The agreement was signed by Kanayo F. Nwanze, President of IFAD and Rionald Silaban, Senior Adviser to the Minister for Finance on Macro Economy and International Finance of Indonesia. IFAD is providing a US$98.5 million loan and a $1.5 million grant towards the $852.9 million Integrated Participatory Development and Management of Irrigation Project. Co-financiers are the Asian Development Bank ($600 million), the Government of Indonesia and other sources.

Smallholder farmers in Indonesia face a number of challenges, including declining rural infrastructure, diminished access to land, high transport and logistics costs, difficulty reaching markets and vulnerability to erratic weather patterns and lack of rainfall due to a changing climate.

“Indonesia has set ambitious targets related to food security and inclusive development in rural areas. This investment will contribute greatly towards supporting Indonesia to achieve its goals,” said Ron Hartman, IFAD Country Director for Indonesia. “By establishing a policy that allows smallholder farmers to help design and manage large investments in irrigated agriculture, there will be stronger and more sustainable results."

The project will improve farm productivity by providing a range of support options that include farmer-to-farmer knowledge dissemination, crop intensification and diversification methods, and better access to, and storage of, high-quality seeds. It will also establish better access to financial services, prioritize innovation in local value chains and encourage partnerships with private suppliers of agricultural inputs. Farmers will be in charge of managing the irrigation systems to ensure that access to water is  equitable and that maintenance costs and responsibilities are shared.

In the first phase, the project will cover 16 provinces in Sumatra, Java, Kalimantan, Sulawesi and Nusa Tenggara, with approximately 1,800 irrigation schemes covering a total area of almost 2 million hectares.

Since 1980, IFAD has extended loans to Indonesia for 16 programmes and projects totalling US$509.9 million reaching over three million households. In 2016, IFAD opened a country office in Jakarta, servicing Indonesia, the Pacific Countries, Papua New Guinea and Timor-Leste.