Oil palm is well suited to cultivation by smallholders because its long lifecycle and high yields mean that cultivation of a few hectares of land can provide a family with a reliable source of income for around twenty years. REA’s first PPMD smallholder scheme was voluntarily established in 2000 and the development of plasma smallholder schemes remains a significant focus of the group’s expansion programme.
The group recognises that smallholder schemes are one of the most effective ways to share the economic benefits of its operations with the surrounding communities. This can help to engender the support of these communities for the smooth running of the group’s operations. In 2014, REA purchased nearly 120,000 tonnes of FFB from plasma, PPMD and independent smallholders, which provided these local farmers with an income of 234.8 billion rupiah (US$19.7 million).
Suppliers of FFB processed in REA's mills
In an effort to improve the practices of the smallholders within the group’s supply chain who manage their own land, REA has formed a collaboration with the international development NGO SNV. Since this component of REA’s supply chain comprises over 2,000 farmers cultivating some 7,000 hectares of oil palm, a ‘train-the-trainer’ approach has been selected. Initially, this involves training REA’s smallholder team and the management teams from five cooperatives in the course content and techniques necessary to provide effective training in best agricultural practices and cooperative management. Once these master trainers have proven their ability to convey the training materials to others effectively, they will then train others to become trainers. The ultimate aim is that each cooperative within the supply base eventually has the capability to provide training to all of their members on a regular basis. The ultimate aim of the training is to improve the yield and quality of the fruit these farmers produce, which accounted for 14% of the FFB processed in REA’s mills in 2014. The business case for investing in this training is therefore clear: it will increase both the farmers’ income and the profitability of REA’s palm oil mills.