Palm Oil’s Future Built on Borrowed Time

At Indonesia’s plantation expo, palm oil was on full display as the crop of the future. Under spotlights and banners reading “Oil Palm is Indonesia’s Future,” state planners unveiled biodiesel roadmaps and mini processing refineries. These showcases were designed to impress the general public, but most importantly, potential “green” investors with promises of digital traceability, ESG compliance, and scalable sustainability. In this polished vision of the future, financial capital flowed easily, risks were managed, and growth was green.

Just in front of the spotlighted stage, smallholder representatives gathered at quiet tables. They talk among themselves about overdue replanting funds, and seeking answers about old debts still on their books. They weren’t there to marvel at models of future plantations. They were there because their livelihoods depended on navigating a bureaucracy that too often left them behind.

Ever More Finance

This contrast is not incidental. The core of Indonesia’s sustainability narrative today is finance, and even more of it. Building innovative financial infrastructures – expanding credit schemes, attracting climate finance, and blending public-private finance – is becoming a bigger part of the government’s push for sustainable palm oil and biodiesel. The focus is more on carbon markets and investment vehicles than they do on seeds, soil and labor that makes plantations possible.

Finance is framed in these events as a neutral instrument that will modernize palm oil and include more smallholders. But inclusion into this system is rarely neutral. It is shaped by who is seen as creditworthy, which documents are deemed “valid,” and what kinds of futures get funded. For smallholders in West Kalimantan and elsewhere, inclusion often means entering formal credit arrangements that are difficult to repay, especially when the value of their crops fluctuates, or when access to inputs is uncertain.

Picture 1. A Smallholder harvesting an aged oil palm tree. As the tree matures, especially beyond 20 years,  it becomes harder to harvest, its yield declines, and its price drops significantly. The replanting program seeks to remediate this decline (Source: Author)

Pushing Back

Over the past eight years, many smallholders have been enrolled in the state’s flagship sustainable plantation program: replanting. It is only the latest chapter in a longer history of debt-financed expansion, where each promise of reform leaves new obligations in its wake. Backed by government grants, subsidized loans, and renewed corporate partnerships, the program offers support – but only to some. Smallholders with unclear land titles or who are still paying debts are often disqualified or delayed. The costs of participation—idle plots, months without income—add up quickly. Credit may open doors, but it also locks farmers into long repayment cycles.

Yet smallholders are not passive. At a National Smallholder Assembly, representatives did something rarely seen at state-run expos: they refused to let the conversation move on. While state officials and private financiers spoke of IPOs, hedge funds, and corporatization of cooperatives, smallholders pushed back. They demanded clarity on disbursement timelines, accountability for delayed funds, and a meaningful role in shaping how sustainability is defined.

Behind the scenes, corporations benefit from this financial model: credit-backed smallholders guarantee raw material, while profits flow upward. This was not simply a plea for inclusion; it was a direct challenge to a system where the promise of a green future is built on unresolved debts. For many, indebtedness is not new. Debt is a precondition of the plasma scheme that tethered smallholders to corporate mills. Even when plasma debts are cleared, new ones emerge as companies restructure, assetize, and pass risk down the supply chain, forcing smallholders to borrow just to stay afloat.

Reckoning with Debts

If sustainable palm oil is to be more than a marketing promise, it must confront this reality. Sustainability cannot be measured only by how much finance is generated. It must also reckon with the debts that already structure the plantation economy. It must begin with clearing the ledger: auditing old obligations, restructuring burdens, and investing in systems of care, not just yield. Otherwise, we risk building a greener future on the backs of those still paying just to be included.

Listen to the Talking Indonesia podcast, Betting the Farm, with the author discussing his research here: https://indonesiaatmelbourne.unimelb.edu.au/talking-indonesia-betting-the-farm/