Financing Indonesia'S Independent Smallholders: Working Paper - May 2018

FINANCING INDONESIA’S
INDEPENDENT SMALLHOLDERS
WORKING PAPER | MAY 2018
Executive Summary
• In Indonesia, independent smallholders dominate the production of many agricultural commodities.

However, they are also linked to major economic, environmental, and social challenges.
Challenges linked to independent smallholders include low productivity, low crop quality, deforestation, fires
and haze, and social conflict.
• Access to finance provides one possible means of addressing these issues. However, the characteristics
of independent smallholders make it difficult for them to access formal financing.
These characteristics include remote location, lack of collateral and legal land title, lack of financial literacy,
exposure to production risk, small required loan amounts, and irregular and lengthy repayment schedules.
• To address declining productivity, many independent smallholders urgently need finance to replant
their ageing plantations within the next few years.
Without finance, independent smallholders may resort to clearing new plantation land or conduct replanting
with low-quality seed stock, creating significant negative economic and environmental impacts in the long term.
• Providing independent smallholders with access to finance requires a suite of interventions to be

jointly implemented by governments, plantation companies, off-taking companies, financial institutions,
and NGOs.
This suite of interventions includes project identification and monitoring, collectivising smallholders, training
in good agricultural practices, providing access to superior agricultural inputs, supporting certification and off-
taking agreements, and designing financial products appropriate for independent smallholders’ needs.
• In return, supporting independent smallholders can provide companies in the agricultural supply
chain and financial institutions with significant benefits.
All companies in the supply chain stand to benefit from improved crop yields and quality, increased profitability,
reduced reputational risk, and fulfilment of traceability and certification commitments. Plantation companies
may enjoy reduced environmental impacts and social conflict. Financial institutions may be able to expand their
customer base and align their policies with the Indonesian government’s push for sustainable finance.
• Most independent smallholder financing projects are still in the pilot stage. However, they have
already demonstrated positive economic, environmental, and social impacts.
Given the current supportive stance of government bodies such as the Financial Services Authority and regional
governments, there is good potential for successful pilot projects to be scaled up and replicated across Indonesia.
• There is potential for financial institutions and investors based outside Indonesia to invest in these
projects through specially-designed investment vehicles and facilities.
A number of these investment vehicles have already been launched, with the support of the Indonesian
government and development agencies such as UN Environment, USAID, and IDH.
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1. Introduction: The Importance of
Green Finance and Smallholders in ASEAN
1.1 Green Finance in ASEAN’s Agricultural Sector

This report focuses on the prospects of providing green finance to independent smallholders in
Indonesia’s agricultural sector, especially those in oil palm. Smallholder plots are very small compared
to those of the large plantations – smallholders typically manage 2 hectares or less, whereas the largest
plantations can cover hundreds of thousands of hectares.
Yet their numbers add up. As a group, smallholders are highly significant in the supply chain, as they are
responsible for the majority of Indonesia’s agricultural output for crops ranging from rubber to cocoa.
They are also significant in the Indonesian political economy, especially given how democracy has taken
root in the country and the greater focus now given to ameliorating inequalities within society. There
is now a renewed political incentive for understanding and addressing key issues for the smallholder,
which will only increase as Indonesia heads into the presidential election in 2019. A third reason
attention must be given to smallholders is their impact on environmental protection and sustainability.
What smallholders do will affect not only the local and national environment but regional and global
outcomes on a range of issues, from deforestation, fires, and haze to the management of biodiversity
and carbon emissions. The commitments under the Paris Agreement underscore the need to give this
issue attention.
Against this background, this Report surveys three projects in Indonesia that aim to expand independent
smallholders’ access to finance. Improving financial access for smallholders has significant potential to
unlock better profitability, social cohesion, and environmental protection. Each of these projects represents
a new kind of initiative through which private actors work in partnership not only with national authorities
and international bodies, but also with local communities and smallholders.
While these projects are at present still nascent or limited in scope to certain crops or geographical areas,
they hold promise and bear closer attention going forward. An analysis of the aims and methods used by
these projects to achieve their economic, environmental, and social goals is offered, with the hope that
this can help more people understand the different efforts that are currently emerging in Indonesia. Only
then will it be possible for these projects to scale up and offer a broader impact.
This Report draws on studies about smallholders as well as interviews with a broad range of stakeholders,
including plantation companies, NGOs, financial institutions, agricultural consultants, and multilateral
development agencies. Inputs are also drawn from a workshop, “Making Green Finance Count: Impact
Investing for Indonesia’s Agricultural Sector”, that was jointly organised in Jakarta by World Resources
Institute Indonesia and the Singapore Institute of International Affairs (SIIA). The SIIA’s work on
sustainability has increasingly considered the shift in Singapore and ASEAN towards low-carbon growth
that addresses economic, social, and environmental issues, and the role of green finance in assisting this
transformation.
This Report begins by considering why independent smallholders are important and some of the key
challenges they face. Benefits of financing independent smallholders are then considered, together with
the components that can build towards a successful agricultural smallholder financing project. Examples are
taken from a selection of existing smallholder financing projects to show how these can be implemented.
We then survey some key initiatives that are emerging in different agricultural products, before concluding
with suggestions for the next steps that should be considered to move forward on this issue.
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1.2 Why Independent Smallholders Are Important
Independent smallholders dominate Indonesia’s agricultural commodities production, managing 85 percent
of Indonesia’s rubber plantations,1 90 percent of its coffee plantations,2 and 95 percent of its cocoa
plantations.3 For oil palm, Indonesia’s most valuable agricultural export,4 the proportion of plantations
managed by independent smallholders is smaller – about 30 percent5 – but still significant. Hence, the vast
majority of companies operating in Indonesia’s agricultural supply chains are either directly or indirectly
impacted by the activities of independent smallholders.
Independent smallholders are linked to economic challenges, such as low productivity and crop quality,
as well as environmental and social challenges, such as deforestation, fires and haze, and social conflict.
These latter challenges arise as the plantations of independent smallholders are often located adjacent
to or within Indonesia’s sensitive forest and peatland landscapes. The sustainable management of these
landscapes is critical for reducing carbon emissions, conserving biodiversity, and maintaining ecosystem
services. The longer we wait to assist independent smallholders, the more complex these issues will become,
and because of the massive size of these landscapes, the decisions made by Indonesia’s independent
smallholders have significant global impacts.
Supporting independent smallholders is also becoming increasingly critical because of the urgent need for
replanting. Many of the plantations started by smallholders in the 1980s and 90s, including oil palm, rubber,
and cocoa, are reaching the end of their productive lives. If these crops are not replanted, smallholders risk
significant and accelerating declines in yield and revenue. However, replanting requires clearing land and
purchasing new seed stock, which is prohibitively expensive for the majority of independent smallholders.
In addition, crops such as oil palm and cocoa do not yield for the first 3 to 7 years following replanting,
further increasing the financial burden.
If independent smallholders are not supported to conduct replanting sustainably, they may choose to
abandon their plantations in favour of establishing new ones. This increases the likelihood of deforestation
and land burning. From a long-term perspective, these new plantations will likely be established with cheap,
low quality seedlings, locking smallholders into another cycle of inferior productivity and profitability, as
well as prolonging the associated environmental and social issues.
2. Why Companies and Financial Institutions

Should Support Independent Smallholders
2.1 The Replanting Challenge
Supporting independent smallholders is becoming increasingly critical because of the urgent need for
replanting. Many of the plantations started by smallholders in the 1980s and 90s, including oil palm,
rubber,6 and cocoa,7 are reaching the end of their productive lives. For example, almost 30 percent of
Indonesia’s smallholder oil palm plantations will need to be replanted by 2025.8 If these crops are not
replanted, smallholders risk significant and accelerating declines in yield and revenue.
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However, replanting requires large amounts of capital, which is needed to clear the land and purchase
new seed stock. For example, the estimated replanting cost of an oil palm smallholder plantation is 40 to
50 million IDR.9 This is prohibitively expensive for the majority of independent smallholders, who, unlike
plasma smallholders, are unable to rely on off-taking companies to offset the expense. In addition, certain
crops, such as oil palm and cocoa, do not yield for the first 3 to 7 years following replanting, increasing the
financial burden even further.
If independent smallholders are not supported to conduct replanting sustainably, they may choose to
abandon their plantations in favour of establishing new ones. This increases the likelihood of deforestation
and land burning. From a long-term perspective, these new plantations will likely be established with cheap,
low quality seedlings, locking smallholders into another cycle of inferior productivity and profitability, as
well as prolonging the associated environmental and social issues.
2.2 Benefits of Financing Independent Smallholders

On top of avoiding negative environmental and social impacts, if performed effectively, financing
independent smallholders can also provide a range of economic, environmental, and social benefits to
plantation companies, downstream off-taking companies, and financial institutions. These benefits and
the institutions that stand to receive them are described below.
Plantation Downstream Financial

