How Indonesia is using crowdlending to boost financial inclusion
By Pulse Lab Jakarta
A fintech startup is helping Indonesian farmers get better access to market information and capital to grow their businesses.
To help circumvent this financial barrier, PT Tani Fund Madani Indonesia developed an online crowdlending platform, called TaniFund, which connects farmers with investors who are willing to render financial support. In a recent conversation with Pulse Lab Jakarta, co-founder Michael Jovan Sugianto discussed TaniFund’s budding role in Indonesia’s FinTech landscape.
Tell us about TaniFund’s story.
When I was in college, I had to develop a business concept for an e-business course. I was drawn to a noticeable information gap in Indonesia’s agriculture sector regarding farmers’ lack of knowledge about the market price of their crops.
Fast forward a couple of years, TaniHub marketplace (related to, but not the same as TaniFund) was born, purposed as a digital marketplace for farmers to trade their agricultural products directly with market players, such as supermarkets, modern retailers, traditional markets and the likes. TaniFund later emerged as an offshoot approach to encourage people to invest directly in agricultural projects via our website.
How does TaniFund differ from banking institutions?
A gap still exists between the reach of banking institutions and the demand from society when it comes to financing. Financial technology has the ability to accelerate financial inclusion, which means reaching many individuals in the middle to low income levels who are unbanked. While agriculture is a big sector in Indonesia, many farmers still cannot meet banking institutions loan application requirements.
TaniFund provides an avenue for investors who are understanding of the farmers' struggles to invest their money in the agriculture sector. The investors receive monthly updates on their selected projects and may even request field visits. The money pooled in for a certain agriculture project is managed and utilised to enable a better supply of fertiliser, as well as to deploy experienced agronomists in the field to monitor crops. The idea is that with better supply and better management afforded by these investments, farmers can reap more profits when the times comes for harvesting. There’s a transparent 40:40:20 profit-sharing ratio involving farmers, investors and TaniFund, respectively.
Do investors get to select specific projects to invest in?
TaniFund manages different agricultural projects. On our website, we provide the complete list of projects (consisting mostly of fruits and vegetables) that need to be financed. The prospectus of each project is also available, detailing the amount of capital needed, profit estimation and calculations about the production and harvest costs. Individuals as well as institutions may become investors.
The number of units available for purchase per project depends on the amount of capital needed. So, let’s say for a cabbage project, the amount of capital needed is 200 million IDR, then 40 units (at 5 million IDR per unit) would be available to interested investors.
What are the benefits to farmers?
The capital invested in each project is distributed to respective farmers by way of fertilisers, seeds, farming equipment, and weekly allowance until the project is finished. After harvesting is complete, the crops are sold and distributed through TaniHub online marketplace. By having a better understanding of the true value of their crops, farmers can earn a larger profit from the sales compared to marketing and selling by themselves. Again, farmers are entitled to 40% of the profits, which are awarded after the project has been fully completed.
How would you describe the fintech industry in Indonesia?
The burgeoning fintech industry is somewhat more developed overseas than here in Indonesia. More sophisticated initiatives are emerging in developed countries due to a more advanced ecosystem of financial and tech players. Square Up is a financial service startup based in United States, for example, which invented an effective and easy way to access a mobile payment tool. In contrast, many fintech businesses here are still narrowly focused on providing access to capital.
Fortunately, with fintech, the operational costs are not as expensive and permits are not as complicated to obtain when compared to formal banking institutions.
What role do you believe TaniFund will play in the future of fintech here?
TaniFund hopes to become a major finTech player in the agriculture sector here in Indonesia. Through the TaniHub marketplace and TaniFund’s investment approach, we could potentially solve many of the problems farmers face, related to low-profit sales and insufficient capital for crop production. Food self-sufficiency in the future is not far-fetched; we just need to continue looking for ways to improve our business model to benefit everyone, including farmers, consumers and investors.
We want to inspire people to build more start-ups in the agriculture sector, which can cover all areas in Indonesia. Indeed, agriculture has always been a bedrock of Indonesia’s economy and TaniFund’s goal is to continue supporting such vibrancy