The 3rd International Conference on Politics, Social Sciences and Humanities (ICPSH)

Purwokerto, November, 2024

Utilization of Social Capital in the Brown Sugar Industry to Maintain Business Continuity in Sukolilo
Village, Wajak District, Malang Regency

Authors
Devi Ernawati and Razzaqi Hatmawira Rabbani R2
1*

1
Faculty of Social and Political Sciences, Brawijaya University, Malang 65145, Indonesia
2
Faculty of Animal Science, Brawijaya University, Malang 65145, Indonesia
* Corresponding Author: Devi Ernawati Email: [email protected]

Abstract

Sukolilo Village is one of 378 villages in Malang Regency with various potentials, one of which
is the brown sugar industry, a local identity of the local community's economy. However, the
sustainability of this local industry is threatened by modernization which has an impact on
socio-cultural shifts by prioritizing production efficiency that abandons traditional values. As a result,
local industries are faced with business competition against large industries in terms of production
resources, product competence, distribution and product prices on the market. The lack of
regulations and policies from the government that support people's businesses makes it difficult for
local industries to develop. This study aims to identify the efforts and the challenges faced by the
local community in maintaining their businesses. This research is important to provide
recommendations to maximize the capabilities of industry players in increasing the resilience of local
businesses. Social capital has an important role in maintaining the resilience of local industries by
transforming social resources into economic capital. The methodology used in this study is a
qualitative approach with a descriptive method whose data collection is carried out through
observation and interviews. The results of the study show that social capital in the form of networks,
trust, and norms is a strong foundation in facing external challenges to maintain business continuity.
Among them are helping to mitigate financial risks and maintain business operations. The
development of a more structured and formal social capital can be the right strategic step in
strengthening this industry.
Keywords: business sustainability, local industry, social capital

1. Introduction

Referring to BPS data in 2018, it shows that the number of rural industries in villages or
sub-districts in Indonesia reviewed based on the existence and type of small and micro industries at
the village level cumulatively amounted to 147,662 business units divided into various types of
industries [1]. Of the several types of industries that exist, including the leather industry, wood
industry, precious metal industry and 5 metal materials, weaving industry, pottery or ceramic or
stone industry, fabric or weaving industry, food and beverage industry, and other industries. East Java
Province is one of the 36 provinces in Indonesia with various home industries, small industries, and
micro industries that are developing in this region. Referring to similar data, the number of industrial
distributions in the East Java Province is 24,540 business units [1]. Malang Regency is one of the
areas in East Java Province with villages that have various industrial potentials in them, one of which
is Sukolilo Village, Wajak District. Sukolilo Village is one of 378 villages in Malang Regency with
various potentials, one of which is industry. Where in this village there are 3 types of industries
developing, namely the brown sugar cane industry, the garden grass industry, and the cassava
cracker industry which are managed directly by the local community. When compared to other
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Purwokerto, November, 2024

villages in the Wajak District area which are also industrial villages, of course Sukolilo Village is
superior. This is because many villages in the Wajak District area only have one type of industry that
is developing in their area, while in Sukolilo Village, the industry that is developing in this village area
does not only focus on one type of industry but also has various other types of industries. In
addition, when viewed in terms of industrial quantity, Sukolilo Village also has a greater number of
business actors compared to other villages around it.
However, just like other rural industries, of course this brown sugar cane industry is faced
with various challenges that often threaten the existence and hinder the sustainability of this
business. The most prominent challenge is related to business competition with large industries,
especially in terms of production resources, product competence, distribution and product prices on
the market. In addition, the presence of new industries supported by the use of modern technology
in each production process is increasingly tightening competition between industries. Competition is
a condition where organizations compete to achieve desired results or goals, by competing in terms
of consumers, market share, survey rankings or required resources [2]. In addition, the lack of
regulations and policies from the government that support people's businesses weakens the
bargaining position and competitiveness of local industries, which in the worst case has the potential
to cause the business to go bankrupt.
Based on these problems, this study attempts to examine the use of social capital elements
as a strategy to actively achieve the sustainability of the brown sugar industry, by observing and
exploring the actors involved in the industry. The research objectives to be achieved are (1) to
determine the description and form of social capital in the brown sugar industry, (2) to determine the
extent to which social capital is used and utilized by brown sugar industry business actors. This
research is important to be carried out as evaluation material that can be used to provide
recommendations to maximize the capabilities of brown sugar industry actors in Sukolilo Village in
utilizing social capital to increase the resilience of their businesses. By utilizing social capital as a
survival strategy in facing dynamic industry challenges, this research is expected to provide practical
solutions for business actors to optimize the social resources they have. It is hoped that the results of
this research can contribute to the development of rural industry and support the sustainability of
local businesses in order to create long-term business sustainability.

