Agritech Industry in Indonesia that Continues to Grow

One of the things that is quite encouraging in the development of Indonesia's digital economy is the creation of solutions to various problems in various sectors, as well as creating new opportunities that can have an impact on many people. Online motorcycle taxis, food delivery merchants, and the transformation of stalls towards digital are some of them.

What has not been heard widely is how the agritech industry is growing in Indonesia. The story hasn't reached the surface yet. Actually, several names have focused on this sector, TaniHub, SayurBox, KedaiSayur, iGrow, Crowde, Etanee, EdenFarm, Freshbox, and other names are a series of startups trying to transform the agritech industry in Indonesia with their respective solutions.

For the last few years they have tried to validate ideas and at the same time educate the market that there are technological solutions that can solve existing conventional problems, such as farmer loans, low prices, and distribution of their crops.

In 2020, since entering the pandemic period, several names in this sector have begun to show significant growth. Especially those who focus on service delivery of crops directly to customers. This potential is also what makes Pivot Vegetable Shop and focus on grocery delivery services. Sayurbox, Etanee, EdenFarm, and Freshbox also compactly stated that there was a growth in retail customers during the pandemic.

Meanwhile, in terms of capital services, Crowde shared his story with DailySocial at the beginning of the pandemic their operational business was affected. This condition was caused by the large number of POs with hospitality businesses which had to be canceled for reasons force majeure also due to travel restrictions from one area to another.

Many parties are surprised by the new policies and gray plans, for example, many investors do not dare to reinvest after repayment or new policies to limit the type of business they are invested in.

"We also made adjustments to the system so that capital still has relevant risk mitigations during this pandemic, such as credit insurance options in capital, diversification taker for the absorption of crop yields, to the option of purchasing crop yields in tonnage. In order to facilitate the capital distribution assistance system, we also work more closely with local sons as partners consultant farmer and field agent"explained the Head of Impact Investment Crowde Afifa Urfani.

Crowde's performance during the pandemic is quite promising. In the period from March to August they claim to continue to channel funds to reach more than Rp60 billion. This figure is higher than normal conditions, considering that the peak of the planting season is from September to October each year. The funds were channeled to more than 18.000 farmers and more than 300 small and micro businesses in the agricultural sector.

"During the pandemic, we continue to work with >10 institutional investors who are not afraid to channel capital even in a pandemic condition with uncertain credit fate. Shout out to 2 of them, namely Bank BJB and Bank Mandiri, which in fact continue to be open to many adjustments in agricultural capital," explained Afifa.

Supply chain and farmer capital loans

If you look further at the problems that are being solved by technology startups in the agritech sector, it will focus on two things: supply chain or distribution and also farmer capital loans. For the supply chain, these startups will usually go directly to the regions to meet farmers or farmer groups and work together to accommodate their crops.

Then the harvest will be accommodated in a kind of processing center to be sorted and packaged before being passed on to customers. With a short distribution chain like this, the quality of vegetables and fruit will be maintained, prices will remain competitive, and customers will have an interesting shopping experience.

As for agricultural capital loans, the outline of the process is that farmers open projects on the provided platform, complete with information on the crops they will plant and the amount of profit offered. Furthermore, the owner of the capital will select the project and finance it.

Of the two basic problems, there is one thing that makes it able to have a positive impact on farmers. All of them are competing to make farmers harvest with maximum and quality. The goal is to produce the best quality for their respective services. Quality fruit or vegetables in abundance, or good returns for those who invest. This synergy is expected to be able to elevate farmers to a better, more measurable, and more documented level.

Agritech in other countries

China as a country with rapid technology adoption in the past decade has made the transformation in the agritech sector as a national priority. They launched plans for the development and digitization of the agricultural sector from 2019 to 2025. Cutting-edge technologies such as AI robots for sensor-based automation and monitoring, blockchain, supply chains, to 5G networks are expected to create solutions in the agricultural sector. According to a report published last March, investment in China's e-Grocery grew 25% from 2018. That's a whopping $2,1 billion.

While in India, the supply chain or supply chain leaders is also a challenge for the agritech industry. Connecting farmers directly to customers appears to be an important homework for agritech in many countries.

A report, titled Agritech - toward transforming Indian Agriculture issued by EY last August, mentioned the potential supply chain leaders for the Indian market reached $12 billion, while for financial services reached $4.1 billion. These two sectors provide space for startup players to grow while at the same time contributing to national agriculture.

Next potential

Indonesia is an agrarian country where every year there are news about farmers who fail to harvest or farmers whose crop prices drop. When it comes to potential, it is clear that empowering farmer groups to reduce these risks is the most important.

Furthermore, in the more mature stage of IoT-specific sensor technology, predictions based on data typical of big data and machine learning can take farmers to the next level. Determine the planting period and what variant is the most profitable to reduce the risk of crop failure.

Indonesia is heading in that direction. The investment obtained by companies in the agritech sector is expected to be able to provide solutions for a better future for Indonesian farmers.