Smallholders
Oil palm smallholders are farmers with less than 25 hectares of planted oil palm. On average, smallholders manage about 2 hectares per household. Traditionally, the family provides the majority of labor and grows other crops for subsistence1.
There are two types of smallholders: Scheme and Independent.
| Scheme smallholders | Independent smallholders | |
|---|---|---|
| Bounded to a particular mill by contract or credit agreement | ✓ | ✗ |
| Autonomy to work with mill operator or agent of their choice | ✗ | ✓ |
| Receive supervision and training on planting, crop management techniques by mill managers | ✓ | ✗ |
| Access to schemes or assistance from government agencies, businesses or cooperatives | High | Low |
As of 2015, smallholders in Indonesia hold approximately 40% of oil palm plantations – independent smallholders at 22.5% (2.54 million ha) and plasma or scheme smallholders at 17.7% (2 million ha). There is an estimated number of over 1 million smallholders in Indonesia2. Yet, only less than 1% of independent smallholders are certified by the Roundtable on Sustainable Palm Oil (RSPO) and Indonesia Sustainable Palm Oil (ISPO)3.
According to the Palm Oil Agribusiness Strategic Policy Initiative (PASPI), smallholders are set to manage 60% of Indonesia’s oil palm plantations by 2030. This means that smallholders are a substantial group that must be included in the journey to make sustainable palm oil the norm.
Read: Four reasons why smallholders are key to sustainable palm oil
| 1 | RSPO Smallholders Definition. Roundtable on Sustainable Palm Oil (RSPO). Retrieved here. |
| 2 | Overview of Indonesian Oil Palm Smallholder Farmers. Daemeter, November 2015. Retrieved here. |
| 3 | Smallholder Farmers Are Key to Making the Palm Oil Industry Sustainable. World Resources Institute (WRI), March 2018. Retrieved here. |
Independent smallholders are usually disadvantaged due to the lack of access to updated technical and operational knowledge, limited access to markets, and financial resources. The result is often lower yield productivity, profitability, and sustainability standards. Scheme smallholders, due to their business relations with companies, have access to technical knowledge and financial resources. This is covered under our KKPA (Kredit Koperasi Primer Anggota) scheme.
Research from International Finance Corporation, a member of the World Bank, shows that independent smallholder yield is 116% below company plantations in Indonesia. The research also highlighted the agricultural practices of smallholders and how it can be improved, such as the efficient use of fertilizers and optimal harvesting periods.
As smallholders depend on the forests and environment for their livelihood, it is essential to promote sustainable production of oil palm to ensure resilience and long-term economic growth.
What is the smallholder program?
Targeted at independent smallholders, our program aims to integrate independent oil palm smallholders into sustainable palm oil supply chains. Its curriculum is developed from a diagnostic study on smallholders and is developed around five components that would encourage smallholders to produce oil palm sustainably.
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Yield
Improve oil palm agricultural practices. Increase quality and yield. Increase income and improve livelihoods.
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Market access
Increase market access by enhancing communication between smallholders and mills. Improve access to agri-finance for fertilizers.
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Replanting
Support replacement and replanting efforts in the case of aging palm.
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Legitimacy
Confirm the legality of the smallholders’ land titles.
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Alternate livelihoods
Assist smallholders to generate alternative income.
The curriculum modules within components of the smallholder program are designed such that smallholders work towards NDPE policy compliance. The modules and components are geared towards improving the livelihoods of smallholders. It covers good agricultural practices, financial literacy, and personal nutrition. The figure below lists the modules taught in the smallholder program.
Improving independent smallholders’ access to finance empowers them towards better profitability, social cohesion, and environmental protection. To facilitate this process, Musim Mas financed a working paper by the Singapore Institute of International Affairs (SIIA) to explore the prospect of providing green financing to independent smallholders. Read the full working paper here.
To date, we have established smallholders programs across Indonesia.
