Independent smallholders around Musim Mas subsidiary Siringo-Ringo, in Rantau Prapat, are receiving funding to replant their palm trees. (Antara Photo/Akbar Tado)

Musim Mas Program Increases Financial Access for Independent Smallholders

MAY 16, 2019

Jakarta. For the first time, independent smallholders around Musim Mas subsidiary Siringo-Ringo, in Rantau Prapat, North Sumatra, are receiving funding to replant their palm trees.

This funding, provided by the government's Palm Oil Fund Management Agency (BPDPKS), helps to promote sustainable agriculture practices and increase market access among smallholders – goals synonymous with Musim Mas's smallholder program.

Approximately every 25 years, palm trees cease to be productive and need to be replanted. Otherwise, smallholders risk decline in yield and subsequently, in revenue. Traditionally, slashing and burning is one of the means to clear land for replanting, as it is the quickest and cheapest means to clear land, but it is the most dangerous and polluting.

Replanted palm trees do not yield in the first two to three years, hence stressing the financial burden on smallholders. Support from the industry, government and financial sector is crucial to promote sustainable means of replanting, including financial support in smallholder programs. Musim Mas' smallholder program recognizes that agronomic training is not enough to encourage sustainable production of palm oil from smallholders.

Hence, the smallholder program also provides education on legal requirements and access to global markets and financial support, such as this replanting program. Musim Mas started its smallholder program in collaboration with the International Finance Corporation (IFC) in 2015 and have since reached out to over 15,000 smallholders.

This Musim Mas-IFC joint program is the largest independent smallholder program in Indonesia. Forming farmer group associations and accelerating sustainable oil palm production. As part of the smallholder program, independent smallholders are encouraged to band together to form farmer group associations, so they can reach out to organizations and vice versa.

This accelerates the process of distributing government replanting subsidies, purchasing higher quality seeds and other benefits to smallholders, as they are a cooperative. With roughly 2 million smallholders in Indonesia from different ethnic backgrounds and locations across the archipelago, forming farmer group associations requires a lot of time and effort. In Rantau Prapat, where Musim Mas subsidiary Siringo-Ringo is located, IFC and Musim Mas has successfully helped form a farmer association, Maju Lancar Mandiri Labuhanbatu.

To scale up the smallholder program, Musim Mas is extending its smallholder program to its other mills and third-party mills.

"Collaborations across sectors, such as the government and banks are crucial to support smallholders to continuously adopt sustainable agriculture practices," said Rob Nicholls, general manager of programs and projects.

"We are glad to rope in a long-term commercial partner, BNI bank, to get involved in the replanting program for smallholders. We hope to bring in more financial and funding partners to ensure the continuity of the program," Rob added.