Musim Mas' smallholder programme increases financial access for independent smallholders
17 May 2019, Indonesia - For the first time, independent Smallholders around Musim Mas’ subsidiary PT Siringo-Ringo (SRR), in Rantau Prapat, North Sumatra, Indonesia, are receiving funding to replant their oil palm. This funding, provided by the Indonesian government’s Palm Oil Fund Management Agency (BPDPKS), helps to promote sustainable agriculture practices and increase market access among Smallholders – goals synonymous with Musim Mas’ smallholder programme.
Above: To celebrate the breakthrough in financial access for Smallholders , Musim Mas held an inaugural replanting event on 16 May 2019 with a farmer association of independent Smallholders , BPDPKS, the Indonesian government, BNI bank and IFC.
Approximately every 25 years, oil palm cease to be productive and need to be replanted. Otherwise, Smallholders risk declines in yield and revenue. Traditionally, slashing and burning is one of the means to clear land for replanting, as it is the quickest and cheapest means.
In addition, replanted oil palm do not yield in the first two to three years of replanting, hence stressing the financial burden on Smallholders . Therefore, support from the industry, government and financial sector is crucial to promote sustainable means of replanting.
Including financial support in smallholder programmes
Musim Mas’ smallholder programme recognises that agronomic training is not enough to encourage sustainable production of oil palm from Smallholders . Hence, our smallholder programme also provides education on legal requirements, financial support and access to global markets.
Musim Mas first started its smallholder
programme, in collaboration with IFC, in 2015 and have since reached out to
over 15,000 Smallholders . This Musim Mas-IFC joint programme is the largest
independent smallholder programme in Indonesia.
Forming farmer group associations accelerates sustainable oil palm production
As part of the smallholder programme, independent Smallholders are encouraged to band together to form farmer group associations. This is so that collectively, Smallholders can reach out to organizations and vice versa. This accelerates the process of distributing government replanting subsidies and other benefits to Smallholders , as they are a cooperative.
Left: At the inaugural replanting event, Musim Mas invited the Regent of Labuhanbatu to replant an oil palm seedling in one of the independent Smallholders ’ plantations.
“Our replanting target for this year is 200,000 hectares of oil palm, and to date we have replanted approximately 10% of the target,” said Hosea Reno, a representative from BPDPKS. “This year, we signed contracts with 80 farmer associations who have received the replanting subsidies.”
With roughly 2 million Smallholders in Indonesia from different ethnic backgrounds and locations across the archipelago, forming farmer group associations requires a lot of time and tenacity. In Rantau Prapat, where Musim Mas’ subsidiary PT SRR situates, IFC and Musim Mas have successfully helped form a farmer association, Maju Lancar Mandiri Labuhanbatu (MLML).
“Our biggest obstacle in forming MLML was convincing the independent Smallholders to join this programme [by Musim Mas] and not to drop-out midway. One of the reasons why Smallholders drop-out is due to the long verification process,” said Hamdan, the Chairman of MLML.
Above: Genting, an independent smallholder from MLML, receives a cheque of replanting funds on behalf of MLML from the Indonesian Oil Palm Plantation Fund Management Agency (BPDPKS).
Expanding the smallholder programme
To scale up the smallholder programme, Musim Mas is extending its smallholder programme to its other mills and third-party mills.
“Collaborations across sectors, such as the government and banks are crucial to support Smallholders to continuously adopt sustainable agriculture practices,” says Rob Nicholls, General Manager of Programmes and Projects of Musim Mas. “We are glad to rope in a long-term commercial partner, BNI bank, to get involved in the replanting programme for Smallholders . We hope bring in more financial partners to ensure the continuity of the programme.”
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