Fostering Economic Resilience in Berau through Smallholder Crop Diversification Report

The report argues that independent palm oil smallholders in Berau face significant economic risks due to monocropping and low productivity, with returns often falling far below the regional minimum wage. Through financial modelling, the study finds that diversifying into maize and cocoa can substantially increase revenue—potentially up to 825% more than monocropping—while reducing sensitivity to market price volatility. It recommends that diversification begin during the peak productivity of palm oil trees (around year 10) to ensure bankability and positive cash flow. To facilitate this transition, the report suggests leveraging financial instruments such as the Kredit Usaha Rakyat (KUR) interest rate subsidy, credit guarantee schemes, and maize insurance, while strengthening local programs like PRUKADES and farmers' corporation plantation zones.

• Diversifying palm oil plantations with maize or cocoa can significantly increase income potential compared to monocropping, with maize offering up to 825% higher returns and cocoa up to 495% higher returns.
• Maize is the most recommended diversification crop due to its high income potential, stable prices (averaging IDR 3500-4200 per kg), and established supply chains, while pepper is the least attractive due to extreme price volatility.
• The optimal timing for diversification for smallholders with vacant land is during the peak productivity of palm oil trees (approximately year 10), as this period provides the highest cash revenues and makes them more creditworthy for loans.
• Diversification improves economic resilience by reducing sensitivity to market price volatility; a 25% price drop in a diversified plantation results in a smaller average cash flow decrease than in a monocropping plantation.
• The Kredit Usaha Rakyat (KUR) program provides a critical financial lever for diversification by offering a lower annual interest rate (7% p.a.) compared to commercial banks (13-18.5% p.a.).
• Possession of the Surat Tanda Daftar Budidaya (STDB) plantation permit is essential for independent smallholders to improve financial and market access and to prevent illegal expansion into state forest zones.
• Maize insurance (Asuransi Usaha Tani Jagung—AUTJ), expected to be operational in 2021, can increase returns for insured farmers by 7% to 11% depending on the frequency of productivity loss cycles.

APA

Mecca, B., Mafira, T., Larasati, L., & Inantha, M. W. (2020). Fostering Economic Resilience in Berau through Smallholder Crop Diversification Report. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/11/Fostering-Economic-Resilience-in-Berau-3.pdf

Chicago

Mecca, Brurce, Tiza Mafira, Luthfyana Larasati, and M. Windrawan Inantha. Fostering Economic Resilience in Berau through Smallholder Crop Diversification Report. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/11/Fostering-Economic-Resilience-in-Berau-3.pdf.

Wikipedia

{{cite report |last1=Mecca |first1=Brurce |last2=Mafira |first2=Tiza |last3=Larasati |first3=Luthfyana |last4=Inantha |first4=M. Windrawan |title=Fostering Economic Resilience in Berau through Smallholder Crop Diversification Report |publisher=Climate Policy Initiative |date=November 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/11/Fostering-Economic-Resilience-in-Berau-3.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mecca2020fostering, author = {Mecca, Brurce and Mafira, Tiza and Larasati, Luthfyana and Inantha, M. Windrawan}, title = {{Fostering Economic Resilience in Berau through Smallholder Crop Diversification Report}}, institution = {Climate Policy Initiative}, year = {2020}, month = nov, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/11/Fostering-Economic-Resilience-in-Berau-3.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }