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The Sustainable Growth Potential of Indonesian Smallholders

Aidenvironment has finished a diagnostic survey of Indonesian oil palm smallholders for IFC. Working in a consortium with Global Sustainability Associates and Triodos Facet, we developed the Smallholder Diagnostic Instrument and tested it among 1069 independent and tied smallholders on Sumatra and Kalimantan. This provided a wealth of data on agronomic practices, physical context, and enabling context (access to technical assistance, farmer organization, markets, inputs, infrastructure, and finance).

The survey included a statistical analysis of the data and showed that smallholders’ yields are below expectations. Tied and independent smallholdings yielded 6 percent and 40 percent respectively, below a good practice scenario for smallholders. The yield gap was particularly wide in the early years of cultivation, with smallholder yields not catching up until about year 16, by which time the most productive phase of the palms has passed. Most smallholders also underperformed on sustainable practices when measured against a selection of RSPO requirements included in the survey. Analysis showed that smallholders who performed well on these requirements had 25 percent higher yields than those who performed poorly. Although careful interpretation is required, this finding suggests that there was no trade-off between sustainability and productivity, but rather a positive relationship.

The report resulted in the identification of the following key support strategies to improve smallholder performance:

  • Train smallholders in sustainable intensification of existing plantations.
  • Support replacement and replanting efforts in cases of high proportions of non-hybrid Duraand Pisifera palms or aging palm trees.
  • Ensure short lines of communication between smallholders and crude palm oil (CPO) mills regarding the flows of information (quality and pricing), FFB and payments for FFB.
  • Provide smallholders with improved access to finance for on-farm investments and ensure increased investments in the enabling environment.

As the relevance and design of each of the above strategies may differ per location, tailor-made solutions are needed for each context. Before a support program can be established, it is therefore essential that a detailed initial assessment is made of farmer performance, needs, willingness to invest, and the enabling context. The Smallholder Diagnostic Survey Instrument provides a systematic approach to make such an assessment and enables the formulation of specific recommendations on support strategies in specific circumstances.

Click here to download the results of the diagnostic survey or check out our report section.

For more information contact Jan Willem Molenaar.