The objective of this study was to evaluate past and current policies and smallholder financing schemes in the palm oil industry in Indonesia and Malaysia. The outcomes of these models for smallholders were also evaluated, in terms of income security, sustainable practices and environmental impact. Finally, financing schemes that could contribute to more sustainable smallholder oil palm development were analyzed, and compared to past and existing schemes. The focus of this study is on oil palm smallholders, who play a crucial role in the palm oil production industry and account for the vast majority of oil palm cultivation in Malaysia, and even more so in Indonesia.
A number of past and current financing schemes in Indonesia and Malaysia were evaluated through a literature analysis and field assessment. In Malaysia, the main long-term financing challenges faced by smallholders have been solved by large government-sponsored financing schemes and are, thus, less relevant for the report’s discussion. As such, the case studies regarding current innovative financing schemes are restricted geographically to Indonesia.
The report proposes potential models to increase the mobilization of long-term finance to smallholders in the palm oil sector. Furthermore, it identifies and reflects on the key enabling conditions that would help overcome the bottlenecks in smallholder long-term financing and create an enabling environment for sustainable oil palm investments. These are: 1) incentives to meet sustainability requirements including Good Agricultural Practices, RSPO certification and deforestation-free production; 2) land tenure security; 3) improved market linkages between smallholders and mills; 4) support for FSPs to assess and manage risks; and 5) strong and effective smallholder organizations.
Download:
DOI:
https://doi.org/10.17528/cifor/006612Altmetric score:
Dimensions Citation Count:
Publication year
2017
Authors
Bronkhorst, E.; Cavallo, E.; van Dorth tot Medler, M.; Klinghammer, S.; Smit, H.H.; Gijsenbergh, A.; van der Laan, C.
Language
English
Keywords
oil palms, finance, small scale farming, supply chain, investment
Geographic
Indonesia, Malaysia
Funders
United States Agency for International Development (USAID)
