Determinants of Smallholder Farmers to Participate in the People’s Palm Oil Replanting Program in Indonesia: Do Non-Economic Factors Dominate?

Abstract

The People’s Palm Oil Replanting (PSR) program is a national strategic initiative of the Indonesian government that is aimed at rejuvenating aging oil palm plantations to enhance productivity and sustainability among smallholder farmers. However, participation rates remain below policy targets, indicating the presence of constraints beyond financial considerations. This study aims to identify the determinants of smallholder farmers to participate in the PSR program. Using 348 farmers as samples, and by employing SEM-PLS, the study revealed that non-economic factors, proxied by two variables (farm and location), are the most significant factors that determine the decision of farmers in joining the PSR, while governance and technical procedure have no significant impact on farmers’ decisions to join the PSR Program. An interesting finding was also documented in this study, in which the economic factor has no significant impact. Overall, the findings showed that the economic factors alone are insufficient to drive smallholders into joining PSR programs. Instead, institutional support, access to reliable information, governance alignment, and farm conditions are more crucial. Hence, a proper policy mix is required to maximize the impact of the program for the farmers.