empowerment aimed at fostering the economic well-being of undercapitalised groups, including small farmers. The idea of economic empowerment has been manifested in the provision of financial services to rural farmers who were previously excluded from banking access. The absence of financial services in rural settings has been regarded as one of the underlying causes of poverty, constraining farmers’ ability to develop their livelihoods and exposing them to the risk of asset loss through exploitative debt relations. The availability of financial services has thus been envisaged as an ideal solution, offering farmers access to capital to enhance their economic capacity. This spirit of economic empowerment aspires to enable farmers to become masters—landlords—in their own homes, strengthening their economic position so that they might reclaim ancestral lands lost through practices of land dispossession. Yet, in practice, this noble aspiration does not always align with the realities on the field.
This dissertation begins with the case of Nek Yoyo, a Dayak farmer who passed away due to complications arising from illness. Financial constraints had long prevented him from accessing adequate medical treatment, compelling him to endure prolonged pain until his final days. His story inspired the formulation of the central question of this study: why have poverty reduction initiatives through financial intervention—namely CUs—not been fully effective in reaching smallholder farmers? This study seeks to uncover unintended consequences of CU interventions within rural contexts. Rather than simply accepting the widely circulated narratives of empowerment, I endeavour to examine directly the implications of the presence of financial institutions among farming communities. Employing an ethnographic approach allows me to investigate the consistency between narrated ideals and lived realities, delving into the everyday life practices and personal experiences of farmers in order to gain a more critical and comprehensive understanding.
Field findings indicate that, rather than universally fostering economic improvement, CUs at times generate unintended side effects. First, the presence of CUs in rural West Kalimantan does not automatically guarantee that all farmers are able to access the financial services provided. Certain groups of undercapitalised farmers remain excluded from these financial facilities. In practice, access to CU services is neither cost-free nor equally affordable for all, as not every group is capable of bearing the required fees for accessing its services. Second, the adoption of a more commercial philosophy has enhanced institutional profitability. Indeed, this strategy has enabled CUs to gain wider recognition within Indonesia’s credit cooperative sector. However, this commercial orientation has come at a considerable price, gradually eroding the social and empowerment-oriented characteristics that once distinguished them from other banking institutions.
Third, local socio-economic dynamics present further challenges to the realisation of the ideal of collective welfare creation. Large-scale land acquisition by oil palm plantations has led to a reduction of landholdings managed by farmers. At the same time, the promise of lucrative returns has fuelled competition among farmers, particularly through practices of land purchase and sale aimed at expanding oil palm businesses. CUs are able to generate benefits for wealthier farmers, reinforcing the capital they already possess through additional financial backing. Such enhancement of economic capacity enables the rich to expand their oil palm enterprises, often through the acquisition of land formerly owned by other farmers. Within this uneven competition, some farmers emerge victorious and legitimate control over rural resources, whilst others are left to endure the loss of their land.
These field findings have prompted me to reflect that, rather than functioning as instruments of economic empowerment, CUs have, in certain respects, come to operate as mechanisms of capital displacement. CUs, in this sense, act as intermediaries in the circulation of funds, absorbing savings from the broader farming population and channelling them to wealthier farmers for the purpose of capital accumulation, a process that often disadvantages smallholders. On a wider scale, the participation of farmers in financial institutions appears to expose them to another form of risk: being entangled within an extended financial chain, through which rural capital may become accessible to external actors beyond the village sphere. In the end, the financial intervention in the context of oil palm farmers constitutes a ‘false panacea’ which, rather than delivering prosperity, instead propels farmers further into the depths of poverty.