Benefit Companies Off-takers Institutions
1. Improve Yields, Quality, and Profitability √ √ √
2. Reduce Reputational Risk √ √ √
3. Reduce Environmental Impacts √
4. Fulfil Traceability and Certification Commitments √ √ √
5. Reduce Social Conflict √
6. Create New Customer Base √
7. Align with Government Push for Sustainable Finance √
Improve Yields, Quality, and Profitability
In general, the plantations of independent smallholders produce significantly less crop yield and lower-
quality crops than those of plasma smallholders and plantation companies. A 2013 survey of oil palm
smallholders conducted by IFC found that the average yield of independent smallholders was 32 percent
lower than that of plasma smallholders and 54 percent lower than that of well-managed company
plantations.10 This can be attributed to a variety of reasons, including lack of access to high-quality seeds,
poor knowledge of agricultural practices, and lack of access to high-quality agricultural inputs and tools
such as fertiliser and heavy machinery.
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The poor yields of independent smallholders are exacerbated by their generally low profit margins. Due
to their rural location, independent smallholders must often sell their crops through several levels of local
traders, all of whom receive a cut of the profits. The small and fragmented plots managed by independent
smallholders also prevent collectivisation and economies of scale, decreasing profitability.
The poor yields of independent smallholders can significantly impact the profitability of plantation
companies, especially those that source a significant percentage of their raw materials from independent
smallholders. The entry of low-quality raw materials into the supply chain also has a negative effect on
the quality of the products produced by downstream off-takers using these raw materials. Finally, sub-
optimal yields and crop quality expose the banks providing loans to plantation and off-taking companies
to additional credit risk.
On the other hand, providing independent smallholders with financing options allows them to purchase
better-quality seeds, tools, and agricultural inputs. This will improve their yields and crop quality, creating
knock-on profitability gains for all institutions in the supply chain.
Reduce Reputational Risk and Environmental Impact
In the absence of adequate law enforcement, low yields may drive independent smallholders to illegally
clear additional land for agriculture, increasing the rate of deforestation. An analysis by Global Forest Watch
shows that 45 percent of Indonesia’s deforestation from 2000 to 2015 took place outside of concession
boundaries,11 suggesting significant involvement by smallholders in the deforestation observed.
Many independent smallholders also use fire to clear land, as they cannot afford to do so with machines
and chemicals. Once set, these fires may spread out of control, especially on sensitive landscapes such as
degraded peatlands, generating large amounts of carbon emissions and haze pollution. Without oversight,
independent smallholders may also cause environmental pollution and engage in illegal labour practices
like employing child labour.
Another major challenge faced by independent smallholders is the lack of formal land rights. 90 percent of
Indonesian smallholders lack government-issued freehold land titles (Sertifikat Hak Milik - SHM),12 as the
process of obtaining these land titles is long, bureaucratic, and expensive. In addition, many independent
smallholders illegally operate, either knowingly or unknowingly, in protected or restricted landscapes such
as national parks.
Plantation companies found to be sourcing from these high-risk smallholders, whether knowingly or
unknowingly, risk significant negative impacts on their reputation. This may translate to large financial
impacts if customers, financiers, and investors decide to dissociate from the company as a result.
Conversely, plantation companies that are able to demonstrate a proactive, sustainable approach towards
working with smallholders may enjoy an improved reputation and be better able to attract customers and
financiers.
Downstream off-taking companies may face similar consequences. Off-taking companies that produce
consumer goods are especially vulnerable to reputational impacts and customer losses as a result of public
advocacy campaigns
Finally, the financial institutions that finance plantation companies exposed to smallholder risks are also
exposed to significant reputational risk through their clients. Recent examples of campaigns directed
at financial institutions focusing on their links to plantation companies with unsustainable practices
include Greenpeace’s Dirty Bankers campaign against HSBC in January 201713 and Rainforest Foundation
Norway’s campaign against six Southeast Asian banks in May 2017.14
On the flip side, working with independent smallholders in their supply chain makes it easier for companies
to identify potential environmental and social risks and address them before they escalate into public
liabilities.15
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Fulfil Traceability and Certification Commitments
A growing number of consumers, especially in Europe and North America, are demanding more information
on the origins and sustainability impacts of the goods they purchase. In response, many plantation and off-
taking companies have made time-bound commitments to achieve full traceability of their raw materials
to the plantation level. A smaller number of companies have also committed to sourcing only raw materials
that have received sustainability certification.
As independent smallholders produce a large proportion of the supply of many agricultural commodities,
it will be necessary for companies to work with independent smallholders to fulfil these traceability and
certification commitments. This is becoming an increasing concern as the deadlines for these commitments
approach, especially for larger downstream off-taking companies, which may source large volumes of raw
agricultural materials from many thousands of independent smallholders.
Reduce Social Conflict
Active engagement with independent smallholders through financial and other support programmes
helps plantation companies build better relationships with these smallholders. This reduces the risk of
land conflicts and other disagreements with local communities, which may disrupt plantation companies’
operations if not quickly identified and resolved.
In addition, by gaining the trust of independent smallholders, plantation companies may find it easier
to convince smallholders to invest in their land. Companies may thereby enjoy the economic benefits
generated by smallholders’ improved yields and profitability.16
Create New Customer Base
Though the loan amounts required by individual smallholders are small, collectively, smallholders represent
a large untapped market for financial institutions such as retail and commercial banks. In addition, creating
replicable, scalable credit models that fulfil the needs of independent smallholders could not only generate
more business for these banks, but also equip these smallholders with greater financial literacy. This could
lead to greater demand for other financial products such as savings accounts, investment products, and
insurance. (For more information on the financing options currently available to smallholders, please see
the box: “Limitations of Current Smallholder Financing Options”)
Align with Government Push for Sustainable Finance
In July 2017, the OJK passed a regulation (Regulation No. 51/POJK.03/2017) that mandates financial
institutions to develop a sustainable finance programme, as well as report on the economic, social,
and environmental impacts of their operations.17 Providing financial options tailored to independent
smallholders would allow financial institutions to fulfil this regulatory requirement.
2.3 Loans Versus Other Types of Financing

In this report, “financing” and “access to finance” refer to credit, specifically in the form of loans, unless
indicated otherwise. It is important to note that there are other possible means of extending financing to
independent smallholders, such as through savings accounts and microinsurance. Some of the smallholder
financing projects profiled in this report include or have begun exploring these other, non-credit forms of
finance as well. However, this report will focus on loans, as this is the area of smallholder finance where
the greatest amount of work has been done in Indonesia.
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Limitations of Current Smallholder Financing Options
Many of the problems faced by independent smallholders could be resolved through better access to credit.
However, the financing options currently available to independent smallholders are limited and often inappropriate
for developing the plantations of independent smallholders, for reasons outlined below.
Loans through Local Traders

Due to their rural location, most independent smallholders lack access to formal financing institutions such as
banks. Instead, independent smallholders may obtain loans through local traders or middlemen. However, these
loans usually have high interest rates and a short tenor. Hence, they can only be used to support household
expenses and short-term operating capital, rather than large, long-term expenses such as replanting.
Commercial Bank Loans

Even independent smallholders with access to formal financing institutions often have difficulty obtaining loan
approvals. This is due to a variety of reasons, many related to banks’ procedural requirements when lending money:
Lack of Cashflow Information: Many independent smallholders do not keep financial or agricultural production
records, making it difficult for banks to evaluate their cashflow and creditworthiness. Many also owe significant
outstanding debt to local moneylenders, further reducing their ability to take on additional loans.
Exposure to Production Risk: Independent smallholders often plant on small, non-contiguous plots. This makes it
difficult for them to share risks and makes them disproportionately vulnerable to production losses. To exacerbate
the issue, few independent smallholders purchase crop insurance; such insurance is also not readily available for
many crops in Indonesia.
Lack of Formal Land Rights: Commercial banks generally require farmers to produce their land title for use as
collateral. However, banks only recognise the validity of official land titles issued by the government. The majority
of independent smallholders lack these land titles, as they are difficult and expensive to obtain. Banks are also
hesitant to work with farmers without formal land titles as this creates the risk that these farmers could be
operating illegally.
Lack of Collateral: In some cases, commercial banks do not accept land title as collateral, because of the limited
value of the small, fragmented plots held by independent smallholders. Hence, even farmers with official land titles
are often unable to access formal financing.
Lack of Guarantors: Some commercial banks also require customers to have a guarantor to serve as a form of
external credit enhancement. For plasma smallholders, mills or off-taking companies may fill this role. Conversely,
it is difficult for independent smallholders to secure a guarantor because they have no long-term formal business
relationship with any mill or off-taker.
High Administrative Costs: For most commercial banks, working with independent smallholders involves high
acquisition and servicing costs. These costs result from the remote location of most independent smallholder
plantations, making it hard to visit smallholder clients, and the fact that most commercial banks lack experience
and expertise in working with independent smallholders. In addition, the loans extended to smallholders are small
(generally some tens of millions of IDR, or a few thousand USD). As administrative costs do not vary significantly
with loan size, this means that banks can only expect limited profits from working with smallholders relative to
the costs incurred.
Payment Schedule: Due to fluctuations in yields between harvest seasons, the earnings received by smallholders
are often irregular and spread out over several years. This is especially the case for smallholders who have just
conducted replanting, which for crops such as oil palm and cocoa entails an unproductive period of 3 to 7 years.
This makes it difficult for banks unfamiliar with smallholders’ needs to calculate an appropriate loan repayment
schedule.
Risk-Averse Attitude: Many commercial banks display risk-averse attitudes, and are unwilling to work with new
types of clients, such as independent smallholders, until a business model for doing so has been adequately
demonstrated.
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Specialised Financial Products
In light of these issues, there have been attempts made by both the Indonesian government and commercial banks
to design financial products tailored to the needs of independent smallholders. Though these products generally
address some of the issues preventing independent smallholders from accessing finance, none of them can yet be
considered a complete solution.
Microfinance Institutions: In 2013, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan – OJK)
passed a new act governing the activities of microfinance institutions. This law took effect in 2015.18
In theory, the purpose of microfinance institutions is to provide financial services to clients without access to other
formal financial institutions. However, microfinance providers are generally still restricted to districts and towns
with a larger density of clients, as it may not be economically viable for them to operate in sparsely-populated
rural areas.19 Hence, many independent smallholders remain unable to access microfinance.
Branchless Banking: In 2015, the OJK introduced new branchless banking rules that allow commercial banks to
extend their services to areas not serviced by physical branches. Banks do this by recruiting local agents, who
provide services such as micro-savings and payment services on behalf of the bank.
However, most banks do not offer loans through branchless banking agents. When loans are offered, they are
also governed by rules that may make them inappropriate for independent smallholders’ capital requirements. For
example, the maximum loan available is 20 million IDR, and the maximum tenor is generally 1 year.20 Notably, this
means that these services cannot be used to finance replanting.
SME Loan Mandate and Kredit Usaha Rakyat (KUR): To encourage banks to extend more capital to small and medium
enterprises (SMEs), OJK has introduced regulations requiring Indonesian banks to allocate 20 percent of their loan
portfolio to SMEs by 2018.21 To help banks develop their SME customer base, the Indonesian government also
introduced the Kredit Usaha Rakyat programme, or KUR, in 2007. Under KUR, state-owned banks and regional
banks (Bank Pembangunan Daerah – BPD) receive government subsidies that allow them to design low-interest-
rate financial products for SMEs.22 This allow banks to cut interest rates to as low as 7 percent, compared to over
20 percent for standard microfinance loans.23
KUR has the potential to solve some of the issues with smallholder finance: the interest rates of KUR loan
products are relatively low, and state-owned banks and regional banks together form a network with significant
geographical coverage. Under the KUR Retail option, banks may also extend loans of up to 500 million IDR,24
which is sufficient for most independent smallholders’ capital needs, including replanting.
However, banks still have the discretion to design the characteristics of individual KUR financial products. Hence,
these products may fail to satisfy all the conditions required for independent smallholders to access them.
For example, CIMB Niaga’s and Bank Mandiri’s smallholder credit products continue to require collateral and
guarantors, which many independent smallholders cannot provide.25
Government Funds: The Indonesian government has set aside some funds to support the needs of independent
smallholders, particularly replanting. One example is the Oil Palm Estate Fund (Badan Pengelola Dana Perkebunan
Kelapa Sawit – BPDPKS), which was launched in July 2015. By collecting export levies on palm oil products,
the Fund had accumulated 11.7 trillion IDR as of October 2017. A percentage of these funds is earmarked to
help oil palm farmers improve their production and conduct replanting.26 However, coordination issues, stringent
requirements for disbursement, and the allocation of the vast majority of the fund to other purposes such as
biodiesel subsidies have made it difficult for independent smallholders to access the fund without additional
support.27
Foreign Financiers
Some financial institutions based outside Indonesia, particularly impact investors and commercial banks exposed
to the agricultural industry, have expressed interest in ways to support independent smallholders’ financial needs.
However, foreign financial institutions face obstacles that are preventing them from participating more actively,
such as difficulties in carrying out credit assessments and due diligence on the ground and restrictions on financial
flows from outside Indonesia. Overcoming these obstacles will likely require tailor-made financial schemes
involving elements such as local partners and blended finance. A number of such schemes exist (see Section 3.10),
but remain in the pilot stage.
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3. Components of a Successful Agricultural
Smallholder Financing Project
A number of projects aimed at improving independent smallholders’ access to finance (both loans and
savings) are currently being implemented in Indonesia. These projects are being carried out in various
locations and with various crops, including palm oil, cocoa, coffee, and corn. Some of the most significant
and/or promising projects include:
Swisscontact’s Sustainable Mercy Corps’ AgriFin Mobile Golden Agri-Resources