2. Method

This study uses a qualitative approach with a descriptive analysis method. Iskandar (2009)
defines a qualitative approach as a process in research that seeks to understand based on an
investigation of a social phenomenon and problems experienced by humans. The descriptive analysis
method is a method that seeks to find facts and provide a picture of an experience or event in
people's lives [3]. The source of research data was obtained by conducting field observations and
interviews with informants. The technique for determining informants used is the purposive
sampling technique. Sugiyono (2009) explains that the purposive sampling technique in determining
informants is a sampling technique as a source of research data which is carried out on the basis of
certain considerations, in accordance with the criteria that have been set and are relevant to the
research topic [4]. with the characteristics that are set, namely first, those who are the main actors in
the industry including family members or in this case have the status of owners of the brown sugar
industry itself. Second, those who are directly involved in every production process or operation of
the brown sugar industry or in other words are workers in this industry. Researchers use business
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Purwokerto, November, 2024

actors or owners of brown sugar industries, including family members, as the main informants on the
grounds that these people know and understand more about the social capital in their brown sugar
industries.

3. Results and Discussion

3.1. Sukolilo Village Profile

Sukolilo Village is one of 13 villages in Wajak District, Malang Regency, East Java. The location
of Sukolilo Village is approximately 16 km from the capital of Malang Regency and 3 km from the
Wajak District office area. This village is on the same route as Tumpang District which is the main
access to enter the Mount Bromo Tourism Area. With an area of ​573 Ha, Sukolilo Village is the fifth
largest village of the total area of ​all villages in Wajak District. The topography of Sukolilo Village
includes lowlands, most of which are used as residential areas, village roads, agricultural land and
plantations such as sugar cane, corn, and garden grass. Not to forget, in this village there are also
several small livestock such as chickens, goats, and cows which are managed by several local
residents.

Sukolilo Village is known as an industrial village, because this village is a center for processing
local agricultural products. Various local agricultural products such as sugar cane are processed by
the local community into substitute products to have a higher selling value on the market. This is
done because selling processed substitute products is much more profitable when compared to
selling raw products. In other words, substitute agricultural products that have gone through a
processing process produce a greater profit margin than raw products. One of the several industries
in the Sukolilo Village area is the brown sugar cane industry which focuses on processing sugar cane
into brown sugar or the local community calls it Gulo Abang. The location of Sukolilo Village which is
quite close to the Krebet Sugar Factory production area makes the brown sugar industry mushroom
in this village.

3.2. Business Continuity of Brown Sugar Industry in Sukolilo Village

The development of the brown sugar industry in Sukolilo Village cannot be separated from
the historical nuances that have been passed down from generation to generation by the ancestors
of the local community. Where the existence of the brown sugar industry still survives until now and
efforts continue to be made to maintain its existence so that it can be passed down to the next
generation. The production house of the brown sugar industry in Sukolilo Village has been operating
since approximately 1918, with industrial activities centered in several hamlets in the village area.
Based on initial review data referring to information from the people of Sukolilo Village, it shows that
the processing system of the brown sugar industry in this village has changed a lot and continues to
evolve following the times. In the past, brown sugar processing was carried out nomadically, namely
by moving from one sugarcane plantation to another. Then the processing technology used was also
still simple, namely in the form of a manual mill made of wood with its operation utilizing the driving
force of animals such as cows and buffaloes. Over time, changes began to occur from the previously
nomadic sugarcane processing system (moving from plantation to plantation) to becoming settled by
building permanent buildings located near residential areas or adjacent to the homes of the business
owners.
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Purwokerto, November, 2024

Research data shows that out of 35 industrial business units, some have stopped production,
with only 22 remaining in this village area. It should be noted that the brown sugar industry in
Sukolilo Village is a people's business that is managed independently by the community, so that in its
implementation it is very dependent on the resources owned by business actors. The challenges that
often arise in this industry are related to minimal capital, because the production capital used only
comes from funds owned by business actors obtained from product sales. With the dependence on
funds owned by business actors, the development of technology and innovation that supports
industrial progress is limited. For this reason, assistance is needed from external parties such as
educational institutions that act as business partners. With this assistance, it can be a solution for the
brown sugar industry in terms of identifying potential sources of capital and financial management to
maximize the management of limited capital.

