The cacao industry has played an important role in terms of export earnings and employment opportunities in Indonesia since 1980s. It is the main source of income for more than one million smallholder farmers in Indonesia, who are considered poor. Most planted areas of cacao are in Eastern Indonesia; however, cacao production has developed in Western Indonesia recently, with West Sumatra designated as the area of central production. Due to the importance of cacao industry in the Indonesian economy, there is a big opportunity to explore the potential of the industry in poverty alleviation. The study uses the participatory impact pathway analysis (PIPA) method. It is a new approach to formulate a development strategy and policies proposed by the Institutional Learning and Change. This approach is used because it: (1) covers impact analysis in order to investigate the potential contribution of cacao agribusiness development to poverty alleviation, which is not covered by other participatory approaches; and (2) can be used to identify stakeholders‟ relationships for cacao agribusiness development. The use of PIPA in this study involves various tools: a participatory workshop, surveys and semi-structured interviews. Problems facing the cacao industry were identified through the workshop, including low yields and price and price instability. Lack of knowledge by farmers of agronomic practices and low quality of seedlings were considered to be the main causes of low yields by the participants. Low price of cacao beans was thought to be mainly caused by low quality of cacao beans while lack of cooperation between farmers and the village cooperative and lack of a farmers‟ association were considered to be the main factors affecting price instability. Farmer survey data results show slightly different priorities from the workshop. Most cacao farmers disagreed on the problem of low yields and low price of cacao beans but a high proportion agreed on the problem of price instability and confirmed that cacao farmers face a problem of low quality of cacao beans. Most farmers do not know the cause of price instability, while improper fermentation was agreed as the main factor causing the low quality of cacao beans.


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