Participants at the InPOP high-level advisory meeting, sponsored by the Swiss State Secreatariat for Economic Affairs (SECO), discuss smallholder financing schemes for sustainable palm oil development in Indonesia.
20 January 2016, Jakarta – To support Indonesia’s targeted increase of crude palm oil (CPO) production to 40 million tons per annum by 2020, the capacity of smallholder and independent farmers must be increased simultaneously. Access to financial capital has been recognised as an essential resource to support smallholder farmers in this pursuit and to serve as mechanism to potentially provide incentives for them to conduct better agriculture practices that increase yields and put less pressure on forest.
On January 20, 2016, InPOP convened a high-level advisory meeting in Jakarta to discuss smallholder financing schemes for sustainable palm oil development in Indonesia. The event, which was hosted by the Ministry of Agriculture and UNDP Indonesia with support from the State Secretariat for Economic Affairs (SECO) of the Swiss Government, convened key stakeholders in the palm oil industry to agree on ways to implement and improve existing smallholder financing schemes. Participants included key stakeholders from the government, smallholder unions APKASINDO and SPKS as well as financial institutions including Bank Negara Indonesia (BNI), and high-level representatives from the Indonesia Palm Oil Pledge (IPOP) and its member companies.
Around 50 stakeholders, both local and international, participated in the high-level meeting led by the Ministry of Agriculture. Photo:Nick Hurt/Jakarta/InPOP
Among the objectives of the high-level multistakeholder discussion was highlighting essential mechanisms that provide smallholder financing for activities such as replanting and education around good agricultural practice. It was reiterated by the government representatives present that increased production should not necessarily translate into land expansion but go hand in hand with higher-yields through intensification and better agriculture practices.
While substantial investment and financing was considered inevitable to improve the industry’s practices and productivity it was highlighted that long-term sustainability rests with the smallholders’ ability to form cooperatives in order to strengthen their position in the market and share knowledge of best practice. Sakariza Qori of Bank Negara Indonesia explained that in reality most small-scale farmers are considered ‘unbankable’ and in order to improve their chances of accessing credit, schemes should be designed around communities or cooperatives. Qori also emphasised the need for the oil palm sector to think creatively in order to attract more investment. “We need more creativity and innovation from the palm oil sector,” he said referring to recycling waste and upstream entrepreneurship.
The former Minister of Agriculture Prof. Bungaran Saragih spoke of the need for Indonesia to change its development paradigm. Photo:Nick Hurt/Jakarta/InPOP
General Manager of Asian Agri, Freddy Widjaya, highlighted the difficulty in establishing financing mechanisms for independent smallholder farmers, noting that partnerships with banking institutions were necessary.
The meeting participants agreed better coordination and understanding of existing initiatives such as the CPO Fund, the Plasma Programme and other non-government financing schemes was a priority action for the InPOP working groups.
Dwi Pratomo Sudjatmiko, InPOP’s National Project Director who also serves as the Director of Perennial and Beverage Crops at the Ministry of Agriculture, concluded the discussion by emphasising the need for swift follow-up as farmers look to replant their aging crops over the next two years.
InPOP will further the discussion on financing for oil palm farmers throughout this year in order to design and agree on a systematic financing model that could contribute in enhancing environmental stewardship and social equity in the sector. These outputs will then be incorporated into the platform’s National Action Plan on Sustainable Palm Oil. For minutes from this high-level meeting or to learn about InPOP’s technical working group meetings occurring throughout the year please contact the secretariat at email@example.com.
Andrew Bovarnick, the Global Head of the Green Commodities Programme speaks with Derom Bangun of the Indonesian Palm Oil Board (DMSI). The Green Commodities Programme partners with the UN, government, private sector and civil society to strengthen the national enabling environments of key agricultural commodity sectors including palm oil in Indonesia. Photo:Nick Hurt/Jakarta/InPOP
“I think development and more importantly sustainable development need a model of participation: participation from the government, from the business community, from farmers, from NGOs and also the public. So InPOP, led by the Ministry of Agriculture and supported by the UNDP and the Swiss Government, I think is a very good idea and a very timely idea. Indonesia is now changing its paradigm from development to ‘sustainable development’.”
– Prof Bungaran Saragih, Former Minister of Agriculture
“The development of a sustainable Indonesian palm oil sector requires substantial investment and cooperation between the government, private sector, international donors, and civil society organizations. All players must come to the same table in order to find and agree on solutions”
– Andrew Bovarnick, Global Head of the Green Commodities Programme
Workshop Participants Included
Ministry of Agriculture
Ministry of Agrarian Affairs and Spatial Planning / National Land Agency (BPN)
National Planning and Development Agency (Bappenas)
CPO Fund of the Ministry of Finance (Badan Pengelola Dana Perkebunan Kelapa Sawit)
Provincial Government of Riau
Provincial Government of South Sumatera
Dewan Minyak Sawit Indonesia (DMSI)
Gabungan Pengusaha Perkebunan Indonesia (GPPI)
Indonesia Palm Oil Pledge (IPOP) Management
Bank Syariah Mandiri
Bank Negara Indonesia
Asosiasi Petani Kelapa Sawit Indonesia (APKASINDO)
Serikat Petani Kelapa Sawit (SPKS)
Palm Oil Agribusiness Strategic Policy Institute (PASPI)
Institut Pertanian Bogor (IPB)
Forum Pengembangan Perkebunan Strategis Berkelanjutan (FP2SB)
Deliverology Institute Indonesia
IDH Sustainable Trade Initiative
United Nations Development Programme (UNDP)
Center for International Forestry Research (CIFOR)
United States Embassy
For detailed minutes of the expert discussion on ‘Financing for Palm Oil Smallholder Farmers’ please contact us at info@Inpop.id