Cocoa Production programme, which works (GAR)’s Innovative
Programme, which supports with rural and commercial Financing Scheme, which
131,429 cocoa smallholders banks to disburse loans and is working to help 450 oil
across Indonesia to improve bundled services to 2,773 palm smallholders within
cashflows and access savings corn smallholders in West GAR’s supply shed conduct
accounts and loans. Nusa Tenggara province. replanting.
Scheme Sustainable Cocoa AgriFin Mobile Innovative

Production Programme Programme Financing Scheme
(SCPP)
Implementer Swisscontact Mercy Corps Golden Agri-

Resources (GAR)
Start Date 2012 2014 2014
Commodity Cocoa Corn Palm oil
Location(s) Aceh, Lampung, Sumatra Bima District, Dompu Riau and Jambi
Barat, Sumatra Utara, district, Sumbawa provinces
Sulawesi Barat, Sulawesi District, and Bima
Selatan, Sulawesi Tengah, City, all in West Nusa
Sulawesi Tenggara, Tenggara province
Gorontalo, and Nusa
Tenggara Timur provinces
No. of farmers 131,429 2,773 (total in years 450

(current) 1-4)
No. of farmers 165,000 15,000 farmers total 20,000 (by 2022)

(targeted) by 2020
Funding Swiss State Secretariat for Swiss Agency for GAR (covers
Economic Affairs, Millennium Development management fees),
Challenge Account for and Cooperation, banks, other financial
Indonesia, downstream financial institution institutions (e.g. IDH,
cocoa-buying companies partners (BPR Pesisir IFC), Oil Palm Estate
(Barry Callebaut, Cargill, Akbar, Bank Oke Fund, downstream
Ecom, JeBeKoko, Krakakoa, Indonesia, Asuransi palm oil off-taking
Mars, Mondelēz International Central Asia), companies
and Nestlé) agricultural company
partner (Syngenta)
Page 9 / May 2018

Though these projects all have different characteristics, they generally share certain elements which
can be identified as prerequisites for finance to be extended to independent smallholders. The SIIA has
identified these components and developed a set of indicators for assessing them. The components and
indicators are described in detail in the section below.28
It is important to note that this list of components may not be exhaustive. A project may also not require
all of the components identified to achieve its sustainability objectives. This is because smallholder
financing projects vary significantly in terms of geographical coverage, objectives, and current stage
of implementation. In addition, most smallholder financing projects are still in the pilot stage, having
been in operation for five years or less, and the impacts and levels of success of these projects are still
being evaluated. Nevertheless, these indicators provide a useful framework for designing and assessing
smallholder financing projects.
Stage 1: Project Identification
3.1 Evaluation and Monitoring

Before any intervention is made, a baseline study is first conducted, a process that generally takes up to 12
months. This helps to identify locations with the greatest potential for projects, ascertain improvements
that could be made to farming processes, and collect baseline data against which the impact of the project
can be measured. During this phase, the programme design, cost-benefit analysis, and training materials
are also developed.29
Conducting a baseline study is especially important when working with independent smallholders, as the
characteristics of independent smallholders may vary greatly from place to place. During the study, the
independent smallholders who will be participating in the survey are interviewed and specific indicators
for each smallholder are measured. These indicators may include age, literacy, number of household
members, level of existing farming knowledge, level of existing access to finance, value of assets held,
legality of land tenure, and membership in a farmer group or community association.
Another important reason for conducting a baseline study is to enable creditworthy smallholders to be
separated from non-creditworthy ones. By analysing information about smallholders’ yields, economic
situation, and cashflow, financial institutions can restrict lending to those smallholders with the highest
productive potential, thereby reducing the risk of default.
While the project is being carried out, monitoring and surveys are also conducted on a regular basis. This
helps project implementers evaluate whether the intervention is working, and decide how to re-allocate
resources and modify their strategy, if necessary.
Case Study: Financial Access Credit Risk Scoring Tool

Financial Access, a financial services advisory firm focused on developing countries, has designed
a tool that provides an estimate of a smallholder’s credit risk by measuring 25 financial, household,
and production variables and their impact on cash flows. The tool can be applied to various crops
in various countries and for the purpose of both short-term and long-term loan products. Using
this tool allows banks to quickly separate bankable smallholders from non-bankable ones, reducing
default risk and lowering the interest rates the bank needs to charge. The tool is currently being
piloted in a number of areas and agricultural crops, including in a joint SNV-Financial Access project
in Jambi province that works with independent oil palm smallholders in need of replanting loans.30
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3.2 Tracing, Mapping, and Spatial Planning
Once a project area has been chosen, individual smallholder farmers within the area are identified and
geographically mapped. This provides a picture of the actors within the landscape and helps to identify
smallholders with higher risk, such as those located in protected forests and other areas unsuitable for
agriculture. Depending on the project’s objectives, such smallholders can either be excluded or special
provisions can be designed to allow their participation while minimising environmental and legal risk. In
addition, the economic interactions of the smallholders with other actors in the supply chain, including local
traders, middlemen, and plantation companies, are traced. This enables project implementers to connect
smallholders directly with downstream mills and plantation companies. In certain areas, middlemen may
also be persuaded to take on new roles, such as disbursers or guarantors of loans.
Case Study: CocoaTrace

CocoaTrace is a cloud-based software programme developed by tech startup Koltiva to support
the tracing and monitoring of cocoa smallholders. CocoaTrace provides each smallholder an
ID card with a unique QR code, which is scanned during each transaction. By monitoring the
farmers’ transaction history, CocoaTrace is able to trace the supply chain in a particular area
and track the cash flow of each smallholder, information that is useful for helping banks make
credit decisions. Following its successful use in Swisscontact’s Sustainable Cocoa Production
Programme, CocoaTrace is now being expanded for use with smallholders in other crops, such as
coffee, coconut, and oil palm.31
3.3 Supporting Legal Land Rights

Some projects may support independent smallholders to obtain government-issued land permits. Doing
so both helps smallholders access financing from banks and encourages them to invest more into their
plantations. For example, Swisscontact’s Sustainable Cocoa Production Programme assists smallholders
to register their plantations with the National Land Agency (Badan Pertanahan Negara – BPN) through the
national PRONA (Proyek Operasi Nasional Agraria) programme at relatively little cost.32 In Musi Banyuasin
regency, oil palm smallholders with plantations within protected areas are provided with amnesties by the
government so that they can receive funding from the Oil Palm Estate Fund.33
3.4 Government Participation

Currently, many government bodies at both national and sub-national level in Indonesia lack a clear,
complete picture of the locations and characteristics of independent smallholders. This makes the
information collected by project implementers during the baseline study stage especially valuable for the
government. By incorporating this data into land use and economic development plans, governments can
identify and resolve cases of overlapping land claims, allocate land for appropriate purposes, and develop
other schemes for engaging with smallholders at the village level.34
Some governments have committed to working closely with project implementers either through
a jurisdictional approach, which aims to provide all smallholders within a certain jurisdiction with
sustainability certification, or through a green growth plan, which aims to provide a model for sustainable
development for the jurisdiction. Examples of jurisdictions that have committed to these approaches
are East Kalimantan province (green growth plan), South Sumatra province (green growth plan), Seruyan
Regency (jurisdictional approach), and Musi Banyuasin regency (jurisdictional approach).
Working closely with government bodies also helps successful models be replicated quickly in other areas.
For example, OJK is working to replicate Mercy Corps’ AgriFin Mobile programme, which supports corn
smallholders to obtain credit,35 and the Ministry of Agriculture is helping with the socialisation of Musim
Mas and IFC’s Indonesia Palm Oil Development for Smallholders (IPODS) programme to other companies
within the landscape.36
Page 11 / May 2018

