An Econometric Analysis of the Impact of Digital Finance on Maize Harvest Quality among Smallholder Farmers

Abstract

Digital financial services offer much to smallholder farmers, though the benefits of these innovations are often unclear. There are value chain structures in maize that aim to improve market access, food security, and the overall profitability of the system. This study focuses on the effect of digital microfinance on maize harvest quality within the maize farming system in Central Java Province, Indonesia. This study surveyed 320 smallholder maize farmers in the four most productive regencies of the province. The constructs of Digital Microfinance Access (DMAI) and Harvest Quality Index (HQI) were operationalised across multi-dimensional finance and harvest quality. When evaluating the constructs, Access and Finance were treated as latent. The results of this study indicated that digital microfinance positively affected harvest quality and that the impacts were substantial. Access to digital microfinance significantly improves harvest quality outcomes, as indicated by an average marginal effect of 0.284. A one-unit increase in the Digital Microfinance Access Index (DMAI) is associated with a 0.284 increase in the Harvest Quality Index (HQI), holding other factors constant. However, in the case of digital farming classes, access to digital microfinance had an adverse effect, unlike in the three farming categories. Digital microfinance mobilizes liquidity and transforms maize farming from structural, qualitative, competitive, and transformational perspectives. The findings confirm that improved access to digital microfinance significantly enhances maize harvest quality, with measurable gains in key quality indicators and clear differences across farmer segments.