In addition to capital constraints, limited access to information technology is also the biggest
challenge in the brown sugar industry in Sukolilo Village. Most business actors do not have access to
the use of the latest production technology, as a result their businesses often experience delays in
terms of increasing production quality. Limited technology produces brown sugar products that do
not meet market demand standards, thus the production process must be repeated to produce
brown sugar that meets standards. Therefore, there needs to be involvement from external parties
such as government institutions and the private sector to provide opportunities for business actors
to receive technology transfer through counseling and training. Where it is useful for the
development and improvement of the production capacity of brown sugar industry business actors
to carry out wider market expansion.

3.3 The Potential of Social Capital Utilization to Support Business Continuity of Brown
Sugar Industry in Sukolilo Village

3.3.1 Forms of Social Capital in the Brown Sugar Industry

Putnam (1993:36) explains that social capital includes physical capital and human capital,
where the term social capital can be interpreted as a feature of social organization that refers to
networks, norms, and beliefs that can be used to improve the structure of society and facilitate
certain actions from actors involved in the structure [5]. Tonkiss (2004:11) added that social capital
can have economic value, because of its ability to transform potential into real power that can be
used as a supporter of development to encourage progress [5]. Lesser (2004:121) revealed that there
are several reasons behind the importance of the presence of social capital in small industries,
including; (1) facilitating access to information, (2) as a medium for sharing power, (3) as a means of
developing solidarity, (4) intermediary for mobilizing resources, (5) a tool for achieving common
goals, and (6) forming common behavior in the organization [5].

The social capital of the brown sugar industry in Sukolilo Village can be seen from the way
the local community builds networks, norms and social beliefs that apply among them. Where the
three elements of social capital are formed gradually and are continuously maintained by the
community in the business environment and joint production process. This social capital is the basis
for the community in building mutually beneficial cooperative relationships by reducing the risk of
conflict through increased coordination and participation in production activities. In running their
business, the community of brown sugar industry business actors adhere to social norms, respect
shared values ​and interact with each other in social networks, this can be seen from the process of
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disseminating information that takes place between them. Based on mutual trust, information
received from fellow business actors is used as a benchmark for them in making business decisions.
The following is a further explanation of the elements of social capital in the brown sugar industry in
Sukolilo Village:

● Social Network

The social network in the brown sugar industry in Sukolilo Village refers to the relationship
between business actors and workers involved in this business. This relationship is seen from the
intensity of interaction and social contact that occurs between business owners and industry workers
in one industry or with other industries. In the process, interaction and social contact occur quite
intensely, resulting in a relationship that allows business actors and workers to transmit information,
technology, and knowledge to each party involved in this industry. The exchange of information and
knowledge that is carried out makes them have their respective roles and responsibilities to minimize
risks and reduce possible industrial barriers. On that basis, the behavior of each business actor and
worker in the brown sugar industry is interrelated which ultimately influences most of the choices of
actions by business actors towards their brown sugar industry.

● Social Norms

Norms in the brown sugar industry in Sukolilo Village refer to the standards of behavior that
must be followed by business actors and workers as parties involved in this industry. Where through
these standards that become the limits in shaping their behavior. This can be seen from the actions
of business actors and workers in one industry that are influenced by the behavior and opinions of
fellow business actors and other industrial workers in this village area. The structure of social
relations in the production activities of the brown sugar industry is mostly carried out on the basis of
social norms that apply in running a business in the village. From the existing structure, decisions and
thoughts between fellow business actors are interrelated and influence each other. For example, in
terms of decision making regarding production periods and production time gaps, industry players
tend to consider the similarity of actions from other industry players. Generally, industry players will
also take a production time gap when the majority of other industry players also do the same. On the
other hand, if most business actors run the production period, then other business actors will also
follow.