Indicator Sustainable Cocoa Production AgriFin Mobile Programme Innovative Financing Scheme
Programme (SCPP)
1. Evaluation and Monitoring
Was a baseline study Yes Yes Yes

conducted?
Is data collected in Yes Yes Yes
Page 12 / May 2018

the baseline study
regularly updated?
How often is data Yearly for 10% of participating farmers. Loan repayment is tracked in real time Monthly
updated? through monitoring apps.
Yield information is tracked 60 and 90

days after planting.
What data is Environment, demographics, nutrition, Agricultural inputs used, current crop Monthly
collected/monitored? labour practices, production and post- yields, existing access to financial
harvest practices, financial situation, etc. products, mobile phone ownership.
Credit assessment is conducted by BPR

Pesisir Akbar, a rural bank. Farmers
also have to be recommended by grain
traders, Syngenta farmer leaders, and
field staff to be selected for programme.
Loan disbursement and repayment

are monitored through real-time
AndaraLink online platform.
Crop growth and yield increases are

monitored using Android-based mobile
data collection app (DataHub) and in
person.
How is the data Using CocoaTrace, a cloud-based software Data is collected using DataHub app By GAR Upstream Operational team
managed? solution maintained by Koltiva, an agri- by officers from BPR Pesisir Akbar and
tech software company. Syngenta, then uploaded onto system
managed by 8villages, an agri-tech
startup.
Programme (SCPP)
2. Tracing, Mapping, and Spatial Planning
Are farmers being Yes Yes Yes

traced?
How many farmers 131,429 2,773 450

have been traced so
far?
Are other actors in Yes (local traders, processors, exporter Yes (local traders) No (farmers supply directly to GAR mills)
the supply chain warehouses)
being traced? If so,
which actors?
What system is being Information from farmer interviews and Android-based mobile data collection -
used to conduct sales transactions is input into CocoaTrace app
traceability? software.
Are farmers being Yes, deliveries are monitored along supply Yes, via the networks of local factories Yes, via GAR mills.
traced via a mill/other chain from local traders to warehouses and traders.
supply chain actors? and processing facilities.

mapped?
Is project area being Yes, farmer locations are overlaid with Yes, Asuransi Central Asia (ACA), an Yes, potential project areas within 50km
mapped according protected forest boundaries and other insurance company, assessed the of GAR concessions are mapped, then
to risk and crop land use classifications. Only farmers not area’s risk before crop insurance was selected for participation in project in
suitability? located in protected areas can participate. implemented. compliance with government spatial
However, crop suitability is not mapped. plans. Conservation areas, existing
concession and plasma smallholder
areas, High Conservation Value (HCV)
areas, and High Carbon Stock (HCS)
Page 13 / May 2018

areas are avoided.
Sustainable Cocoa Production AgriFin Mobile Programme Innovative Financing Scheme
Programme (SCPP)
3. Supporting Legal Land Rights
Are farmers being Yes No Yes
Page 14 / May 2018

supported to obtain
legal land titles?
If so, how? SCPP is facilitating farmers’ registration - GAR is facilitating farmers’ registration
with the National Land Agency (Badan with the National Land Agency (Badan
Pertanahan Nasional - BPN) through Pertanahan Nasional - BPN).
a national program (Proyek Operasi
Nasional Agraria - PRONAS) that allows
land registration for a comparably low
cost.
How many farmers 22,369 (only some facilitated by SCPP) - 246 farmers will be assisted
have received legal
land titles?
Are there measures No Yes, BPR Pesisir Akbar has extended a No

to extend special provision allowing one land certificate
provisions or to be used as collateral for 3-4 farmers
amnesties to farmers within the same farmer group.
with regards to land
title?
Programme (SCPP)
4. Government Participation
Is the government Yes (District, provincial, and national) Yes (District and national) Yes (District, provincial, and national)
involved in
the project’s
implementation?
If so, what level of
government?
What is the nature of Swisscontact staff and government Training is implemented in coordination District government’s Land Agency,
the involvement? officials discuss and assess the main cocoa with district government’s Agriculture Environment Agency, and regent
producer villages, and also jointly lead Agency. (bupati) facilitate issuance of
training in the farmer field schools. environmental permits for farmers,
The Indonesian Financial Services as well as provide socialisation and
Authority (OJK), the national financial encouragement to join the programme.
regulator, is promoting the agricultural
financing model of AgriFin Mobile and National government’s Land Agency
replicating it with commercial banks in provides legal land title and national-
other regions under its AKSI PANGAN level Ministry of Agriculture provides a
programme, which was launched in 4% subsidy for loans during the grace
March 2017. period through programmes such as
KUR (Kredit Usaha Raykat).
How is information Findings from data collected by SCPP are Model is being promoted by OJK in -
from the project shared with the government for inclusion alignment with its AKSI PANGAN
being integrated into in future spatial plans. programme. Model was also included
government land use by National Committee for Economy
and other plans? and Industry (Komite Ekonomi dan
Industri Nasional – KEIN) in policy paper
on agricultural financing, which was
presented to the President.
Page 15 / May 2018

Stage 2: Community Engagement
3.5 Stakeholder Engagement and NGO Involvement

Once all the necessary information has been gathered, a project moves to the community engagement
stage, where independent smallholders are approached to participate in the project. This socialisation
process is particularly important for the initial pilot, as farmers tend to be reluctant to cooperate until the
benefits of doing so are demonstrated.
It is common for project implementers to engage NGOs to support the socialisation process. Partnering
with NGOs can reduce the costs of hiring field staff and allow project implementers to draw on the NGOs’
networks, social capital, and existing expertise in conducting socialisation activities in the area. Other
organisations, such as agricultural companies and financial institutions, may also be recruited to lend their
expertise in areas such as agricultural training and microfinance.
3.6 Forming Farmer Groups and Cooperatives

Once smallholders agree to participate in the project, they are often collectivised into informal groups or
formal cooperatives.
Depending on the needs and willingness of the smallholders to collaborate, a farmer group may provide
varying levels of services. At the most basic level, an informal farmer group may simply serve as a means to
gather smallholders for training or monitoring. Farmers may also pool their resources to form a cooperative,
expanding the potential for collaboration. Smallholders under a cooperative may continue managing their
plantations individually, meeting only to pool their crops for trading or to fulfil certification requirements.
More developed cooperatives may provide their members with access to agricultural inputs such as
fertiliser, distribute loans, create funds through member contributions to be used for purposes such as
replanting and insurance, or collate and distribute profits to members after crops are sold. Members of a
cooperative may also combine their plots and manage them collectively.37
Establishing a farmer group or cooperative provides several advantages to a project implementer. It makes
it easier to collect and disseminate information, distribute agricultural inputs, and achieve traceability. The
formation of cooperatives enables certification, improves profit margins by reducing logistical costs, and
provides the scale and financial records necessary for the farmers to obtain loans from a commercial bank.
However, as some cooperatives have fallen victim to mismanagement and graft, project implementers
should take care to provide regular oversight over the farmer group’s actions and only seek to collectivise
smallholders who are ready and willing to do so.
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Programme (SCPP)
5. Stakeholder Engagement and NGO Involvement
Are NGOs/external Yes Yes Yes

organisations
involved in
socialisation and
project design?
If so, which Rikolto, Migunani, Yayasan Sahabat Cipta BPR Pesisir Akbar, Bank Oke Indonesia, Social NGOs and technical NGOs;
organisations? (community development NGOs) ACA, Syngenta NGOs involved vary according to
project
What is the 334 5 Syngenta field officers (including 67

size of the team agronomists), 10 BPR Pesisir Akbar field
implementing the officers, 2 ACA staff
project on the
ground?
Are other companies Yes (Barry Callebaut, Cargill, Ecom, Yes (Indonesia EXIM Bank, Bank BRI) No
in the landscape JeBeKoko, Krakakoa, Mars, Mondelēz
being engaged? If so, International, Nestlé)
which?
What is the level of Companies partially fund project Indonesia EXIM Bank, a non-bank -
engagement? implementation. financial institution, provided a 5
billion IDR loan to BPR Pesisir Akbar to
implement the project’s 4th year.
Bank BRI and Syngenta are jointly

working to implement an agricultural
financing model based on AgriFin
Mobile in South Sulawesi province,
Page 17 / May 2018

beginning February 2018.
Programme (SCPP)
6. Forming Farmer Groups and Cooperatives
Are farmers Yes (Both informal groups and Yes (Informal groups) Yes (Cooperatives)
cooperatives)
Page 18 / May 2018

collectivised?
If so, are these
informal groups or
cooperatives?
How many farmers 25-30 10-15 90 (average)

are in each group?
How many such 4,542 100 5

groups are there?
How many villages 2,186 60 16 (14 in Riau, 2 in Jambi)

have been engaged?
What percentage of 46% 15% Riau: 38% of the villages within 50km of
the villages in the GAR concessions
landscape is this? Jambi: 25% of the villages around
specific GAR mill
What inputs are Training in good business practices Agricultural inputs (seeds, fertiliser, crop Technical knowledge, financial
provided through the protection packages) incentives
group?
Stage 3: Increasing Profitability
3.7 Education and Training

