The Sweet Trap of KUR Behind the Government's Ambitious Self-Sufficiency Goals

By: Randika Ermawan, Doctoral Student of Agricultural Sciences, UMM

Livestock KUR and the Elusive Self-Sufficiency

Almost every month, the shadow of non-performing loans haunts many farmers. Not a few are forced to seek new loans just to cover previous obligations. In this situation, the People's Business Credit (KUR), originally designed as an instrument to strengthen businesses, risks turning into a cycle of debt.

Data from the Coordinating Ministry for Economic Affairs shows that in 2025, the realization of KUR distribution in the agricultural sector reached Rp78.08 trillion. However, the portion allocated to the livestock subsector was only about 1.8 percent, or approximately Rp1.4 trillion.

This problem is not a new phenomenon. The pattern repeats year after year: when issues arise, the solution offered is to increase quotas and expand credit access.

In the last five years, at least Rp110.31 trillion in KUR has been distributed to the agricultural sector. The nominal figure is large, but the amount of funds is not always directly proportional to the quality of policy governance.

Behind the ceremonies of fund disbursement and credit realization reports, a pattern of firefighting policy is evident. The government seems to operate on the assumption that debt-based capital injection is the primary answer to livestock problems.

In reality, KUR without improvements to the business ecosystem is nothing more than a temporary painkiller. It may reduce immediate pressure, but it does not resolve the root illness.

The fundamental issues lie in production costs, feed prices, livestock mortality risks, weak market access, and credit payment structures that have not fully adapted to the biological cycles of livestock farming.

When the government focuses on fund distribution at the start and then leaves farmers to face all business risks alone, the policy becomes reactive.

From a public policy perspective, William N. Dunn explains that reactive policies often emerge when problem formulation is not conducted accurately. If the root cause is not identified from the start, the policy will only repeat the same solutions for recurring problems.

As a result, rigid monthly installment schemes remain in place, while farmers struggling to meet credit obligations continue to emerge.

Uneven Growth

The claim that cheap credit fuels the growth of the livestock sector also needs to be read more critically.

Statistically, the livestock subsector did record a growth of 7.78 percent throughout 2025. One of the drivers was the increasing demand for eggs and broiler chicken meat to support the Nutritious Free Meal (MBG) program.

However, the important question is: who benefits most from this growth?

Broiler chicken and egg commodities have experienced a surplus, while beef and milk still face domestic production shortages.

Stronger growth is occurring in commodities supported by integrated industries with relatively mature business chains. Meanwhile, ruminant livestock, which are largely managed by small-scale farmers, remain left behind.

This is where the paradox arises.

If trillions of rupiah in KUR are distributed every year, why is the dependence on imported beef and milk still so high?

In 2024, national beef production was recorded at approximately 0.37 million tons, while demand reached roughly 0.77 million tons. Thus, about 52 percent of demand is still met through imports.

A similar condition occurs with milk.

National milk demand is in the range of 4.7 million tons, while domestic production is around 1 million tons. This means about 79 percent of demand still relies on foreign supplies.

National fresh milk production has also not shown significant growth. Production was recorded at approximately 837,223 tons in 2023, then fell by 3.44 percent to 808,352 tons in 2024, and only rose slightly to around 821 thousand tons in 2025.

This situation shows that the main problem is not just the availability of credit, but how effectively that capital can increase the scale and productivity of farmers.

Ideally, KUR could be used to encourage farmers to grow, for example, from owning two cows to five or ten.

However, in practice, credit funds are often exhausted just to keep the business running amidst high feed prices, veterinary costs, disease risks, and sales price volatility.

Without improvements in productivity and supply chain efficiency, KUR ultimately only functions as a short-term stimulant.

Self-Sufficiency Pursued Through Import Doors

The government places meat and milk self-sufficiency as an important part of the food security agenda, especially after the demand for animal protein increased through the implementation of the MBG program.

The targets set are also very ambitious.

To achieve milk self-sufficiency by 2029, the government states that Indonesia needs an additional one million dairy cows over five years.

As of May 2025, 196 business entities were reported to have committed to bringing in nearly one million dairy cows. In the same period, about 9,736 imported cows from Australia had entered Indonesia.

However, there is still a significant gap between commitment and realization.

Ministry of Agriculture documents show that the realization of cattle investment is running relatively slowly, while dependence on imports remains high.

By the end of November 2025, realization was only in the range of 12 thousand dairy cows and about 19.6 thousand beef cattle.

The statement by the Deputy Minister of Agriculture that bringing in cattle is faster than breeding them essentially illustrates the major dilemma in this policy.

This is where the problem becomes increasingly clear.

Self-sufficiency seems to be treated as a matter of importing cattle, rather than building the foundation of the national livestock industry.

Indeed, pregnant cows can be imported in a matter of months. But building a healthy livestock population, providing affordable feed, strengthening cooperatives, establishing a stable market, and creating resilient farmers takes years.

There is an imbalance that needs attention.

Investment paths are wide open for large companies, while small-scale farmers who have been raising livestock for years only receive a small portion of the total agricultural KUR.

If small-scale farmers are not placed as the main actors, then self-sufficiency risks only shifting the form of dependence.

From initially depending on imported meat and milk, Indonesia could shift to depending on imported breeding stock, technology, seeds, and a handful of large corporations.

Fixing the Scheme, Restoring the Dignity of KUR

KUR essentially still has an important position in supporting small-scale livestock businesses. What needs to be improved is not the existence of the program, but its design and implementation mechanism.

First, the payment scheme must adjust to the biological character of livestock businesses.

The concept of Yarnen or paying after harvest is worth considering, or at least providing a more flexible grace period for principal payments.

Cattle farming cannot be treated the same as daily trading businesses that have cash inflows almost every day.

There are reproductive, growth, fattening, and harvest cycles that require relatively long periods.

Second, KUR must be integrated with the business ecosystem.

It is not enough to just give farmers money. They need access to affordable feed, technical assistance, a guaranteed market, and standby buyers or offtakers.

In the context of dairy, for example, the processing industry needs to be given a greater role in absorbing domestic fresh milk through mechanisms that provide price certainty to farmers.

Third, protection against business risks must be strengthened.

Subsidized livestock insurance should be an integral part of the credit package, especially for small-scale farmers who have limited ability to bear the risks of livestock mortality or disease outbreaks such as Foot and Mouth Disease (PMK).

Without such protection, a single disease event can destroy a business built over years while leaving behind credit obligations that must still be paid.

Ultimately, KUR should be a tool to increase the capacity of farmers, not just increase the value of their debt.

If the policy design is not adjusted to the biological and economic realities on the ground, KUR risks continuing to be a "sweet trap" for small business players in rural areas.

Meanwhile, the target of meat and milk self-sufficiency will continue to be a slogan repeated from one policy period to the next.

It is time for the government to look at the real conditions in the farmers' barns, not just the credit realization figures in reports.

Self-sufficiency is not born solely from how much funding is distributed or how many cows are successfully imported.

Self-sufficiency is built from productive farmers who are financially healthy, protected from risks, have access to feed and markets, and are able to expand their businesses sustainably.

If that foundation has not been built, no matter how much credit is distributed, it will remain difficult to lead Indonesia toward true food independence.