Entrepreneurs Cut Out Middlemen in Indonesia’s Agricultural Trade
Technology has long been supporting the agriculture sector in Indonesia, with the use of modern machinery to improve farmers’ productivity along with also efficiency. Recently, however, technology has been helping the agriculture sector in a completely new way, along with also likely changing the industry for Great. Several completely new tech companies have set up shop in Indonesia to empower agriculture businesses by letting local farmers cut out the middlemen.
The ubiquitous presence of ‘brokers’ within the farming business will be something most local buyers along with also sellers have taken for granted over time. however, as industry experts know, having a long chain of brokers between the farmer along with also the consumer tends to drive prices up to unreasonable levels.
The cost of shallots bought directly by Indonesian farmers, for example, can be around Rp.38,000 (US$2.88) per kilogram. however at the retail level, prices soar to around Rp.60,000US$4.55) per kilogram. Four young web developers realized This kind of was problem when they entered the Hackathon Merdeka competition in 2015. For those who don’t know, a ‘hackathon’ will be an event where developers come together in teams along with also have a finite amount of time to conceptualize along with also build an innovative digital product.
“We wanted to connect farmers directly with consumers so they can get better prices. Maybe there are already similar attempts, however they are all still modest in scale,” says 26-years-old web developer Arif Setiawan in an interview with Indonesia Expat.
Indonesian farmers | Photo by Jos Dielis
As a result, Setiawan along with also his three friends came up with the idea to set up an online marketplace for shallot farmers along with also buyers to interact with each some other. “Most groups discussed staple foods, such as rice, sugar along with also corn. We did some brainstorming, along with also we thought the one of which has the most fluctuating prices along with also could be sold online was shallots,” explains Setiawan.
This kind of idea gave birth to a completely new company called Limakilo, which earned the team first place within the hackathon. The victory encouraged the team to develop Limakilo into a full-fledged mobile app, which was officially launched by Indonesia’s Communications along with also Information Ministry earlier This kind of year. Since the launch, as many as 20 farmers within the Brebes Regency of Central Java along with also the Sleman Regency of Yogyakarta have signed up to use the product.
“We are focusing on farmers with less than one hectare of land each. If the farmers have a big plot of land, they probably already have Great livelihoods,” says Setiawan, adding of which farmers have already been able to bolster their income by selling appropriately priced produce directly to buyers through the app.
“If they sell the idea to brokers, they will have to give cheaper prices because the brokers usually buy in bulk. The difference could be up to Rp.2,000 [US$0.15] per kilogram. If the volume of sales will be one tonne, then the difference in a farmer’s income could be substantial.”
Former Indonesian Trade Minister Thomas Lembong said of which mobile apps such as Limakilo could increase a farmer’s income by an average of 15 percent, along with also also help push down prices at the consumer level by another 15 percent.
While Limakilo focuses on selling farmers’ produce directly to buyers, another company called Eragano aims to be the first one-stop-shop for all agricultural needs in Indonesia. Co-founder of Eragano, Stephanie Jesselyn, says she came up with an idea to provide a wide range of agricultural services, as problems facing the agricultural sector in Indonesia were complex along with also abundant.
Based on the 2013 Agriculture Census, the national agricultural industry will be still dominated by home operations, with more than 26 million households qualifying, while the number of agricultural companies added up to merely 4,165. This kind of means of which the majority of Indonesian farmers are modest share operators, with undeveloped technology along with also limited access to education along with also information.
Further, the census showed of which Indonesia recently lost about 5 million farmers due to a lack of support along with also low profits.
As modest farmers are finding the idea harder to survive within the archipelago, Eragano looks to strengthen them.
“If we only help them sell their produce, the quantity along with also the quality won’t be Great. We need to provide solutions by the beginning until the end, including guiding them,” Jesselyn tells Indonesia Expat. Since the Eragano mobile app launched in April of 2016, the company has so far been able to help 40 farmers increase their income for one harvest season.
“They get better prices as well as increased productivity because we help them. So their income increases by two sides: prices along with also productivity,” says Jesselyn, adding of which farmers can get a cost of Rp.3,000 (US$0.23) per kilogram for tomatoes if they sell through Eragano, for example, while they would likely only be able to get Rp.500 (US$0.04) per kilogram if they sell via traditional brokers. Jesselyn hopes to soon have 3,000 farmers using Eragano in Indonesia.
Digital businesses like Limakilo along with also Eragano are at the forefront of change for Indonesian farmers, who have so far earned the smallest piece of the pie within the agriculture industry, while bearing all the risks, including crop failure.
“This kind of could be a completely new desire, since they bring science, digital technology, as well as access to information along with also global networks for the local farmers to utilize along with also compete,” said Bagus Handoko, who works at the Center of Macroeconomic Policy within the Finance Ministry’s Fiscal Policy Agency, as quoted by The Jakarta Post.
however the digital revolution will be still relatively completely new, with most startups in Indonesia not focusing on traditional sectors like agriculture. of which said, the potential for agriculture technology will be big, with more than 25 million farmers within the nation who are ready for higher profit margins. For many of them, smartphones are no longer a luxury. however problems still arise, however, as Indonesian farmers often don’t know how to use — let alone profit by — fast-developing mobile technology.
due to This kind of reason, the idea’s important for tech founders to approach farmers directly, along with also on the ground. “Literacy in technology, particularly the idea for farmers, will be very important. Without the idea, they cannot use the services along with also software provided by startups [of which are trying to help them],” Handoko said.
For agriculture tech firms to truly take off in Indonesia, the idea’s important for founders, investors along with also public officials to understand why such companies are needed. “A few things need to be undertaken, starting with building awareness along with also providing knowledge about the needs of […] farming,” said Handoko.
“For agriculture, research along with also surveys are important. We have to do market research to know who to target. There are some [entrepreneurs] who contain the spirit, however do not do research. Once they have started off their companies, the reality within the field turns out to be wildly different [by what they originally thought],” says Jesselyn, adding of which the government can also help by providing comprehensive policy support, ranging by licensing issues to access to capital along with also some other incentives.
Handoko added, “A government-established incubator will be a Great starting point because the idea facilitates access to capital along with also advocates for policy support.”
Featured Image by Lukas Bergstorm
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Entrepreneurs Cut Out Middlemen in Indonesia’s Agricultural Trade
Entrepreneurs Cut Out Middlemen in Indonesia’s Agricultural Trade