Providing training in good agricultural practices is the first key method for improving the yield and quality
of smallholder crops. With higher yields, independent smallholders can become more profitable, making
it easier for them to access finance from formal financial institutions. On top of agricultural training,
smallholders may also receive training in financial literacy, which may also help them better manage their
finances and secure access to loans.
Training can take place in person, through written materials such as guide books, and/or through the use
of technology such as cellphones and radio.38 Topics covered include agronomic calculations, land use
planning, fertiliser use, pest control, irrigation, and financial management.
Case Study: Musim Mas and IFC’s Indonesia Palm Oil Development for Smallholders (IPODS)
Project
The Indonesia Palm Oil Development for Smallholders (IPODS) project is a collaboration between
palm oil grower and trader, Musim Mas, and IFC. IPODS is currently working with independent
oil palm smallholders in 2 locations in North Sumatra and Riau to improve yields and provide
certification, so as to enable these smallholders to access financing from commercial banks.
IPODS conducts training through a team of agronomists and field assistants. Training in each of the
two locations is led by Musim Mas and IFC agronomists. These agronomists train a team of field
assistants drawn from the local community, who in turn lead training for local smallholders. This
allows the local community to take ownership of the programme, improving the local standard of
agricultural knowledge and multiplying the programme’s reach while reducing costs.39
Training materials have been specifically designed by IFC for use in the project. These materials
take the form of guidebooks that provide photographs and simple explanations of common
agricultural situations and actions to take to maximise outputs. These guidebooks are both used
during training sessions and distributed to smallholders for everyday reference.
3.8 Providing Inputs, Productivity, and Extension Services

Access to improved agricultural inputs, such as seed stock and fertiliser, is the other key method of
improving yields and crop quality. These inputs may be provided to smallholders in various ways. For
example, project implementers may provide inputs to smallholders at reduced prices through cooperatives.
Page 19 / May 2018

Another way is through an outgrower programme. Under such a programme, a plantation company or
financial institution purchases agricultural inputs in bulk and loans them to independent smallholders at
the start of the season. In exchange, farmers agree to sell their crops to the plantation company when the
harvest is complete. The cost of the inputs is then deducted from the proceeds from the harvest. This form
of support has a number of advantages: it increases the likelihood that loans provided to smallholders will
be used to improve their plantations, and helps decrease the likelihood that smallholders will fall into debt,
as no monetary exchange takes place.40
3.9 Providing Certification and Market Access

On top of improving yields, some project implementers also aim to help independent smallholders obtain
sustainability certification, through certification bodies such as the Roundtable on Sustainable Palm Oil
(RSPO) for oil palm smallholders and Rainforest Alliance for cocoa smallholders. Obtaining certification
fits well with independent smallholder financing projects, because many of the agricultural standards and
improvements that are required to obtain certification are also required to allow smallholders to access
finance. This synergy also helps reduce the costs associated with the certification process.
Obtaining certification can be beneficial to both smallholders and downstream companies. Certification
allows smallholders to sell their crop at a premium, improving their profitability. At the same time,
helping independent smallholders get certified helps the downstream companies that source from these
smallholders meet their time-bound commitments to only source certified raw materials. Because of these
benefits, downstream off-takers are often willing to support some of the costs involved in the certification
process. Examples of downstream off-takers that are supporting independent smallholders to obtain
certification include Unilever in North Sumatra province (with oil palm smallholders) and Mars in South
Sulawesi province (with cocoa smallholders).
In other projects, independent smallholders are first supported to improve their yields, without any obligation
to become certified. Certification is then presented as an additional option once increased productivity
and profits have been achieved. This stepwise approach helps to secure buy-in from smallholders.
To reduce the risk of side-selling, project implementers may require independent smallholders to enter
into a contract to sell their crop to specific downstream companies. This is especially common when
certification is involved, due to the additional costs this imposes on project implementers. Although
entering into a contract reduces independent smallholders’ freedom of association, they also stand to
benefit through guaranteed market access and a guaranteed selling price. An alternative approach is taken
by the IPODS project, which does not require smallholders to enter a formal contract, but guarantees
higher-than-market prices to encourage voluntary partnership.
Page 20 / May 2018

Programme (SCPP)
7. Education and Training
Is training in Yes Yes Yes

good agricultural
practices provided?
Who provides the SCPP’s field staff together with 5 agronomists from Syngenta. GAR staff, through cooperatives
training? government extension officers, private
sector staff, and key farmers. Farmers also provided with access to
interactive SMS-based information
service (8villages’s platform) to which
they can send agricultural and financial
questions and reports and receive
customised answers and guidance.
Farmers also receive agricultural tips via
mass SMS (Syngenta’s SMS Blast).
Is there a Train-the- Yes Yes Yes

Trainer programme?
How much training is 1,714 master trainers and 3,809 key Before each planting season (good Training is conducted every 6 months.
conducted? farmers have been trained. 1.53 million agricultural practices) and harvest
training days have been delivered. season (financial literacy).
What subjects does Good agricultural practices, good financial Good agricultural practices, good Good agricultural practices, good
the training cover? practices, good nutrition practices, good financial practices financial practices
environmental practices
Page 21 / May 2018

Programme (SCPP)
8. Providing Inputs, Productivity, and Extension Services
Are farmers Indirectly – nurseries are supported to Yes Yes (Dami Mas seeds developed by GAR)
provided with produce superior planting material and
improved seeds? conduct top-grafting
Page 22 / May 2018

Are farmers Yes, farmers are taught to conduct Yes Yes
supported to conduct staggered replanting (e.g. 20% of farm per
replanting? year) to avoid the difficulty of securing
long-tenor loans and minimise loss of
income during unproductive period.
Are farmers Yes Yes (a percentage of loans is disbursed in Yes

supported to obtain the form of agricultural inputs sourced
fertiliser and other from Syngenta and distributed in person
agricultural inputs? at village level)
Are extension and Yes No Yes

alternative livelihood
services provided?
If so, what kind? Training in alternative livelihoods - Food crop planting, financial planning,
(developing food gardens and fish ponds), and non-farming-related skills
developing nurseries, developing buying
units
What changes in Farm yields increased 60% compared to Farm yields increased an average of Farm yields increased an average of
yield and household start of programme. 11% each year. 120% compared to start of programme.
income have been
observed so far? Net income increased 157 USD net Income increased an average of 17%
income per farmer per year. each year.
What changes Not measured Downstream off-taking factories report Better quality oil palm fresh fruit
in company an increase in the quality and quantity bunches are provided to mills, resulting
productivity of grain sourced from participating in double the amount of crude palm oil
indicators have been farmers. extracted.
observed so far?
Programme (SCPP)
9. Providing Certification and Market Access
Is certification a target Yes No Yes

of the project?
If so, which Rainforest Alliance - ISPO, RSPO

certification
schemes?
How many farmers 23,225 - 0

have been certified
so far?
What is the 94,730 farmers certified by 2020 - Plan to obtain ISPO certification for
certification target farmers after 4 years of participation
and timeline? in programme.
What measures are Database used to identify all potentially - Compliance with ISPO standard
being implemented certifiable farmers. Internal audit is and training in Standard Operating
to work towards conducted for these farmers: farms are Procedures and Best Management
certification? re-visited and certification questionnaires Practices.
conducted. Audits by certification bodies
and access to market for certified cocoa
beans are facilitated by SCPP.

helped to directly
access mills and
downstream off-
takers?
If so, is there a No, most farmers have access to Yes, between farmers and Yes, between farmers and GAR mills
formal off-taking multiple traders. Only certified participating grain traders. About 70%
contract between sustainable farmers have volume of farmers sell to participating grain
farmers and mills/ contracts with off-takers. traders.
downstream off-
takers?
Page 23 / May 2018

If so, does this - Yes Yes
contract include
price and purchase
volume guarantees?
Stage 4: Financing
3.10 Providing Access to Finance

Once the above elements are in place, independent smallholders are ready to obtain and manage financial
loans.
Loans for independent smallholders generally fall into three categories: working capital loans, agricultural
input financing, and long-term loans for replanting purposes (in increasing order of loan amount and
complexity). To maximise their effectiveness, loans are often structured to meet the specific financing
needs and cashflow characteristics of a specific group of smallholders.
Banks may also work with microfinance institutions, financial cooperatives, and local credit unions, tapping
on their existing network and knowledge of local farmers’ cash flows to improve oversight and identify
the most creditworthy clients. Banks may also structure loans so that risk is shared among these local,
specialist financial institutions.
Alternatively, loans may also be disbursed to smallholders through supply chain actors such as off-taking
mills or middlemen. The advantage of doing so is that the existing supply chain can be used as a means to
channel finance, rather than having to create a new channel. However, going through supply chain actors
will usually require a higher level of oversight, such as a off-taking agreement between smallholders and
the supply chain actor so as to guarantee cashflow.
Finally, projects may also make use of mechanisms such as blended finance, through which loans are de-
risked by providing grants or development aid. This could allow the participation of a much broader range
of financial institutions, including commercial banks, institutional investors, and foreign investors. The
objective of such mechanisms is usually to allow farmers to build capacity and a financial track record, so
as to make them bankable even when the grant or aid money ceases.
Case Study: Golden Agri-Resources (GAR)’s Innovative Financing Scheme

Golden Agri-Resources (GAR), one of Indonesia’s largest palm oil plantation companies, has
developed an Innovative Financing Scheme (Skema Inovasi Pembiayaan) that is designed specifically
to support independent smallholders to conduct replanting.
One notable aspect of the Innovative Financing Scheme is the provisions it includes to support
smallholders during the 4-to-5-year non-productive period following replanting. For example,
grants are provided to smallholders to support their daily expenses during the non-productive
period; downstream off-taking companies provide some of the support for these grants. During
this period, smallholders are also taught non-farming-related skills, such as financial planning and
food crop planting, and supported to generate income through alternative means, such as by
providing skilled services.41
To provide an additional means of external credit enhancement, GAR acts as a go-between for the
smallholders to secure replanting loans from banks. The company helps smallholders negotiate
subsidised interest rates and obtain extended loan tenor, and also serves as the guarantor of the
loan.
Page 24 / May 2018

