BANDA ACEH – ILO – October 15, 2024 is marked as a pivotal moment for Indonesia’s small and medium-sized enterprises (MSMEs), particularly in the patchouli oil sector in Aceh, with the signing of a Collaboration Agreement between the International Labour Organization (ILO) and Syiah Kuala University. This partnership will enhance the capacity of smallholder farmers’ financial literacy in the value chain ecosystem of the Atsiri Research Center (ARC) at the Syiah Kuala University through comprehensive training, innovative digital tools, and improved access to financing to increase growth and market access.
With over 64.2 million MSMEs contributing 60.5% of Indonesia’s GDP and employing 97% of the workforce, these enterprises form the backbone of the nation’s economy.[1] The agriculture sector, a significant segment of these MSMEs faces unique challenges, including limited access to credit, limited access to the market, weak capacity, and regulatory hurdles that hinder competitiveness.
“The potential for Indonesia’s patchouli oil sector to fuel sustainable and human-centred economic growth and job creation is immense. This partnership represents a unique opportunity to connect a premier research institution with industry to bring benefit to both the industry and the community. By working together, we are laying the groundwork for a sustainable patchouli oil value chain that supports local farmers while responsibly promoting the highly sought-after patchouli oil – both for domestic and export markets,” said Simrin Singh, ILO Country Director for Indonesia and Timor-Leste.
Indonesia is a global leader in patchouli oil production, accounting for 80-90% of the global market, with Aceh supplying 70% of this demand.[2] The collaboration between ILO and Syiah Kuala University will focus on productivity improvements but also emphasize sustainable farming and production practices and decent job creation within the sector.
A significant milestone achieved today is launching an Enterprise Resource Planning (ERP) system that enables patchouli farmers to maintain records of their production processes, ensuring compliance with industry standards and regulations. This web-based ERP system, called MyNilam, is a tailored ERP for patchouli commodities that will improve operational efficiency, a centralised data for informed decision-making, manage inventory and supply chains effectively, and enhance patchouli crop management and planning in the ARC value chain ecosystem.
Lead by Djauhari Sitorus, Project Manager for ILO’s Promise II Impact, Jonas Grunder, Program Manager of State Secretariat for Economic Affairs (SECO), and Dr. Syaifullah Muhammad, Head of ARC, the launch of MyNilam will not only help local farmers gain credibility in the eyes of consumers but will also make the patchouli sector more appealing to financial institutions. As a result, farmers will have better access to much-needed capital, which is essential for ensuring the sustainability of patchouli production and improving their livelihoods.
MyNilam provides farmers with essential features, including profile management, production tracking, commodity traceability, and sales monitoring. Improving operational efficiency empowers farmers to adopt sustainable practices and fosters long-term growth in the patchouli sector, ultimately enhancing their quality of life.
“The launch of MyNilam is a game-changing opportunity for patchouli farmers,” stated Djauhari Sitorus. “We hope through Promise II Impact, the benefits from digital innovation such as the use of ERP can also be replicated in patchouli ecosystem in other locations that share the same objectives with us.”
Prof. Dr. Ir. Marwan, Rector of Syiah Kuala University, added, “With MyNilam, we are not just providing a tool; we are equipping farmers with the resources to build a sustainable future. This is about creating a thriving agricultural community that can compete in the global market.”
Additionally, the event celebrated Aceh’s first patchouli oil exports from the Indonesian Financial Services Authority (OJK)’s Inclusive Financial Ecosystem (EKI) Village, showcasing the tangible results of collaboration and innovation in the region. Based on the latest data, historically, only 0.01% of Aceh’s credit has been allocated to the patchouli sector, highlighting the need for financial ecosystems that better support farmers.[3]
“The collaboration between OJK and ILO in EKI Village significantly advances the patchouli sector as it is designed to unlock the full potential of rural areas—natural, cultural, social, and financial—by expanding access to banking, insurance, and capital markets,” said Mahendra Siregar, Chair of the Board of Commissioners of OJK. This initiative is expected to accelerate rural development and improve the welfare of village communities.
Dr. Erdiriyo, Deputy Assistant in Charge of Financial Inclusion & Islamic Finance from the Coordinating Ministry for Economic Affairs (CMEA) also added that the collaboration aligns with Indonesia’s National Strategy for Financial Inclusion, empowering local farmers with essential resources and training to enhance productivity and integrate rural communities into the national financial ecosystem.
The ILO’s Promise II Impact project, now in its second phase, aims to tackle these challenges directly, with the support of the Swiss Confederation Government through SECO. The project focuses on enhancing financial service providers’ capacities and promoting financial inclusion. Today, 200 farmers at the ARC have benefited from financial literacy and entrepreneurship training, with 20% of participants being women.
“This collaboration between Switzerland and Indonesia is a powerful example of how financial inclusion and digital transformation can drive sustainable economic growth. I am especially pleased with the commitment from all stakeholders involved in this patchouli value chain, and I believe this can serve as a model for other sectors and future replications,” said H.E. Olivier Zehnder, Ambassador of Switzerland to Indonesia, Timor-Leste and ASEAN.
ILO, in partnership with OJK, CMEA, and the Aceh Provincial Government under the Regional Financial Access Acceleration Team (TPAKD), envisions a future where the patchouli oil sector serves as a model for sustainable agriculture and financial inclusion that stands to benefit thousands of smallholder farmers, driving national economic growth and fostering resilience in the agricultural sector.
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