Indonesian state banks are to finance smallholders a total of Rp4 trillion under the microcredit scheme Kredit Usaha Rakyat (KUR) to allow them to take part in the oil palm replanting program, a report said on Friday (18/5).
According to PT Bank Mandiri (Persero) Tbk Director, Alexandra Askandar, as quoted by Detik.com, Bank Mandiri, together with Bank Negara Indonesia and Bank Rakyat Indonesia, will offer the KUR.
“A total of Rp4 trillion has been allocated for that (oil palm replanting scheme), with a 7% interest,” Askandar said at the Coordinating Ministry for Economic Affairs office on Thursday (17/5).
Askandar explained that in the initial stage, Bank Mandiri would provide replanting program KUR to a group of farmers who own 402 hectares of land altogether, and later, to another group with 859 hectares of land.
The Government, in its drive to boost productivity in the palm oil sector, encourages replanting of old crops and those with low productivity. This year, through the Indonesian Oil Palm Estate Fund (BPDP), the Government provides grant support for the oil palm replanting program of Rp25 million per hectares to cover about 200,000 hectares of smallholders plantations. The actual replanting cost is, however, much more than that, and the smallholders have to seek funding from other sources, including applying for micro-credit loans.
“The cost of replanting ranges between Rp 55 million and Rp 68 million. Rp 25 million can be obtained from BPDP and as for the remainder, the smallholders may apply for KUR,” explained Coordinating Ministry of Economic Affairs Deputy Minister for Food and Agriculture Musdhalifah Machmud
The Government pairs with BPDP to support smallholder farmers by providing financial assistance for replanting oil palm plantation. The Government channels proceed from the new export levies to replanting program.
Indonesia is the world’s biggest producer and consumer of palm oil commodity. Its palm oil plantations cover more than 12 million hectares, with almost half of it owned and managed by smallholders. The productivity of these smallholders’ plantations is still low, between 1.5 to 3 tons per hectare per year compared to the 6 to 8 tons per hectare of large company plantations.