Case Study: Tropical Landscapes Finance Facility (TLFF)
The Tropical Landscapes Finance Facility (TLFF) was launched in 2016 as a collaboration between
ADM Capital Foundation, BNP Paribas, UN Environment, and the World Agroforestry Centre. The
TLFF has mobilised 1.1 billion USD for long-term, investable projects that ensure green growth and
sustainable landscape use, including developing renewable energy, reversing land degradation, and
financing independent smallholders. This is a combination of a 1 billion USD loan fund provided by
BNP Paribas and other international investors and a 100 million USD grant fund, provided by aid
agencies such as USAID.42
To offset the risks In the early stages of a project, loans are collateralised then de-risked using
the grant fund. As the projects mature and begin generating sustainable cash flows, the loans
are repackaged into green bonds, which will be sold by ADM Capital to long-term institutional
investors such as pension funds and insurance companies. Overall, the loans will have a tenor of
10 to 15 years. Using the mechanism of green bonds will allow the TLFF to tap into international
investors who are interested in building a portfolio of sustainable investments or meeting social
impact objectives.43
Currently, TLFF is still in its pilot stage. The facility has conducted one transaction, a 95 million
USD sustainability bond to finance a sustainable rubber plantation in Jambi and Riau provinces,
in collaboration with Michelin and Barito Pacific Group.44 However, there are plans to expand the
TLFF to projects such as financing plasma smallholders supplying to the palm oil company Golden
Agri-Resources in Riau province and developing off-grid power.45
Case Study: Rabobank Foundation

Rabobank Foundation is the social fund of the Dutch multinational food and agriculture bank,
Rabobank. In Indonesia, Rabobank Foundation aims to incubate early-stage agricultural projects,
such as smallholder cooperatives, so that they can develop to the stage where they are able to
secure financing from commercial banks without external support.
Rabobank Foundation does this in a few ways. Firstly, the Foundation provides loans at below-
market interest rates. Because the Foundation works with cooperatives rather than individual
smallholders, it is able to extend loans that are relatively large, about 2 billion IDR per project.
Secondly, the Foundation also provides technical assistance to help farmers scale up their
productivity, in the form of training in good agricultural practices, governance, and financial
management. In Indonesia, the agricultural commodities that Rabo Foundation invests in include
coffee, cacao, padi, and dairy.46
Through this process, Rabo Foundation has been able to help smallholders command selling prices
that are 50 to 60 percent higher than before.47
Page 25 / May 2018

Programme (SCPP)
10. Providing Access to Finance
Is increasing farmers’ Yes Yes Yes

access to finance a part
of the project?
Page 26 / May 2018

If so, which financial BRI, Rabobank Foundation, and financial Bank Oke Indonesia and BPR Pesisir Local banks, state owned banks, some
institutions are cooperatives; insurance companies also Akbar international banks (Rabobank)
involved? develop micro-insurance products
Are farmers Yes Yes Yes

supported to access
credit?
If so, how? SCPP provides financial literacy training Bank Oke Indonesia provides wholesale Interest rates are subsided. Loan tenor
and invites officers from financial credit to BPR Pesisir Akbar. BPR Pesisir is extended to 8-12 years for replanting.
institutions to present their loans and Akbar field loan officers visit farmers GAR guarantees loans.
savings products. Financial institutions in village to disburse low-interest
are trained about the cocoa sector and microfinance loans. Local traders assist in
cocoa financials, and are supported to submission of administrative documents
develop loan products for cocoa farmers. for loan disbursement.
Loans are given in the form of agricultural

input (seed and pesticides) vouchers,
as well as money to cover fertiliser and
labour costs for land preparation and
harvest. Farmers repay loan by selling
harvest to local traders, who take a cut
of proceeds and repay remainder to
BPR Pesisir Akbar. If farmers do not sell
to local traders, they can repay in cash
through traders or directly to BPR Pesisir
Akbar field staff. BPR Pesisir Akbar then
repays its loan to Bank Oke Indonesia.
Additional production assistance is

provided to farmers with outstanding
loans.
Programme (SCPP)
How are collateral Certificates such as farmers’ legal A single land title can be used as collateral Farmers’ legal land title is used as
and other guarantees land titles and motorcycle ownership for multiple loans. collateral.
for credit provided? certificates can be used as collateral.
Loans are insured against crop failure of
>75% due to drought or cyclone.
Loans are disbursed as vouchers for

purchasing agricultural inputs to ensure
that credit is used for farm investment.
Repayments to bank are made by local

traders, rather than farmers, to increase
repayment rate.
Farmers are incentivised to repay loans

early with reduced interest rates.
Only farmers who have repaid are allowed

to continue to next year.
Are farmers Yes Yes Yes

financially supported
in other ways?
If so, how? SCPP provides grants to support farming SMS service is used as a platform to Farmers are provided with grants for
infrastructure, such as subsidies for the disseminate information related to living expenses during the 4-year non-
construction of nurseries and learning loans, insurance, and financial literacy. productive period following replanting.
centres. Mercy Corps also provides financial
literacy education. Farmers participate in alternative
livelihood schemes such as food
crop planting, small business
entrepreneurship, and training in skilled
services. Farmers are educated in
Page 27 / May 2018

financial planning.
Programme (SCPP)
How are returns SCPP receives no financial returns. Bank Oke Indonesia and BPR Pesisir Profits are divided among GAR, farmers,
divided among Financial institutions retain all profits Akbar receive returns from interest rates financial institutions, participating
stakeholders? from farmer loans. charged on loans. ACA receives returns NGOs, certification bodies, and
from insurance premiums charged to participating downstream off-takers
Page 28 / May 2018

farmers. Syngenta receives returns from based on key indicators of project
seed and crop protection packages sold success (e.g. yield).
to farmers. Mercy Corps receives no
financial returns.
Have there been Bank account ownership has increased 2,688-3,188 farmers have received loans So far, participating farmers have not
significant changes from 32% to 46%. over 4 years of project implementation. needed to take up any additional loans
to financial indicators besides those provided through the
of participating Loan disbursement in 2016 increased by Innovative Financing Scheme.
farmers? 1,058% compared to 2013.
What are the Most loans are provided under 1.8% per month Interest rate is set by bank but GAR
expected risk- government’s Kredit Usaha Rakyat (KUR) assists in negotiating low rates.
adjusted returns for scheme at 9% per annum.
private investors/
banks?
What is the maturity Working capital loans up to 3 years, 6 months 13 years

period for these investment loans up to 5 years (note: this
investments? is too short for replanting)
What is the size of Average 20 million IDR 10 million IDR maximum Average 7,000 USD per hectare
each investment? replanted
How much total Working capital for 40% of farmers in 48.7 billion IDR of loans have been 9.1 million USD, assuming 1,300 ha to
investment is the programme is estimated at 50 million disbursed in 4 years of project be replanted
required/being USD per year. Land purchasing costs implementation (excluding investments
solicited? for 20% of farmers in the programme made by Syngenta, BPR Pesisir Akbar, and
are estimated at 150-200 million USD. ACA for training farmers and hiring staff).
(note: figures are estimated based on the
percentage of farmers who are bankable)
Stage 5: Monitoring Environmental Impacts
3.11 Ensuring Environmental Protection

Smallholder finance projects may incorporate environmental protection in a number of ways. At the most
basic level, environmental indicators are measured during the baseline study, and smallholders with a high
risk of committing environmental violations, such as those located within protected areas, are excluded.
Another way is by incorporating environmental aspects into the education and training component, such as
by teaching smallholders how to use pesticides safely and how to dispose of waste in an environmentally-
friendly manner.
Some projects also measure environmental indicators, such as reduction in greenhouse gas emissions and
fire incidents. GAR’s Innovative Financing Scheme uses drones to monitor the project area for hotspots
and enlists smallholders under the scheme in a fire prevention programme. As a result, GAR has been able
to prevent any outbreak of fire within the project area since the project’s inception.48
A second approach is to incorporate conservation targets into the structure of the loans provided to
smallholders. This is the approach taken by the &Green (pronounced “and-green”) Fund, which was
launched by Dutch development agency IDH in July 2017. The &Green Fund follows a “production,
protection, and inclusion” model, and aims to provide investments to improve agricultural productivity
while protecting existing forests. It does this by setting a criterion that for any project that it finances, the
area of land that the project commits to protecting must be 5 times as much as the area of land used for
agricultural production.
In return, the fund is able to offer financing with highly favourable conditions. Loan tenor can be up to
15 years, and repayments only need to commence after the 10th year.49 The fund is able to offer large
amounts of capital (up to 200 million USD), with interest rates significantly below the market rate.50 The
de-risking function is carried out by 400 million USD of grants donated by the Norwegian International
Climate and Forests Initiative (NICFI), as well as other foundations and corporates.51 In total, the &Green
Fund is targeting 2 billion USD of investments and the conservation of 5 million hectares of tropical forest,
with Indonesia as one of the focus countries.52
Page 29 / May 2018

Programme (SCPP)
11. Ensuring Environmental Protection
Is there an explicit Yes, education about the links between No No

conservation good agricultural practices and
component in the environmental conservation is integrated
project? If so, what into farmer training. Farmers are also
Page 30 / May 2018

is it? taught natural resource management
techniques and discouraged from
encroaching into protected areas and
national parks.
What types of areas Protected forests and national parks - -

are being conserved?
What changes Carbon stock, area planted by cover crops, - -

in biodiversity and biodiversity of shade trees have
indicators have been increased. Carbon emissions from farms
observed so far? have decreased.
Does the No No Yes

project have a
fire prevention
component?
Are regular patrols - - Yes, by GAR

for fire conducted?
Are hotspots - - Yes, using drones

monitored using
remote technology?
Are villagers engaged - - Yes, villagers participate in GAR’s fire

in fire prevention prevention programme
efforts?
How has the number - - Zero hotspots have been observed.

of hotspots/fires
in the project area
changed since the
start of the project?
Stage 6: Monitoring Social Impacts
3.12 Protecting Gender and Labour Rights

