Blogs: Smallholders

It generally surprises people who are unfamiliar with the Indonesian palm oil industry to learn that it is not dominated by a handful of big companies. Instead, some two million smallholders own over 40 percent of all palm oil estates in Indonesia.

That’s why it’s crucial in any discussion of promoting economic growth, social progress and sustainable agriculture to look at how to improve the welfare of these smallholders. This is especially true for independent farmers who are not connected to any one particular company or estate. Their productivity is often very low  compared to plasma smallholders who benefit from good quality seeds, fertiliser and agricultural practices due to their links to the big plantation companies.

At GAR/SMART we are trying to level the playing field by bringing independent farmers up to the level of our own estates because we believe this is key to creating a resilient and sustainable palm oil industry.

No difference between nucleus, plasma and independent estates

This was noted by Food and Agriculture Deputy in the Coordinating Ministry for Economic Affairs, Ms. Musdhalifah Machmud who recently paid a visit to Jak Luay Village accompanied by the CEO for East and South Kalimantan region, Mr. Suryanto. Looking at the conditions on the ground, Ms. Musdhalifah observed that the Company had succeeded in ensuring that nucleus, plasma and independent estates were all equally well run. “There’s no difference in terms of quality between the nucleus and independent estates. Everything is managed properly.”

Meeting an independent smallholder Ms. Musdhalifah learnt that he felt very fortunate to be partnering with the Company as it provides support in the form of infrastructure, quality seeds and fertiliser, mentoring and training. The farmer also benefits from the Innovative Financing scheme designed to help farmers replant their estates and boost yields.

We now support various Innovative Financing schemes in East Kalimantan and Riau, using these to help propel independent farmers to higher productivity. In East Kalimantan around 4,000 households have benefited from the Innovative Financing scheme.  Meanwhile, in Riau GAR also implements a form of financing support for independent smallholders. The Company acts as a guarantor for planting, estate management and helps cooperatives in implementing the replanting programme.

These efforts help to improve the livelihoods of millions of farmers who depend on palm oil and make the industry more robust.  As Ms. Musdhalifah pointed out, with palm oil earning around USD19 billion last year, the country needs a strong sector for the long term. “We wouldn’t want to let other countries surpass us. We must take advantage of technological advances, so that the palm oil industry in Indonesia can grow continuously for a hundred years to come.”

Read more about GAR/PT SMART’s efforts in helping farmers in our Sustainability Report 2015.