The Potential Of Commodities Bank To Strengthen The Local Economy In West Sumatera

Abstract

The economic vulnerability of gambir farmers in West Sumatra, Indonesia, stems from their reliance on middlemen and the absence of financial mechanisms to support sustainable agricultural practices. This study proposes the establishment of a commodities bank that recognizes gambir as collateral, aiming to empower farmers and strengthen the local economy. Grounded in Human and Social Capital Theory and supplemented by Institutional Theory, this research integrates quantitative and qualitative data from key stakeholders, including farmers, middlemen, and local government officials. Findings reveal that a commodities bank mitigates price instability, enhances farmers’ bargaining power, and fosters sustainable agricultural practices. This innovative financial model bridges gaps in existing research by linking social trust and local governance with rural economic development. The study concludes by emphasizing the scalability of this model across other agricultural commodities, offering a framework to boost economic sustainability in developing regions. Policymakers are urged to prioritize localized financial solutions and institutional support to empower farming communities and reduce economic disparities.