Mission of Telkom Business Unit "Agree" to Digitize Agricultural Ecosystem from Upstream to Downstream

As the strength of the Indonesian economy, agriculture is one of the main sectors in the digital transformation agenda targeted by PT Telekomunikasi Indonesia Tbk (Telkom). The company through its Agreeculture (Agree) business unit seeks to solve various problems and challenges experienced by Indonesian farmers with technology.

Agree is an aggregator platform to help digitize agriculture that connects actors, buyers, financiers, and entities that support agricultural ecosystems.

Based on reports DSResearch and Crowde titled "Driving the Growth of Agriculture-Technology Ecosystem in Indonesia"In general, the agricultural sector in the country is hindered by access to capital, financial literacy, as well as the ability, knowledge of cultivation, and the ability to cultivate farmers. Not to mention talking about the risk of crop failure in the cultivation sector due to weather and pests.

The low educational background and financial literacy of farmers also contributes to the challenges of cultivation business actors. In 2018, the Central Statistics Agency (BPS) recorded that only 4,5 million out of a total of 27 million agricultural business actors were connected to the internet.

How is Agree's journey and business map in solving the problems above?

DailySocial had the opportunity to talk more deeply about the development of the Agree platform with the Head of Digital Vertical Ecosystem Agriculture Hikmatullah Insan Purnama and the Head of Go-To-Market (GTM) Operations Agree Danang Satria Mustari.

Idea, pivots, and business models

Hikmatullah, who is familiarly called Hikmat, revealed that the idea to develop Agree only came about in 2017. Agree was founded in line with Telkom's vision to contribute to national economic development, one of which is through digitizing the agricultural sector.

After going through an idea incubation period of around one year, Agree's services became commercial in 2018. At that time, Agree had just offered business capital loan products to freelance farmers, similar to the P2P platform concept. lending TaniFund and iGrow. However, Hikmat said, in the two years of its journey, this loan product had not been successful product-market fit because many farmers failed to pay and the Nonperforming Loan (NPL) ratio swelled to 10%.

Hikmat, who just joined in March 2020, decided to mfeedpivot Agree by changing the market segment, from providing business capital to freelance farmers to farmers who have collaborated with agribusiness companies. This model is adopted to guarantee that farmers' products are purchased and ensure initial selling prices. With this model, he believes financial institutions will be willing to provide loans.

Agree starts go to market in January 2021 after going through a market trial process since September 2020. According to his records, the company has distributed IDR 826 billion to 47.362 farmers with 80 billion purchase transactions from 88 agribusiness companies. The company helps channel business capital from startup Alami Sharia and ten other financial institutions.

"Agribusiness companies that join Agree are expected to improve demand. To get demand, our platform offers two schemes, namely bringing together agribusiness companies and buyer, and look for it buyer for agribusiness companies. Only then do agribusiness companies make contracts with farmers. So, this ecosystem chain will come to buyer," said Wisdom.

To mitigate risks, Agree has prepared a number of steps, namely developing dashboards so that banks and financial institutions can monitor farmer activities, as well as utilize IoT devices and field assistant to ensure the utilization of business capital. Agree collaborates with Jasindo insurance to mitigate the risk of default.

Organizational structure

Agree is a business unit under the auspices of Telkom's Digital Business Director M Fajrin Rasyid. This ecosystem is led directly by the Head of Digital Vertical Ecosystem Agriculture Hikmatullah Insan Purnama.

Wisdom is under three tribe leader, which consists of agriculture, fisheries, and smart city. Meanwhile, Agree offers five services, including Agree Partner, Agree Capital, Agree Market, Agree Pedia, and Smart Farming. These five services are prepared to digitalize agricultural activities and connect various stakeholder.

According to Hikmat, Agree is mandated to develop digitalization in the agricultural sector, but its capabilities are also used to support the livestock and fisheries ecosystem because its business scope is very broad. Meanwhile, the total number of people managing digital ecosystems in agriculture, animal husbandry and fisheries reaches 100 people (pro hire), plus seven Telkom people.

Considering that digital business development in the corporate sphere will always be associated with growth culture, aGilanya will certainly be different in the scope of startup. In this case, Hikmat admitted that Telkom gave full authority to tribe leader who manages Agree to develop products, strategies and marketing. Even the Director of Digital Business M Fajrin Rasyid also provided assistance.

Idea development to execution of Agree is carried out from scratch by taking a number of lessons and experiences from other startups. However, to increase its capabilities, Agree will be developed as open platform so that it can open up partnership opportunities with startups or other companies.

Metrics, targets unicorns, and spin off

apart growth cultureHikmat continued, Agree is also given the freedom to determine business metrics, such as the number of transactions, number of agribusiness company partners, and Monthly Active Users (MAU).

According to him, this was the main basis for Agree being formed into a separate division and led by the Digital Business Directorate. Agree wants to separate itself from nature business telecommunications which is synonymous with large investments and is required to return on investment.

"Agree is not required to generate income in the early stages. The target is to pocket it traction, even long-term targets must be able to achieve unicorn. With this way, rule at Telkom it is different from Agree. Key Performance Indicators are calculated from revenue, benefits, and valuation. For [businesses] that have not yet generated revenue, for example IoT, we will be evaluated internally and externally.

By looking at the growth of the ecosystem agritech who started mature, Agree also considers plans for spin-off so we can move faster as a digital company. With its current position, Agree still has to follow the way of working according to Telkom and state regulations as the owner of the company's shares.

At this time, Hikmat has not been able to elaborate on his plans spin-off that in the near future.

Business plan

Head of Go-To-Market (GTM) Operations Agree Danang Satria Mustari added, there are a number of expansion plans being prepared for next year, considering that currently Agree has only launched two services to the market, namely Agree Capital and Agree Partner.

First, Agree will expand to a larger commodity market segment and not just limit it to the agricultural and fisheries sectors. For example, coffee and horticultural products. Then at Agree Capital, the company will expand its target financing market, not only to cultivation players, but also to financing buyer (invoice financing).

In the Agree Partner service, the company will increase collaboration with a number of IoT solution providers to encourage data-based agricultural activities (data driven). "This data is processed to produce recommendations for farmers to grow crops, for example soil conditions. Apart from that, this analytical data can later be used by the government to encourage the growth of the agricultural sector in Indonesia from upstream to downstream," said Danang.

Lastly, Agree will encourage the digitalization of wet markets in Indonesia as the main source for farmers to supply crops through Agree Mart. Through this platform, Agree strives to accommodate transaction needs buyer wider.