Exploring ways to improve access to finance for oil palm smallholders

Oil palm smallholders in Indonesia and Malaysia systemically lack access to long-term finance for replanting and meeting sustainability standards. SNV has worked on a study to assess current practices and innovations in smallholder palm oil finance and identify effective solutions to promote sustainable and inclusive supply chains.

Over the next 25 years, around 175,000 hectares of oil palm land will require replanting every year, in Indonesia alone. Significant funds are required to invest in replanting and bridge the first three years in which the replanted land will remain unproductive. However, despite their large numbers and crucial role in meeting global supply, oil palm smallholders systematically lack access to long-term finance.

SNV, in collaboration with Financial Access, contributed to a research series on the role of finance in integrating oil palm smallholders into sustainable supply chains, published by the Center for International Forestry Research (CIFOR).

In a report and infobrief, we present past and current policies and smallholder financing schemes in the palm oil industry in Indonesia and Malaysia and evaluate the environmental and social outcomes and challenges of these models. Next, a number of case studies are presented of existing and potential innovative financing schemes which seek to address the identified challenges and increase the mobilization of long-term smallholder finance. Finally, the study outlines key conditions that need to be in place overcome the bottlenecks to smallholder financing and create an enabling environment for sustainable oil palm investments.

All the studies in the CIFOR series on smallholder finance in the palm oil sector can be found in the links below:

• Current practices and innovations in smallholder palm oil finance in Indonesia and Malaysia: Long-term financing solutions to promote sustainable supply chains (by SNV & Financial Access): Report & Infobrief.

• Smallholder finance in the oil palm sector: Analyzing the gaps between existing credit schemes and smallholder realities (by InterCAFE): Report & Infobrief.

• Towards responsible and inclusive financing of the palm oil sector (by Profundo): Report & Infobrief.

More details on SNV's palm oil programme can be found on our palm oil information page.