The World Bank has lifted an 18-month global moratorium on lending for new palm oil investments, endorsing a new strategy that focuses on supporting small farmers that dominate the sector.

The poverty-fighting institution suspended new investments in the palm oil sector in September 2009 to review its lending practices and to conduct global consultations in the $30 billion industry.

After meeting with 3,000 stakeholders, including farmers, environmental and social groups, and businesses, the World Bank's private-sector lender, the International Finance Corp (IFC), said palm oil investments could contribute to economic growth and reduce poverty, while also being eco-friendly.

'With the adoption of the new Framework and Strategy, (the World Bank) is now lifting that suspension,' the Bank said in a statement.

Palm oil employs over six million rural poor around the globe. Some 70 per cent of palm oil production is used as staple cooking oil by the poor in Asia and Africa.

Although the World Bank is a small player in the palm oil sector, having invested $132 million in projects in Asia, Central America, Ukraine and West Africa, it said its new effort would seek to boost production on degraded plantations and boost productivity.

'This will take place by helping to strengthen smallholder producer organizations, promoting their access to finance and markets, improving their agronomy practices and productivity, and fostering fair contractual arrangements with larger companies,' the bank said.

Palm oil companies have said the industry has been unfairly vilified for cutting down forests and draining peatlands -- contributing to huge amounts of planet-warming carbon dioxide entering into the atmosphere.

Malaysia and Indonesia produce 85 per cent of global output of palm oil. In addition to food, demand for palm oil is surging as more of the commodity is used for nonfood uses such as soaps, detergents, cosmetics and biofuels. – Reuters