A new initiative to support smallholder farmers in Indonesia’s palm oil sector aims to provide sustainable replanting solutions, offering financial assistance and technical guidance while tackling deforestation concerns.
The Sustainable Oil Palm Replanting in Indonesia (SOPRI) project has been launched by impact fund manager Abler Nordic, in partnership with Temasek Foundation, Musim Mas, and Livelihoods Funds. The initiative will help smallholders replace ageing oil palms with higher-yielding, sustainable crops without expanding into rainforest areas.
Indonesia is the world’s largest producer of palm oil, with smallholders cultivating over 40% of its plantations. However, many face declining yields due to ageing trees and struggle to access the financing needed for replanting. Without affordable loans, some farmers resort to expanding into forested land, contributing to deforestation and climate change.
A Financial Model to Promote Sustainability
The SOPRI project is part of Abler Nordic’s Climate Smart Fund, initially backed by Norway’s Ministry of Climate and Environment. The fund blends public, private, and philanthropic capital to create deforestation-free supply chains and improve smallholder resilience.
As part of the financing structure, Temasek Foundation is providing catalytic capital to reduce financial risks for smallholders, making loans more affordable and encouraging private investment.
The first phase of the SOPRI project will assist 400 smallholders across 400 hectares in Sumatra. Farmers will receive:
- Long-term replanting loans
- Financial literacy training
- Sustainability certification
- Land title support
- Participatory village planning for responsible land use
In return, farmers must commit to preventing deforestation, with compliance monitored through satellite imaging and on-the-ground checks. The long-term goal is to scale the project to support over 20,000 smallholders.
Collaboration for Lasting Change
The initiative is being led by the Climate Smart Fund, which will oversee financing and coordinate efforts with local partners such as Koltiva and Bank Amar.
Musim Mas, a major palm oil producer, will provide technical assistance to help smallholders meet sustainability standards and access premium markets. Livelihoods Funds will offer expertise in training and certification, guiding farmers towards more sustainable agricultural practices.
Beyond traditional replanting, the project will explore climate-resilient agroforestry models, integrating oil palms with shade trees and cash crops. This approach aims to improve soil health, regulate local climates, and help farmers adapt to the impacts of climate change.
Arthur Sletteberg, Managing Director of Abler Nordic, described the project as both ambitious and necessary. “Building long-term relationships with smallholders and communities is at the core of what we do. Our model is complex, but early results show that it works. This initiative will create lasting change for both farmers and the climate.”
Temasek Foundation’s Head of Climate and Liveability, Heng Li Lang, called the pilot a “game-changer”, saying that derisking loans for smallholders will help them replant sustainably without taking on unsustainable debt.
The Climate Smart Fund is now looking to expand from its initial $10 million fund to $40 million, using investor capital, guarantees, and grants to scale up sustainable solutions.