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When you think of the palm oil industry, you would be forgiven for envisaging vast tracts of soulless, corporate-owned plantations where small-scale farmers have been crowded out, just as they have been around the world. However, the backbone of this globally vital industry lies in the hands of millions of smallholder farmers, particularly in the major producing countries of Indonesia and Malaysia.

The sector provides employment for 721 000 smallholders and labourers in Malaysia, and 4 million in Indonesia; a further 11 million in the two countries are indirectly dependent on it.
Most oil palm jobs are in remote rural areas, where alternative employment is scarce, thus
helping to promote rural development and alleviate poverty. 

In Malaysia, palm oil has been a key contributor to reducing poverty from 50 per cent in the 1960s to just 5 per cent today, with smallholder production accounting for 40 per cent of total palm oil plantation areas.

Significant Production Share
According to the Roundtable on Sustainable Palm Oil (RSPO), more than seven million smallholders around the world make a living from oil palm. In Malaysia and Indonesia alone, smallholdings represent approximately 40% of the total area for oil palm production.

This is expected to increase over time. In Indonesia, they are expected to manage 60% of the country’s oil palm plantations by 2030, making their role even more crucial. As the demand for palm oil continues to rise, smallholders will play a pivotal role in meeting this demand sustainably.

Challenges and Support Initiatives
Despite their importance, smallholders face various challenges that can limit their productivity and sustainability.
Smallholder farmers play an important role in the palm oil industry, but they also These include:

  • Lack of access to land and credit
  • Limited access to technical assistance
  • Low yields
  • Poor market access
  • Long-term effects of climate change

However, efforts are being made by organizations like the Roundtable on Sustainable Palm Oil (RSPO) and government initiatives to support smallholders in adopting sustainable practices and improving their livelihoods.

The RSPO, for instance, has a dedicated Smallholder Support Fund that provides training, capacity building, and financial assistance to smallholders seeking RSPO certification.

Governments in Indonesia and Malaysia have also implemented programs to provide smallholders with access to credit, subsidies, and technical assistance to boost sustainable palm production.

Around 96% of Malaysian palm oil plantations—many of them run by smallholder farmers—are now MSPO-certified under the Malaysia Sustainable Palm Oil (MSPO) scheme.
This was a new nationally mandated sustainability standard enforceable by the law, the first of its kind around the world. 

By supporting smallholders, these initiatives aim to improve their yields, incomes, and
overall sustainability, while also ensuring a stable supply of palm oil to meet global demand.

Unsung Heroes
Smallholder farmers are the unsung heroes of the palm oil industry. Their contributions are vital not only for production but also for the socio-economic development of rural communities and the long-term sustainability of palm oil.

As the industry continues to evolve, it is crucial to address the challenges faced by smallholders and empower them to adopt sustainable practices, ensuring a prosperous future for both the industry and the communities it supports.