A new pilot initiative aims to help smallholder farmers access financing and resources to “sustainably” replant oil palms, potentially increasing their income while preventing forest encroachment, or the illegal expansion of cultivable land.
Norwegian impact fund manager Abler Nordic has partnered Temasek Foundation, palm oil producer Musim Mas and international coalition Livelihoods Funds to launch the Sustainable Oil Palm Replanting in Indonesia (SOPRI) project.
In its first phase, the SOPRI project will support 400 smallholders across 400 hectares in Sumatra, offering long-term replanting loans, financial literacy training, sustainability certification, land title support and participatory village-planning to promote responsible land use, reads a March 24 announcement.
In return, smallholders commit to avoiding forest encroachment. This is monitored through satellite and on-the-ground checks.
Future phases of the project aim to reach over 20,000 smallholders.
The SOPRI project is part of Abler Nordic’s broader Climate Smart Fund — launched in the pilot phase with US$10 million ($13.4 million) from the Norwegian Ministry of Climate and Environment. It combines public, philanthropic and private capital with the aim to create “deforestation-free value chains” and support smallholder resilience projects.
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Temasek Foundation is involved in this blended finance model by setting aside a undisclosed amount of catalytic capital to guarantee and derisk loans to smallholders for the SOPRI project. This reduces financing costs for smallholders and makes attracting private investment more viable.
The Climate Smart Fund will act as the lead organisation, managing financial operations and coordinating implementation with local partners such as Koltiva and Bank Amar.
Musim Mas provides technical support to help smallholders achieve sustainable palm oil certification and access markets, while Livelihoods Funds brings expertise in training and certification to help farmers transition to sustainable practices.
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Beyond replanting, the project is also exploring climate-resilient agroforestry models, integrating oil palms with shade trees and cash crops to improve soil health, regulate microclimates and support smallholders in adapting to climate change.
In Indonesia, smallholders cultivate over 40% of the country’s oil palm land but face a significant challenge: ageing oil palms that reduce yields, making replanting an urgent and costly necessity. Without access to affordable financing, some smallholders may expand into rainforest areas, accelerating deforestation and climate change.
Abler Nordic now aims to expand the broader Climate Smart Fund from the initial US$10 million fund to US$40 million in its first close, using a mix of investor capital, guarantees and grants.
Heng Li Lang, head of climate and liveability at Temasek Foundation, says the pilot initiative will be a “game-changer”. “By unlocking financing with catalytic capital, smallholders can replant sustainably without bearing huge financial risks. Temasek Foundation is committed in collectively building this public-private-philanthropic partnership with Abler Nordic, Livelihoods Funds and Musim Mas in nature-based solutions. We are not only driving positive environmental impact, but also paving the way for scalable and meaningful long-term solutions.”
