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Smallholders

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Smallholders are “farmers growing oil palm, sometimes along with subsistence production of other crops, where the family provides the majority of labour. The farm provides the principal source of income, and where the planted area of oil palm is below 50 hectares in size.”

 

Smallholders farm more than 40% of the oil palm plantations in Indonesia. The estimated number of smallholder farmers is about 2 million farmers, excluding their families.

 

We work closely with the schemed Smallholders in our plantations and mills. Schemed or associated Smallholders  are structurally bound by contract, a credit agreement or planning to a mill. They do not choose which crop they grow, are supervised in their planting and crop management techniques, and are often organized, supervised or directly managed by the managers of the mill, estate or scheme to which they are structurally linked.


We also work closely with independent Smallholders too, both the ones who supply to our mills and the ones who supply to our third-party mills. Independent Smallholders  are self-financed, managed, and equipped and are not bound to any one mill. They may deal directly with local mill operators of their choice or process their Palm Oil using personal or community manual Palm Oil presses (more common in Africa).

 

As independent Smallholders also form a significant part of our third-party mills’ supply bases, Smallholders are an important group of stakeholders in our strategy to implement our Sustainability Policy or No Deforestation, Peat, and Exploitation (NDPE ) policy. The chief domestic concern with the NDPE policies is that the policies exclude Smallholders from the supply chain, due to suspension policies. With the mixing of Smallholders ’ oil into the Indonesian supply base, the smallholder dilemma that comes with NDPE policies is complex.

Scheme Smallholders

We provide financial and technical assistance to develop the villagers’ arable land into oil palm holdings (smallholder projects) through cooperative programme, Kredit Koperasi Primer Anggota (KKPA) and Village Development Programmes. As per end 2016, here are the total families/villages of the KKPA and Village Development Program which we are supporting:


Kredit Koperasi Primer Anggota (KPPA)

ProvinceTotal
Riau935 families
West Kalimantan718 families
West Sumatra 762 families


Village Development Programmes

ProvinceTotal
Riau5 villages
South Sumatra1 village
Central Kalimantan8 villages


The other community projects include the construction of wells, road repairs, free medical aid and financial assistance for local community projects. These programmes create employment and increase the community’s income level.

In 2011, the Group’s affiliated Smallholders under the KKPA successfully complied with RSPO certification requirements. The KKPA in West Sumatra is the first smallholder scheme in Indonesia to receive the Indonesia’s National Interpretation of RSPO P&C certification. The Smallholders must adhere strictly to RSPO standards and undertake one main audit every five years, with four annual surveillance assessments. Please click here for more information on the KKPA farmers. 


CompanyName of scheme smallholdersCertified areaNumber of families in KKPA
PT AgrowiratamaKoperasi Sawit Bersama I & Koperasi Sawit Bersama II524262
PT AgrowiratamaKoperasi Sawit Bosa Sungai Aua Manjunjung Bilang500250
PT AgrowiratamaKoperasi Sawit Datuk Bosa Sikilang500250
PT Musim MasKKPA Rawa Tengkuluk802401
PT Musim Mas KKPA Merbau Sakti1066.13534

Updated as at July 2017


The KKPA scheme has resulted in increased productivity, which in turn increased the earnings of Smallholders . For example, our smallholder cooperative in the West Pasaman Regency, West Sumatra Province, contributed to a mosque, a kindergarten and an indoor sports centre.

Independent Smallholders

Given the smaller scale of the Smallholders ’ operations (with planted areas of less than 50 hectares), Smallholders are usually disadvantaged by limited financial resources, limited access to technology and best operational procedures. Hence, the resultant low yields and less environmentally desirable practices make it difficult and costly for them to achieve RSPO certification.

 

Musim Mas is collaborating with the International Finance Corporation (IFC) – a member of the World Bank unit - to assist independent Smallholders who have been supplying FFBs to our subsidiary. We started with one of our subsidiary, PT Siringo Ringo (Siringo Ringo) in Rantau Prapat, Sumatra, Indonesia in June 2015. Siringo Ringo has an independent smallholder supply base that makes up ninety percent of the total FFB supply.

 

The project has since been extended to three other mills in Riau that sources from many independent Smallholders too. These three mills are estimated to benefit additional 9,000 independent Smallholders , bringing the total number of beneficiaries of the Musim Mas-IFC joint projects to 12,000 Smallholders .

 

The project serves to bring these independent Smallholders up to efficient farming standards adopted by large Palm Oil organisations. We will provide agronomic training, provide access to financial support and global markets and educate on the legal requirements. The project will close the gaps between current practices and those required for certification. The project is also part of our endeavors to reach out to more Smallholders for an inclusive supply chain.


Indonesia Palm Oil Development Scheme for Smallholders (IPODS)
This is the largest Independent Smallholder Project in Indonesia. Kicked-off in June 2015, IPODS’ target by end of December 2020:
  • 12,000 independent Smallholders registered
  • 2,000 independent Smallholders certifiable under RSPO, ISPO, and ISCC
For more information, please refer to here for the public presentation on IPODS. 

Key support strategies for Smallholders

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Skills for Smallholders

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Feedback from Baseline study on Independent Smallholders (2014)
  • Independent Smallholders  want agricultural training. 
  • They need quality fertiliser support. 
  • The use of certified seeds is low at only 25%. 
  • Only 1% of the independent Smallholders  in PT. Siringo Ringo's supply chain have heard of RSPO or Minyak Sawit yang Berkelanjutan.

    How is the project different?
    • Independent extension platform of agronomists and farmer advisers who are recruited from the local communities.
    • Electronic tag for traceability.
    • Training modules that focuses on family such as nutrition for children, not just agriculture.
    • Grouping the previously unorganized farmers into groups for greater bargaining power.

    These are truly independent Smallholders who are individuals not organized in a formal manner. 

    Former schemed Smallholders who are made independent Smallholders have gone through some form of organization and are used to partnerships with large corporations.

    The project has to reach out to all the skeptical independent Smallholders , one smallholder at a time.

    Objectives
    • Improve independent smallholder farmers access to Good Agricultural Practices (GAP) and Better Management Practices (BMP).
    • Integrate at least 500 independent smallholder farmers certifiable under RSPO, ISPO and ISCC into Musim Mas supply chains for traceable CPO.

    Challenges of Project
    • Smallholders are worried about legal investigations into their ownership of the land.
    • The farmers did not initially visualize the benefit from the training programmes and waited to see the results.
    • It took us a year to build trust among the Smallholders .

    About the International Finance Corporation

    International Finance Corporation (IFC), a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.

    IFC utilizes and leverage its products and services—as well as products and services of other institutions in the World Bank Group—to provide development solutions customized to meet its clients’ needs. IFC applies its financial resources, technical expertise, global experience, and innovative thinking to help its partners overcome financial, operational, and political challenges.

    Clients view IFC as a provider and mobiliser of scarce capital, knowledge, and long-term partnerships that can help address critical constraints in areas such as finance, infrastructure, employee skills, and the regulatory environment.

    IFC is also a leading mobiliser of third-party resources for its projects. Its willingness to engage in difficult environments and its leadership in crowding-in private finance enable the corporation to extend its footprint and have a development impact well beyond its direct resources.

    For more information on the International Finance Corporation, please visit their website here.