Indonesian Oil Palm Smallholder Farmers

Authors: Skye Glenday, Gary Paoli, Godwin Limberg, Jim Schweithelm

Publisher: Daemeter

Nov 2016

Daemeter announces publication of a series of three Working Papers on Indonesian smallholder oil palm farming, based on field research and outreach over the past two years. The goal of the series is to increase understanding of smallholder oil palm farmers, including their abundance and importance to production across Indonesia; operating models; access to finance; economic, business, and legal challenges; and impacts on forests and the environment. The research fosters more informed discussion on how farmer support programs can be designed, and how smallholder investments could be channeled to improve yields while managing risks of smallholder deforestation.  

  • The first paper provides an overview of smallholder farmers in Indonesia, describing (i) their contribution to production and geographic spread across Indonesia, (ii) a proposed typology of farmer organizational models, and (iii) an overview of farmer needs, potential impacts on the environment and options to address them. The paper is a useful primer for readers new to the subject, and offers novel insights for more experienced practitioners.
  • The second paper describes major sources of smallholder finance, and the terms and conditions associated with them, followed by discussion of financing gaps and challenges to filling them. The study highlights a genuine need to enhance farmer access to credit, especially long-term investment credit, through better alignment of terms and conditions with farmer realities, including use of non-traditional credit indicators or forms of collateral. To ensure sustainable outcomes, credit instruments must be combined with safeguards to manage risk of stimulating farm expansion into forested areas. 
  • The third paper addresses deforestation concerns, providing an overview of environmental impacts potentially linked to farmers, and examining how popular tools and approaches used for managing land use impacts could be applied to farmers. We draw interim conclusions on the most promising strategies, and highlight questions to foster more informed, critical discussion of this often times controversial topic.

The main findings and recommendations of the series are compiled in a Synthesis. Our research shows that oil palm smallholders are numerous, highly diverse, and widely distributed across Indonesia, pointing to the need for targeted research to better understand how to provide them with effective support, and how to manage impacts on the ground.  The series will foster more informed discussion on how farmer support programs can be designed, how to increase farmer access to credit, and how to manage risks of deforestation. Addressing these issues will require further research, outreach and, most importantly, scaled up experimentation with real pilots in the field.