Source of finance and factors considered by banks in the provision of credit for cattle fattening in East Java Province, Indonesia

Access to capital is one of the major constraints in the development of cattle fattening in Indonesia 1bis paper aims to identify the types of financial services and factors affecting the flow of credit for cattle fattening operations. About 54 fatteners as well as fourteen staff from the bank in Tuban and Lamongan Districts, East Java Province, Indonesia were interviewed regarding sources of credit taken and factors considered by banks to lend to farmers. The result showed that finance for fattening is mostly by formal finance (bank, government, and company) both subsidized credit with six percent interest rate or commercial rate; while fewer percentage fatteners involved in sharing cattle arrangement. Even though a low-interest rate credit is less favorable for banks, this contributes to retaining the customers or attracting new borrowers; also expanding the sectors#x2019; scope of banks including cattle fattening. In addition, participating in farmer groups, technical supports by livestock agencies, the availability of certain markets; predicting profit in budget analysis; government policy; and the availability of money from banks are indicated as factors affecting supply for cattle credit. In conclusion, banks are likely to have an incentive to lend cattle fattening as a profitable investment with both subsidized and non-subsidized rate