Women are a generally marginalised group among Indonesian smallholder families. Although female
farmers constitute a large percentage of the workforce for certain crops – for example, women make up
80 percent of coffee farm labour in North Sumatra province53 – they are often excluded from extension
services and other support programmes. This is because smallholder farms in Indonesia are generally
headed and managed by men, meaning that men also serve as the default participants and points of
contact in these programmes. However, it is often women who have the responsibility of seeking out
loans. Men may be embarrassed to deal with debts, and moneylenders may be more comfortable dealing
with women, who are viewed as easier clients from which to collect repayments.54
In response, some smallholder financing projects have made providing equal opportunities to women a
key component. For example, Swisscontact’s Sustainable Cocoa Production Programme (SCPP) actively
encourages women to join smallholder cooperatives and training activities, as well as take on leadership
positions. Results observed include 80 percent female attendance in certain training sessions and 14
percent of farmer groups having women in leadership roles.55 Since November 2016, Mercy Corps has
been also working with BPR Pesisir Akbar to develop a strategy for reaching female farmers, as well as
designing loan and savings products specifically for female farmers, as part of its BRIGE (Building Resilience
through the Integration of Gender and Empowerment) programme.56
Some projects also explicitly monitor for other social issues. For example, the SCPP explicitly mentions its
prohibition on the use of child labour during its training sessions, and regularly monitors the percentage
of cocoa plantations within the project area that engage child labour.
Page 31 / May 2018

Programme (SCPP)
12. Protecting Gender and Labour Rights
Is there an explicit Yes Yes Yes

focus on active
participation by
women?
If so, how is this SCPP provides equal access to women to Women grain traders and farmer group Women are given equal work
Page 32 / May 2018

carried out? participate in the programme, and has set heads are engaged to encourage female opportunities when participating in the
percentage targets for the participation participation in financial decision-making. programme.
of women in trainings and women A financial literacy module has been
leadership in farmer groups. developed for both farmer borrowers and
their wives. Under its BRIGE (Building
Resilience through the Integration of
Gender and Empowerment) programme,
Mercy Corps is supporting BPR Pesisir
Akbar to develop a strategy to reach out
to and develop specific loan and savings
products for female farmers.
Have there been any 14.2% of farmer groups, 21% of farmer Percentage of women borrowers have N/A
changes in women- organisations, and 42% of farmer increased from 4% in year 1 to 22% in
related indicators cooperative boards now have women in year 4
since the start of the decision-making positions.
project?
Is there an explicit Yes No Yes

focus on preventing
labour violations?
If so, how is this SCPP’s training Code of Conduct explicitly - GAR’s Social and Environmental Policy
carried out? prohibits child labour. commits to good labour practices, fair
labour rights, and no child or forced
labour. Regular assessments are
conducted to ensure compliance.
Have there been any Child labour participation rate decreased - N/A
changes in labour- from 4% in 2015 to 2% in 2016.
related indicators
since the start of the
project?
4. Impacts of Smallholder Financing Projects
Though smallholder financing projects are still largely in the pilot stages, they have already been observed
to generate significant positive economic, environmental, and social impacts.
Firstly, smallholder financing projects have been successful in raising productivity and profitability. Over a
period of three years, Mercy Corps’ AgriFin Mobile programme reported, on average, an 11 percent yearly
increase in productivity and a 17 percent yearly increase in income.57 From 2012 to 2016, Swisscontact’s
Sustainable Cocoa Production Programme (SCPP) helped smallholders increase their productivity by an
average of 60 percent and their income by an average of 157 USD per year.58
Smallholder financing projects have also been successful at helping independent smallholders secure
loans and access other financial products. From 2014 to 2017, Swisscontact’s SCPP helped independent
cocoa smallholders receive a total of 9.7 million USD in loans, with the number of loans issued in 2017
having increased 143 percent compared to 2014. The programme also had an impact on savings, which
increased by an average of 8.9 percent.59
Environmental and social benefits are not as well documented because they are not an explicit
objective of many smallholder financing projects. However, projects such as Swisscontact’s SCPP have
demonstrated reductions in greenhouse gas emissions without any negative impact on productivity, due
to the implementation of better soil, fertiliser, and environmental management practices.60 The mapping
process undertaken in the baseline studies of smallholder financing projects also enables the identification
of smallholders operating within protected areas; this allows the government to initiate targeted
programmes to resolve these smallholders’ legality issues. Finally, smallholder financing projects enable
greater oversight over the activities of independent smallholders, reducing the risk that encroachment or
other illegal activities may occur.
Some of the most tangible social impacts can be observed in projects that explicitly engage women.
These have generally seen significant increases in the participation of women in training sessions and
leadership roles in farmer cooperatives. Women are also playing a greater role in financial household
management: for instance, in Mercy Corps’ AgriFin Mobile project, the percentage of female bank loan
borrowers increased from 4 percent during the 1st year to 19 percent during the 3rd year.
Overall, despite the short time frame during which smallholder financing projects have been implemented
so far, they show a great deal of promise not just in enabling financial access for independent smallholders,
but also in meeting other economic, environmental, and social objectives. There is scope for more such
projects to be implemented in order to arrive at scalable, replicable models for independent smallholder
financing that can be implemented across different locations in Indonesia.
Page 33 / May 2018

5. Conclusion and Next Steps
The financing of independent smallholders is a nascent field, but Indonesia’s experience has demonstrated
that it is a promising one. Creating the enabling conditions for independent smallholders to access finance
may have significant positive knock-on effects on the economy, the environment, and social welfare.
Indonesia’s current supportive regulatory environment makes it an ideal time for project implementers
and policymakers to analyse and refine the smallholder financing projects currently being piloted, so as to
derive models that are applicable across multiple geographical locations and agricultural crops.
The need to take action is urgent. A lack of suitable financing options continues to drive smallholders
towards unsustainable practices, causing significant environmental degradation. The upcoming need for
replanting presents a crossroads that may lock the Indonesian agricultural sector onto either a sustainable
or unsustainable path for several years to come.
Current smallholder financing projects should be seen as only the first step in integrating independent
smallholders into the broader financial ecosystem. There are many possibilities for smallholder finance
that have not yet been fully explored, including improved access to retail savings accounts, micro-
insurance, mobile banking, and greater incorporation of mission-driven financiers such as impact investors
and social enterprise lenders into the financing landscape. It should also be noted that loans may not be
an appropriate option for many smallholders, who may be either not ready or not willing to take on loans.
Providing loans to such smallholders risks causing them to fall into debt. Expanding beyond loans to a
broader spectrum of financial products, such as savings and microinsurance, would also allow smallholders
to better choose products that fit their needs.
It is now essential for more financial institutions, from both inside and outside Indonesia, to enter the
smallholder financing sphere. These institutions should draw lessons from earlier financing projects to
design new and ever more effective financing mechanisms for independent smallholders. In particular,
uptake from financial institutions within Indonesia has been slow, with only a few banks, largely the
state-owned banks, being significantly involved. More needs to be done to realign the incentives and
disincentives so that more financial institutions begin to explore smallholder financing as a viable business
opportunity.
Only with the combined effort of institutions from all branches of the financial industry can we arrive
at a long-term, sustainable solution for financing Indonesia’s smallholders and unlock the attendant
environmental, social, and economic returns.
Page 34 / May 2018

Bibliography
1
Janudianto, Prahmono, A., Napitupulu, H., and Rahayu, S. (2013) “Panduan budidaya karet untuk petani skala kecil”,
Lembar Informasi AgFor 5, Bogor: World Agroforestry Centre (ICRAF) Southeast Asia Regional Program, p.1.
2
Indonesia Investments (2017) Kopi, [Online], Available: https://www.indonesia-investments.com/id/bisnis/
komoditas/kopi/item186
3
Aidenvironment (2016) “Evaluation of UTZ in the Indonesia Cocoa Sector”, p.14, [Online], Available: https://www.utz.
org/wp-content/uploads/2016/04/Evaluation-of-UTZ-in-the-indonesian-cocoa-sector.pdf
4
The Observatory of Economic Complexity (n.d.) Indonesia, [Online], Available: https://atlas.media.mit.edu/en/profile/
country/idn/
5
SNV (2015) Smallholder Palm Oil Farmers Can Farm Sustainably, But External Support Is Necessary, [Online],
Available: http://www.snv.org/update/smallholder-palm-oil-farmers-can-farm-sustainably-external-support-necessary
6
Santoso, A.B. (2017) “Analysis: Improving Indonesia’s bouncy rubber industry”, The Jakarta Post, 17 May 2017,
[Online], http://www.thejakartapost.com/news/2017/05/17/analysis-improving-indonesia-s-bouncy-rubber-industry.
html
7
Badron, N. (2017) “Cocoa nurseries program is expanding in Indonesia,” Barry Callebaut, [Online], Available: https://
www.barry-callebaut.com/stories/cocoa-nurseries-program-expanding-indonesia
8
Daemeter Consulting (2015) Overview of Indonesian Oil Palm Smallholder Farmers, p.11.
9
Ibid.
10
IFC (2013a) Diagnostic Study on Indonesian Oil Palm Smallholders, [Online], Available: https://www.rspo.org/file/
Diagnostic_Study_on_Indonesian_Palm_Oil_Smallholders.pdf, p.12
11
Wijaya, A. et al. (2017) “Drivers of deforestation in Indonesia, inside and outside concession areas”, World Resources
Institute Blog, 19 July 2017, [Online], Available: http://www.wri.org/blog/2017/07/drivers-deforestation-indonesia-
inside-and-outside-concessions-areas
12
IFC (2013b) Indonesia Agri-Finance: Promoting Financial Inclusion for Farmers, [Online], Available: www.ifc.org/
wps/wcm/connect/443a6f00408d25feb13ab1cdd0ee9c33/EAP-Indonesia+Agri-finance.pdf?MOD=AJPERES, p.1.
13
Greenpeace (2017) “Dirty Bankers: How HSBC Is Financing Forest Destruction for Palm Oil”, [Online], Available:
http://www.greenpeace.org/international/en/publications/Campaign-reports/Forests-Reports/Dirty-Bankers/
14
Rainforest Foundation Norway (2017) “Nordic Banks and Government Pension Funds Linked to Indonesia’s Palm
Oil Deforestation”, [Online], Available: https://www.regnskog.no/en/news/new-report-calls-out-nordic-countries-
commitment-to-forest-protection-by-linking-nordic-banks-and-government-pension-funds-to-indonesias-palm-
oil-deforestation
15
IFC (2013c) Working with Smallholders: A Handbook for Firms Building Sustainable Supply Chains, [Online],
Available: https://www.ifc.org/wps/wcm/connect/8dc5628042112fdbba2fff494779b2ad/Handbook+-
+Working+with+Smallholders.pdf?MOD=AJPERES, p.12.
16
Ibid., p.13.
17
USAID (2017) “A Quick Look on OJK’s New Regulation on Sustainable Finance”, [Online], Available: http://www.iced.
or.id/a-quick-look-on-ojks-new-regulation-on-sustainable-finance/
18
Undang-Undang Republik Indonesia Nomor 1 Tahun 2013 Tentang Lembaga Keuangan Mikro (2013), [Online],
Available: http://www.indolaw.org/UU/Law%20No.%201%20of%202013%20on%20Microfinance%20Institutions.pdf
19
KPMG Indonesia (2015) New Indonesian ‘Branchless Banking” and Microfinance Laws - A Catalyst for Microfinance
Growth?, [Online], Available: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/07/id-ksa-financial-inclusion-
indonesia.pdf, p.6.
20
Ibid., p.19.
21
Global Business Guide Indonesia (2016) Indonesia’s Microfinance Sector Overview: Key Component for Sustainable
Growth, [Online], Available: http://www.gbgindonesia.com/en/finance/article/2016/indonesia_s_microfinance_sector_
overview_key_component_for_sustainable_growth_11549.php
22
Reuters Staff (2016) “Fitch: Indonesia Microloan Subsidy to Support Loan Growth”, Reuters, 28 June 2016, [Online],
Available: https://www.reuters.com/article/idUSFit965607
23
Maskur, F. (2017) “KUR Bunga 7% Danai Peremajaan Sawit Rakyat Berbasis Koperasi”, Bisnis Indonesia, 27
November 2017, [Online], Available: http://industri.bisnis.com/read/20171127/87/713045/kur-bunga-7-danai-
peremajaan-sawit-rakyat-berbasis-koperasi
24
Bank Indonesia (n.d.) Kredit UMKM, [Online], Available: http://www.bi.go.id/id/umkm/kredit/skim/Contents/
Default.aspx
Page 35 / May 2018