● Social Trust

Social trust in the brown sugar industry in Sukolilo Village leads to collective behavioral
habits resulting from the culture and social system of the local village. Where this trust is the basis
for business actors to carry out open communication related to making decisions concerning their
business. Business actors consider that with open communication it is easier for them to avoid
problems and minimize business risks. According to them, maximizing communication and building
cooperation will increase social exchanges that can bring more benefits. As

3.3.2 Social Capital and Its Relation to Business Sustainability

Business continuity is an effort to maintain and protect resources by developing certain ways
to meet the needs required for the production activities of an industry [6]. The scope of business
continuity includes capital continuity, human resource continuity, production continuity, and
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marketing continuity. Capital continuity is related to financial resources and their allocation of use, in
the brown sugar industry, the fulfillment of capital needs comes from the owner's personal funds
generated after the sale of brown sugar production results. Furthermore, if there is a shortage of
funds, the business owner will apply for a loan to the Bank to cover its fulfillment. This loan
application is only made when there is a significant discrepancy between the low selling price of
brown sugar and the high purchase price of raw sugar cane which results in the inability of the
proceeds from brown sugar sales to cover the costs at the start of production.

Human resource continuity is related to the skills of each party involved, in the brown sugar
industry, the fulfillment of production labor is carried out by taking and selecting people in one
village who have previously worked and have experience in this industry. This is done to minimize the
cost and time required. Field findings show that some of the workers interviewed had worked in one
of the brown sugar industries and then after some time moved to work in another industry. Worker
transfers are a natural occurrence in the brown sugar industry in Sukolilo Village without causing
disputes between the actors. Production continuity is related to the fulfillment of raw material needs
and production support facilities, in the brown sugar industry the fulfillment of production factors is
carried out by building good relationships with suppliers. This is intended to establish long-term
partnerships so that business owners do not need to worry about the availability of raw materials for
production that are needed at any time. In addition, with a partnership system like this, it is easier
for business owners to complain if the raw materials purchased are of poor quality and do not meet
the required standards.

Marketing continuity is related to the distribution of brown sugar products on the market, in
the brown sugar industry there is one industry that acts as a marketing manager. Where other brown
sugar industries deposit in this one industry to finally be sold to large factories with greater profits
when compared to selling them to the market. According to business actors, this system will result in
faster financial turnover with minimal waiting time, so they can immediately carry out the
production process again. In addition, the reason for choosing a deposit system like this is because
some industry owners have limited marketing networks. As a result, they prefer to focus on the
production process and hand over marketing distribution to one of the industries that has wider
relations for the sake of the smooth running of their business. Because if you do marketing
independently with minimal relations, the selling price obtained is not necessarily the same or can
even be lower than the selling price in the deposit system.

The relationship between business continuity and social capital, namely social networks
facilitate the flow of resources including the flow of information, technology transfer, or access to
capital. For example, in the form of cooperation with suppliers to ensure the availability of raw
materials that minimize production delays so that production activities continue to run. In addition,
social networks also help support access to the provision of capital obtained from trusted funding
sources from recommendations from fellow business actors. Social norms in the brown sugar
industry shape the attitudes and behavior of business actors who regulate work ethics so as to
minimize disputes and conflicts. For example, related to the transfer of workers between brown
sugar industries, this occurs without disputes because each business actor already understands the
social norms in this business. The social trust that is present in the brown sugar industry is reflected
in the product deposit system to one industry to reach wider marketing. This trust gives confidence
to every party in the brown sugar industry that the fulfillment of production is a shared
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Purwokerto, November, 2024

responsibility. The existence of this trust strengthens the commitment of each industry to not only
focus on personal profit but also on the shared success of the brown sugar industry in their village
area.

4. Conclusion

This study shows that social capital plays an important role in maintaining the sustainability
of the brown sugar industry in Sukolilo Village. In facing the challenges of the industry, the use of
networks, norms, and social trust can maximize the competence of the village industry. The use of
social capital helps mitigate financial risks and maintain the smooth operation of the business.
However, further evaluation and development are needed regarding the use of more structured and
formal social capital through the formation of social institutions. Where the formation of this
institution can be used as a coordination forum to maximize participation and support collaboration
in solving industrial problems experienced more optimally.

5. Conflict of Interest

The authors declare that there is no conflict of interest regarding the publication of this
article.

6. Acknowledgement

The authors would like to express their gratitude to all individuals and institutions who
provided invaluable support and assistance during this study, particularly the Faculty of Social and
Political Sciences, Brawijaya University for their technical and academic guidance. Special thanks are
extended to the local community and business actors in Sukolilo Village for their cooperation and
insightful contributions.

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