Identifying Potential Sources of Sustainable Financing for Business Actors on Peatlands

Abstraksi

The Peat Restoration Agency (BRG) employs three approaches to restore 2.49 million hectares of peatlands across seven priority provinces: rewetting, revegetation, and revitalization of livelihood (BRG, 2016). The third approach aims at improving the economic welfare of peat communities through the utilization of the native commodities which could support sustainable peat management. These commodities are in fact valuable (e.g., purun, jelutung, gelam) and the locals have high dependency on them. However, a previous study mentioned that the locals often faced with restrictive access to the capital (Bunga et al., 2019). This obstacle often affects their decision to borrow capital from an unofficial source (i.e., middle-men) and becomes one of the inhibitors of their business growth. In addition, increasing financial or capital access of the business actors might increase their chance to develop their business. In the context of peat, successful sustainable business models might attract impact investments that can be used for peat conservation and restoration as well. Therefore, finding the sustainable financing sources for business schemes in peatlands are crucial. Method This paper analyzed the suitability of the financing sources for each business actor in peatlands by using a modeling approach. The data were collected through qualitative approaches, which aim to identify the financing scheme from each source of funding. The sources were categorized into public, private, and blended finance. The qualitative approaches were used to collect primary and secondary data. Primary data were collected through in-depth interviews and survey. Furthermore, secondary data were collected through desk study, which comprised of reviews on the published journal, scientific paper, and recorded official data which commonly gathered by the government. At the analysis basis, modeling can depict the opportunity of the business actors in accessing the funding by its designation. This model provides what is permissible, who can access, what is the requirements, how to account for the money, and what is the scheme of the agreement needed. Results It is apparent that peatlands offer sustainable business case, such as the production of native peatland commodities through paludiculture system. However, there has been limited financial scheme that suit this business case. Whereas in fact, this sustainable business case in peatlands can support socio-economic revitalization which can benefit various business actors. Unfortunately, most of the business actors cannot identify the suitable financial sources for supporting the sustainable business cases. The model results have identified the potential peatland financial schemes that can be accessed by the business actors. At grass-root level, public funding is the most well-known financial scheme by the small-scale business actors. Though the amount is relatively small, this is the most flexible fund to be utilized by the beneficiaries, notably community at the baseline. Indonesia’s Public Service Agency or known as Badan Layanan Umum (BLU) is an example of revolving funding scheme. BLU allows the business actors, particularly local farmer groups, to file budget proposal for land-based sector under profit-sharing system. The private sector holds significant roles in financing peatland restorations within their concessions thus, this may also be a way to finance sustainable business c on peat. Moreover, private sector has the potentials to invest in peat-related projects though most of them still see this as a high-risk investment. Investment return from several commodities managed in peatlands can be seen as an opportunity for both private investors and local communities through its shared-benefit. Besides, blended finance may also aid revitalization in peatlands sector although it is still very rare and limited to small-scale project in Indonesia. Blended financing scheme offers sustainable funding, through its mix funding sources, for these business models by lowering investment risk and involving various business actors to participate. All financial schemes distinguished by the model denote the existing opportunities that can be further utilized for financing sustainable business cases on peatlands. The three types of funding described can sufficiently benefit the business actors to support the business models on peatland. On the other hand, further understanding toward these funding scheme is required. The financier and recipient must realize that the sustainability principle of funding comes from both sides since the scheme has; regulation as the umbrella, the rule for requirements, and the mechanism ensuring a smooth flow of money. A financier should be careful in recognizing the government regulation (law), in which it can guide how to distribute the fund to the recipient. The rule designed for requirement must be aligned by the law. Conversely, the beneficiaries have to build their capacity to comprehend how the financing scheme works therefore this can be sustainable. To sum up, there are two points that should be concerned of. Firstly, the government should provide a proper regulation, thus the business process of financial scheme can be reliable and appropriate for the business actors. Secondly, there must be a commitment and supervision following the sustainable principle, wherefore, funds can be accessed once the recipient's requirements are met. On the other hand, to ensure the sustainability of the funding, recipients must be assisted with financial management. This is crucial to minimize the risk of nonperforming loan bad credit which may encourage fraud, given difficulties in running the business.