Indonesia’s Dairy Sector Goes Digital: OJK and ILO Partner to Empower Farmers

In a major step toward modernizing Indonesia's agricultural economy, the Financial Services Authority (OJK) and the International Labour Organization (ILO) have officially launched the Dairy Ecosystem Digitalization Programme, a pioneering initiative designed to expand financial inclusion and accelerate digital transformation in Indonesia's dairy sector.

The program, launched on 12 October 2025 in Malang, East Java, marks the first phase of a long-term collaboration between OJK and the ILO under the Promise II Impact project, with support from the State Secretariat for Economic Affairs (SECO) of Switzerland. It aims to bridge the gap between rural dairy cooperatives and formal financial systems, improving access to credit, technology, and sustainable livelihoods for thousands of smallholder dairy farmers.

"Digitalization is not just about technology—it's about opportunity and fairness," said Hasan Fawzi, OJK's Chief Executive for Financial Sector Technology Innovation, Digital Financial Assets, and Crypto Assets Supervision. "Through this collaboration, we are helping smallholder dairy farmers who have long been underbanked or unbankable to gain access to formal financial services."

Driving Financial Inclusion Through Digital Innovation

The Dairy Ecosystem Digitalization Programme introduces a comprehensive Enterprise Resource Planning (ERP) platform that integrates multiple aspects of cooperative operations—such as milk collection, logistics, finance, animal health, and payments—into a single, transparent digital system.

This ERP system connects cooperatives and farmers directly with Alternative Credit Scoring Providers (PKA) and Financial Services Aggregator Operators (PAJK), allowing financial institutions to better evaluate creditworthiness and extend loans to small-scale farmers who were previously excluded from traditional banking systems.

According to Fawzi, digital tools like ERP systems and alternative data-based credit scoring are key to unlocking rural financing, especially for agricultural sectors that rely heavily on informal transactions.

"For farmers, digital records create financial visibility. For banks, they create trust. Together, these systems bridge the divide between informal agriculture and the formal economy," Fawzi added.

A Proven Model: Learning from West Java's Success

The initiative builds on the ILO's previous pilot program in Pangalengan, West Java, which demonstrated how digitalization could transform cooperative-based dairy farming. That pilot improved milk productivity, animal health management, cooperative transparency, and financial access for participating farmers.

"At the ILO, we work to create decent work for all. Through this project, we're building a more inclusive financial system powered by technology," said Djauhari Sitorus, Promise II Impact Project Manager at ILO. "The digital ecosystem we're launching in East Java has already proven successful in Pangalengan. It improved not only productivity but also farmers' access to credit and veterinary support."

The ILO's research shows that digital systems not only streamline cooperative operations but also strengthen resilience, allowing smallholders to cope better with price volatility, disease outbreaks, and supply chain disruptions.

Malang: A Strategic Hub for Digital Transformation

With over 12,000 dairy farmers and 85,000 cows, Malang is one of Indonesia's most important dairy-producing regions. The area has a strong base of cooperatives and smallholder farmers, making it an ideal testing ground for scaling up the digital ecosystem nationwide.

The digitalization program is expected to:

• Increase efficiency in milk collection and payments.

• Improve traceability and data accuracy across the supply chain.

• Enhance farmer incomes through easier access to formal credit.

• Support sustainability by integrating animal health and environmental data into cooperative planning.

"This is more than a technological innovation—it's an economic transformation," said Tomas Sugiono, ILO Promise II Impact Project Coordinator. "The ERP platform provides a digital bridge between dairy farmers, cooperatives, and financial institutions, ensuring better data visibility and enabling more accurate credit scoring."

Voices from the Field: Farmers, Cooperatives, and Partners

The launch event featured a talk show and knowledge-sharing session with key speakers from both the public and private sectors.

Aun Gunawan, Head of Koperasi Peternakan Bandung Selatan (KPBS), shared his cooperative's journey in adopting the digital system in West Java. "When we first implemented ERP, it was a challenge to adapt. But now, our cooperative operates more transparently, payments are faster, and banks are willing to work with our members," he said.

Meanwhile, Eva Marliyanti, President Director of KUD KAN Jabung Syariah, emphasized the potential for local dairy cooperatives in East Java: "Digitalization opens new doors for rural entrepreneurs. Our members can now track milk quality, production volumes, and payments—all in real time. This strengthens trust and efficiency."

"Cooperatives are at the heart of Indonesia's dairy industry," Marliyanti added. "By embracing digital transformation, we are ensuring that smallholder farmers have the tools they need to compete and thrive."

Building an Inclusive and Sustainable Dairy Economy

Indonesia's dairy sector faces long-standing challenges, including low productivity, inefficient logistics, and limited access to finance. The Dairy Ecosystem Digitalization Programme seeks to overcome these barriers by embedding digital systems into cooperative management and linking farmers with banks and fintech providers.

The initiative aligns with OJK's broader National Digital Finance Strategy, which emphasizes inclusive financial innovation for micro, small, and medium enterprises (MSMEs), and with ILO's global agenda to promote decent work, productivity, and digital inclusion in the agricultural sector.

Supported by Switzerland's SECO, the Promise II Impact Project combines financial innovation with social impact, helping small enterprises and cooperatives become more resilient and connected to national financial systems.

"This collaboration is a clear example of how technology and policy can come together to drive inclusive growth," said Djauhari Sitorus. "When farmers can access finance, they can invest in better feed, animal care, and equipment—and that means higher productivity and better livelihoods."

Looking Ahead: Scaling Innovation Across Indonesia

Following the Malang launch, the next phase of the program will focus on scaling digital platforms to other key dairy regions, improving data integration across cooperatives, and training farmers in digital literacy and financial management.

The long-term goal is to establish a nationally integrated digital dairy ecosystem, connecting farmers, cooperatives, financial institutions, and policymakers through shared data systems. This transformation could serve as a model for other agricultural value chains, including palm oil, fisheries, and horticulture.

The event concluded with a field visit to local dairy farms in Malang, where participants observed how technology is being used to improve productivity and sustainability on the ground.

"This partnership shows how innovation can empower the backbone of Indonesia's economy—its smallholder farmers," said Fawzi. "With the right technology and collaboration, we can make the rural economy smarter, stronger, and more inclusive."