Sinar Mas Agribusiness and Food teams up with South Sumatra independent smallholders to replant oil palms
Jakarta, 10 December 2020 – PT Bumi Sawit Permai, a Sinar Mas Agribusiness and Food subsidiary, together with the cooperative Koperasi Tiara Sawit Permai of the Ogan Ilir District in South Sumatra, signed a loan agreement with PT Bank Rakyat Indonesia, Tbk (BRI) for the Smallholders Replanting Programme (PSR) in CoHive Uptown building, Central Jakarta. The strategic partnership will aid 84 independent smallholders and provide them with over IDR 60 billion for oil-palm replanting which includes procurement of oil palm seeds, fertilisers and technical assistance covering a total area of 511 hectares.
“This year, we have entered into credit agreements adding up to over IDR 210 billion with 504 independent smallholders across South Sumatra. The agreements are expected to support independent smallholders in replanting their oil palm plantations as well as improve the yields and their livelihood going forward,” explained Iswanto Nadjaja, CEO of Sinar Mas Agribusiness and Food Plantation for South Sumatra.
The agreement signing between PT Bumi Sawit Permai, a subsidiary of Sinar Mas Agribusiness and Food, the Tiara Sawit Permai Cooperative, Ogan Ilir Regency and PT Bank Rakyat Indonesia, Tbk (BRI) for South Sumatera Palm Oil Rejuvenation Programme at CoHive Uptown, Central Jakarta on Thursday, December 10, 2020.
Currently, 40 percent of the Indonesian oil palm industry is made up of smallholders. With that in mind, oil palm smallholders possess great potential to strengthen the national oil palm productivity. Nevertheless, they face a number of challenges, such as having plants that are more than 25 years old and over 15 metres in height, which result in lower Fresh Fruit Bunch (FFB) yields of approximately 10-15 tonnes/hectare/year and meagre revenue which go as low as IDR 1-1.5 million/month/hectare. Therefore, a partnership programme is essential to improve the livelihoods of oil palm smallholders in Indonesia.
The integrated and sustainable oil palm replanting programme (using a closed loop business model), involving a Partner Company (acting as off taker), Bank, Cooperatives and the Government, is regarded as the appropriate development model which gives hope for smallholders in the country. The programme aims to conduct oil palm replanting for approximately 2 million hectares of independent smallholder plantations using certified premium seeds and best agronomy practices in collaboration with Partner Company as off taker. Therefore, it is expected that the smallholders’ future yields of FFB will see an increase to 23-25 tonnes/hectare/year, which in turn raise their revenues.
Meanwhile, the Head of Koperasi Tiara Sawit Permai Satria, Prana Idbariza, mentioned, “We are grateful for the strategic partnership among the cooperative, Sinar Mas Agribusiness and Food and BRI, to assist our smallholders and provide them with the necessary funds for replanting. The Company also supports us by providing certified premium seeds, strengthening our plantation management with best agronomy practices, keeping the FFB pricing consistent with the pricing set by the Plantation Office and helping us with sustainable land and relevant oil palm certifications (ISPO and RSPO).”
With adoption of high plantation standards, the replanting process may take a considerably long time, particularly in preparing the required documents for licensing, partnership and financing with the Bank. Thus, it is paramount that the stakeholders, including the Government, play active roles in supporting the programme implementation. One of the Government’s most important roles is to establish the required policies for supporting the PSR. Such policies include making small-scale business loans (or known as Kredit Usaha Rakyat) dedicated for the oil palm sector easily accessible for smallholders, as well as ensuring a sustainable and integrated partnership model which benefits them. A harmonious collaboration among smallholders, the Government, banks and Strategic Partner Company (off taker) is essential if we are to improve the welfare of oil palm smallholders, our food heroes.