Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
76
an estate setting, partly because of their choice of planting material. In addition,
smallholders are less likely to follow good sustainability practices.
To a significant degree, many problems with quality appear to be caused by gaps in
communication. Because smallholders often market their produce to intermediaries that
aggregate the fruit, they are unaware of quality problems that emerge when the fruit is
delivered. In many cases, it is hard to disentangle quality problems that emerge on a given
farm with problems originating on other farms or with subsequent handling problems.
The same study finds that pricing information is hard to come by. In general, farmers with
contracts receive a better price for their produce—in some cases as much as one-third
more than farmers without contracts. Traders pay promptly for what they purchase,
however, and a few even pay in advance. In contrast, more than two-thirds of farmers who
sell directly to the mill are paid on a monthly basis.
The study concludes that significant gains may be had by improving the flow of
information to smallholders, including technical information on agronomic practices for
growing oil palm. The study highlights the need to improve the transparency of pricing
incentives and to give smallholders information on the penalties for providing fruit of poor
quality. An additional finding is that scope exists to improve the enabling environment for
credit providers.
Food safety
Indonesia’s food delivery systems are changing quickly with urbanization. Between 1999
and 2005, food sales from supermarkets in Indonesia increased by more than 60 percent,
and sales from western-style fast food restaurants more than doubled. 137 Large
international firms face significant reputational risk if food safety systems fail, but little
hard evidence indicates how well those systems ensure food safety overall.
Another way of looking at the quality of a country’s domestic food systems is to look at
how well its exported food products comply with import standards. Data on rejection
rates for Indonesian exports to the USA and EU suggest that rejection rates are average for
most products, with the exception of fish products imported into the EU .
Neighboring Malaysia did better than Indonesia, as did Chile, where food exporters have
implemented strict safety standards.
Lessons for OIC countries
Indonesia clearly demonstrates that it is possible to provide the infrastructure to connect
millions of farmers—even extremely geographically dispersed and small-scale farmers—
to markets. It also demonstrates that education can reach remote rural communities,
enabling a population that was overwhelmingly rural until very recently to achieve high
rates of education. Indonesia has also taken steps to strengthen the institutions that
137 Frazão, Meade, and Regmi (2008).