Independent smallholders program:
| Province | District | Musim Mas’ Mill | Mill Name | Started In | Smallholders Trained | Smallholders’ Land Bank (Ha) | Smallholders RSPO Certified | Note |
|---|---|---|---|---|---|---|---|---|
| North Sumatra | Rantau Prapat | ✓ | PT Siringo-ringo (SRR) | Apr-15 | 8,713 | 1,531 | 735 | – |
| Riau | Pelalawan | ✓ | PT Sinar Agro Raya (SAR) | Oct-16 | 8,089 | 1,424 | 367 | – |
| Riau | Rokan Hilir | ✓ | PT Bahana Nusa Interindo (BANI) | Oct-16 | 6,647 | 1,074 | 341 | – |
| Riau | Rokan Hulu | ✓ | PT Indomakmur Sawit Berjaya (ISB) | Oct-16 | 8,652 | 1,199 | 649 | – |
| Aceh | Aceh Tamiang | ✗ | PT Pati Sari | Apr-18 | 290 | 562 | – | – |
| South Sumatra | Musi Banyuasin | ✗ | PT Bastian Olah Sawit (BOS) | Dec-17 | 551 | 637 | – | – |
| Riau | Indragiri Hilir | ✓ | PT Guntung Idaman Nusa (GIN) | Dec-18 | 391 | 1,696 | – | – |
| Central Kalimantan | Karamuan | ✓ | PT Multipersada Gatramegah (MPG) | Apr-19 | 186 | 693 | – | – |
| West Kalimantan | Sambas | ✓ | PT Sarana Esa Cita (SEC) | Nov-19 | 393 | 510 | – | – |
| West Kalimantan | Ketapang | ✓ | PT Lestari Abadi Perkasa (LAP) | Jan-21 | 312 | 720 | – | – |
| Riau | Pelalawan | x | – | Sep-20 | 883 | 2,907 | In collaboration with United Nations Development Programme (UNDP) |
Data as of December 2021
Smallholders Hub:
| Province | District/ Village | Started In | Smallholders Trained | Smallholders’ Land Bank (ha) | Smallholders RSPO Certified | Village Extention Officers (VEO) 0Trained |
|---|---|---|---|---|---|---|
| Aceh | Aceh Tamiang | Oct-20 | 495 | 704.12 | – | 73 |
| Aceh | Aceh Singkil | Feb-21 | 400 | 602.50 | – | 75 |
| Riau | Dayun, Siak | Feb-21 | 156 | 695.20 | – | – |
| Aceh | Subulussalam | Nov-21 | – | – | – | 28 |
Data as of December 2021
For progress on our scheme smallholders, refer here.
Scheme smallholders are structurally bound to a specific mill by contract or credit agreement. We provide them with planting materials such as seeds, fertilizers and pest control. We invest significant resources for them to adopt good agricultural practices. Schemed smallholders are generally guided and overseen by the management of the mill, estate or scheme to which they are linked.
We reach out to our scheme smallholders in two ways: through a smallholder cooperative which is an individual-based approach tailored to families that own a plantation; and through a village program, a community-based approach designed for villages that collectively manage plantations. Both programs were initiated voluntarily in the 1990s, well before the 2007 establishment of Indonesian regulations that require companies to facilitate the creation of plasma smallholder schemes for the benefit of surrounding communities.
Read about the impact our programs have on scheme smallholders and in villages here.
Kredit Koperasi Primer Anggota
In 1996, we initiated a primary cooperative credit scheme called Kredit Koperasi Primer Anggota (KKPA) for smallholder family units who own two hectares of land or less. KKPA was first introduced in West Pasaman Regency in the Indonesian province of West Sumatra to empower local communities to achieve the necessary technology and skills to undertake palm oil cultivation. The scheme provides smallholders with practical support, including bank loan guarantees, agricultural training, and the transfer of quality seeds and fertilizers.
The smallholders under the KKPA scheme achieved compliance with the RSPO certification requirements in 2010. The KKPA in West Sumatra was the first smallholder scheme in Indonesia to receive the Indonesian National Interpretation of the RSPO P&C certification. These smallholders must now strictly adhere to RSPO standards, undertaking one main audit every five years and four annual surveillance assessments.
The KKPA scheme, which was launched with 762 smallholders, now comprises of 2,423 smallholders cultivating a total planted area of 4,625 hectares (as at 31 December 2017).
The KKPA scheme continues to increase productivity. The income of scheme smallholders has grown by 30-40% over the last few years, from just IDR 86 billion in 2015. This has reaped benefits for community development. For instance, the cooperative contributed to the construction of a mosque, a kindergarten, and an indoor sports center.
Village Development Program
In 2000, Musim Mas launched an outreach initiative for schemed smallholders known as the Village Development Program (VDP). Unlike our smallholder cooperative approach, which targets individual smallholder units, VDP is tailored for community-managed plantations. It is set up to promote economic independence and improve the welfare of communities in the surrounding areas by managing oil palm plantations while the land remains under their ownership.
Through VDP, Musim Mas facilitates funding and investment for oil palm development while providing the communities with technical guidance and training on oil palm cultivation. Once the oil palm enters its productive years, it is sold to Musim Mas, and the villages that own the plantation receive the proceeds from sales of FFB. These proceeds are used to cover operational costs and as installments towards investment costs.
We started out with four villages covering 12 hectares. We now work with 16 villages under the program.
As a result of VDP, the combined income of the villages has almost doubled over the last few years, totaling IDR 1 billion as of 2018.
