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The Value Initiative Program in Indonesia Image

Promoting Inclusive Markets and Financial Systems

The Value Initiative Program in Indonesia

The Value Initiative Program in Indonesia

Summary

Greater Jakarta, Indonesia, is a megalopolis of 25 million people that includes Jakarta, Bogor, Depok, Tangerang, and Bekasi. It is a thriving hub of economic activity and its informal sector is one of the economic engines of the city, employing roughly 40 percent (4 million) of the urban workers. Many of these workers live in slums, barely earning enough to survive, linked together by complex social networks, based on their communities of origin, and through sophisticated business networks based on informal reciprocity.
 
The Value Initiative Program in Jakarta, Indonesia (VIP-Indonesia), introduced cleaner production technology to thousands of tofu and tempeh producers in Greater Jakarta between 2009 and 2011. The value chains for tofu and tempeh (staple foods made from soy beans) exemplify many urban, informal-sector industries.  They operate outside regulations with little support from government or economic development initiatives, and offer easy-entry jobs with poor working conditions. Yet they provide a living to hundreds of thousands of people who support each other through social ties based on their community of origin.
 
VIP-Indonesia took on the challenge of strengthening the tofu and tempeh value chains, which primarily provide affordable food to customers with low-to-moderate incomes. Rather than help a few better-off producers reach high-value markets, the program chose to upgrade fundamental production processes on a mass scale, a strategy designed to benefit large numbers of lower-income producers, traders, and consumers. The upgrade was marketed as “cleaner production,” which included introducing stainless steel vats and boilers, gas cookers, and other modern equipment; and applying more hygienic and environmental production practices. The project helped producers access equipment financing for the upgrade.
 
The immediate benefits to producers included reduced fuel costs and higher productivity; the benefits for employees were improved working conditions with a cooler (lower ambient temperature), smoke-free environment. The added environmental plus was cleaner air and better waste-water management for the neighborhoods around the factories. Producers adopting the new technology reported higher income, compared to non-users, particularly due to reduced fuel costs and higher labor productivity. The project partners valued the improvements in working and environmental conditions and were satisfied to have found economically sustainable ways of introducing these kinds of improvements into the informal sector.


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