25
CIFOR (2017) Current Practices and Innovations in Smallholder Palm Oil Finance in Indonesia and Malaysia: Long-
Term Financing Solutions to Promote Sustainable Supply Chains, Occasional Paper 177, [Online], Available: http://
www.cifor.org/publications/pdf_files/OccPapers/OP-177.pdf, p.15.
26
Wirayani, P. (2017) “Oil Palm Estate Fund Struggling to Complete Tasks”, The Jakarta Post, 23 October 2017,
[Online], Available: http://www.thejakartapost.com/news/2017/10/23/oil-palm-estate-fund-struggling-to-
complete-tasks.html
27
Hernedi, B. (2017) Speech by Beni Hernedi, Vice-Regent, Musi Banyuasin Regency, at “Making Green Finance
Count: Impact Investment for Indonesia’s Agricultural Sector”, Jakarta, Indonesia, 20 October
28
The information concerning the four projects profiled (Sustainable Cocoa Production Programme, AgriFin Mobile,
Innovative Financing Scheme, and Indonesian Palm Oil Development for Smallholders) was obtained directly
through interviews with the project implementers.
29
IFC (20132013c) p.23.
30
Van der Laan, C., personal communication, 17 October 2017.
31
Lebe, D., personal communication, 12 October 2017.
32
Lebe, D., personal communication, 5 December 2017.
33
Hernedi, B. (2017) Speech by Beni Hernedi, Vice-Regent, Musi Banyuasin Regency, at “Making Green Finance
Count: Impact Investment for Indonesia’s Agricultural Sector”, Jakarta, Indonesia, 20 October
34
Glenday, S. and Paoli, G. (2015) p.15.
35
Ikhwan, A., personal communication, 29 December 2017.
36
Bethe, E., personal communication, 16 August 2017.
37
Glenday, S. and Paoli, G. (2015) p.7.
38
IFC (2013c) p.44.
39
Meekers, P., personal communication, 13 September 2017.
40
IFC (2013c), p.84.
41
Kan, R., personal communication, 23 June 2017.
42
Simons, T. (2016) “A Better Deal – Incentivising Wise Land Use with the Tropical Landscape Finance Facility”,
World Agroforestry Centre, 31 October 2016, [Online], Available: http://blog.worldagroforestry.org/index.
php/2016/10/31/better-deal-incentivising-wise-land-use-tropical-landscape-finance-facility/
43
CIFOR (2017) Current Practices and Innovations in Smallholder Palm Oil Finance in Indonesia and Malaysia: Long-
Term Financing Solutions to Promote Sustainable Supply Chains, p.17.
44
Tropical Landscapes Finance Facility (2018) “1st Corporate Sustainability Bond in Asia Issued by TLFF for a
Natural Rubber Company in Indonesia”, 26 February 2018, [Online], Available: http://tlffindonesia.org/wp-content/
uploads/2018/02/TLFF-1-RLU_FINAL-Press-Release-English-26022018-1.pdf
45
Tripathi, S., personal communication, 18 July 2017.
46
Widjaja, S., personal communication, 30 March 2017.
47
Widjaja, S., personal communication, 15 December 2017.
48
Putri, G. D., personal communication, 8 January 2018.
49
Hakim, Z., personal communication, 25 August 2017.
50
Ardiansyah, F., personal communication, 3 October 2017.
51
&Green Fund (2017) “andgreen.fund – investing in inclusive agriculture, protecting forests”, [Online], Available:
http://www.andgreen.fund/
52
&Green Fund (2017) “The &Green Fund: Investing in Inclusive Agriculture, Protecting Forests”, presentation, 31
October 2017.
53
IFC (2013c), p.113.
54
PISAgro (2016) PISAgro News Issue No. 14, p.10, [Online], Available: http://www.pisagro.org/images/
uploadsfiles/FA-PISAGRO-Newsletter%2314-Nov’16.pdf
55
56
PISAgro (2016), p.11.
57
Syngenta and Palladium (2017) Social Impact Assessment of the PISAgro Corn Working Group NTB.
58
59
Swisscontact (2017) “Swisscontact’s Sustainable Cocoa Production Program”, presentation, 20 October 2017.
60
Lebe, D., personal communication, 12 October 2017.
Page 36 / May 2018

ABOUT THE SINGAPORE INSTITUTE OF INTERNATIONAL AFFAIRS (SIIA)
The SIIA is an independent think tank dedicated to the research analysis and discussion of regional and international
issues. Founded in 1961 and registered as a membership-based society, the institute is Singapore’s oldest think tank
that aims to help Singapore become a more cosmopolitan and global society through public education and outreach
on international affairs. The SIIA is also a founding member of the ASEAN Institutes of Strategic and International
Studies (ASEAN-ISIS), a regional alliance of think tanks and plays a key role in Track II diplomacy, supplementing
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ABOUT THE SIIA SUSTAINABILITY PROGRAMME

The SIIA’s sustainability programme focuses on haze caused by fires in Indonesia and on the sustainability of the
plantation sector, both key issues for Singapore. The SIIA also works on climate change issues facing ASEAN and Asia.
The SIIA’s sustainability work goes back to 1997, when it organised Singapore’s first haze dialogue with the Singapore
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on peat restoration.
AUTHORSHIP AND ACKNOWLEDGEMENTS

This report was written by Pek Shibao (Policy Research Analyst, Sustainability) and Fawziah Selamat (Deputy Director,
Sustainability) of the Singapore Institute of International Affairs. Significant input was provided by Anita Neville,
Richard Kan, and Gisela Dwiyanti Putri of Golden-Agri Resources; Jennifer Bielman and Andi Ikhwan of Mercy Corps
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FINANCING INDONESIA’S

• In Indonesia, independent smallholders dominate the production of many agricultural commodities.

• Providing independent smallholders with access to finance requires a suite of interventions to be

Page 1 / May 2018

1.1 Green Finance in ASEAN’s Agricultural Sector

Page 2 / May 2018

2. Why Companies and Financial Institutions

Page 3 / May 2018

2.2 Benefits of Financing Independent Smallholders

Plantation Downstream Financial

Improve Yields, Quality, and Profitability

Page 4 / May 2018

Reduce Reputational Risk and Environmental Impact

Page 5 / May 2018

Reduce Social Conflict

Create New Customer Base

Align with Government Push for Sustainable Finance

2.3 Loans Versus Other Types of Financing

Page 6 / May 2018

Loans through Local Traders

Commercial Bank Loans

Page 7 / May 2018

Page 8 / May 2018

Swisscontact’s Sustainable Mercy Corps’ AgriFin Mobile Golden Agri-Resources

Scheme Sustainable Cocoa AgriFin Mobile Innovative

Implementer Swisscontact Mercy Corps Golden Agri-

Start Date 2012 2014 2014

Commodity Cocoa Corn Palm oil

No. of farmers 131,429 2,773 (total in years 450

No. of farmers 165,000 15,000 farmers total 20,000 (by 2022)

Page 9 / May 2018

Stage 1: Project Identification

3.1 Evaluation and Monitoring

Case Study: Financial Access Credit Risk Scoring Tool

Page 10 / May 2018

Case Study: CocoaTrace

3.3 Supporting Legal Land Rights

3.4 Government Participation

Page 11 / May 2018

1. Evaluation and Monitoring

Was a baseline study Yes Yes Yes

Is data collected in Yes Yes Yes

Page 12 / May 2018

Yield information is tracked 60 and 90

Credit assessment is conducted by BPR

Loan disbursement and repayment

Crop growth and yield increases are

2. Tracing, Mapping, and Spatial Planning

Are farmers being Yes Yes Yes

How many farmers 131,429 2,773 450

Are farmers being Yes Yes Yes

Page 13 / May 2018

3. Supporting Legal Land Rights

Are farmers being Yes No Yes

Page 14 / May 2018

Are there measures No Yes, BPR Pesisir Akbar has extended a No

Page 15 / May 2018

3.5 Stakeholder Engagement and NGO Involvement

3.6 Forming Farmer Groups and Cooperatives