Better finance for farmers: How one fintech startup changed the way it works

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Indonesian peer-to-peer platform Crowde – set up to help small farmers break out of the poverty trap by making it easier for them to secure loans – started out in 2015 by connecting farmers with individual investors. That didn’t work as well as hoped.

The company was spending too much time managing private investors and high net worth individuals wary of widespread scams in agricultural finance. The lead times involved in setting up financing terms were delaying how quickly farmers could get funding.

“We realised it was too unstable and the system was more geared to look after investors than farmers,” explains Crowde co-founder and former farmer Yohanes Sugihtononugroho.

In late 2018, the emphasis shifted to include financial institutions. “We were lucky as well that the government started to mandate that banks had to invest 30-50% with fishermen and farmers,” Yohanes added. “We offered a way for them to do that.”

Since that pivot, Crowde has partnered with eight banks to speed up the process. These include state-owned Bank Mandiri, which is also an investor in Crowde through its VC arm Mandiri Capital.

Five years after launch, Crowde has disbursed more than Rp132 billion (US$9.3 million) in loans.

Relevant Sustainable Development Goals

New ways to borrow money

Crowde is now looking at longer-term loans for farmers as well, over one to two years alongside the existing one-to-three-month lending cycles it offered before.

The company also changed the way it disburses funds in 2019, switching to a credit-based system after discovering that some farmers were using the cash they received for non-farming needs.

Today, farmers source advance credit from Crowde that can be used to finance inventory, invoices and purchase orders, and specific projects.

Point of sale software developed by Crowde to process cashless purchases of seeds, fertilizers and pesticides from local agri-supply stores can also help small retailers manage their business. So far, 300 shops have joined the scheme but growth is slow, due to the fragmented nature of this sector.

Farmers meanwhile can settle the debt with a one-off payment after they’ve sold their harvest by paying as little as a 6% interest , or from this year by sharing profits from certain crop sales (corn, rice and chili) with lenders. Shariah options are also available.

Bigger markets for farmers

Come harvest time, Crowde can also help farmers find buyers for their crop. “Traditionally farmers sell to middlemen,” Yoahnes says. “We want to connect farmers to higher up the distribution chain so that they can get a better price for their produce.”

Since first trialing this service in 2018, to help fulfil demand for chili for a big retailer, more suppliers have approached Crowde to work together.

Partners include institutional buyers such as Indofood, Raja Top Food and Lotte Mart Indonesia, as well as over 100 other local buyers, providing farmers with a more stable end market for their produce.

Crowde was initially naïve when looking to disrupt the existing supply chain, Yohanes admits, recounting how its East Java office was burnt down in the first year of operation.

The company now works with 200 middlemen, hired as either full-time employees helping to expand Crowdes network by liaising with farmers and neighborhood stores, or as buyers for products sold in traditional markets.

“We realised we had to think of the middlemen and how we can also put them into the supply chain,” Yohanes says.

COMPANY SUMMARY : CROWDE

OFFERS Credit and a wider marketplace for small farmers

HOW Connects farmers to lenders, retailers and buyers through an online platform

WHERE Indonesia

USER BASE 28,000 farmers and 300 stores

FUNDING US$2 million

PLANS FOR 2021 Series B funding, grow network to 100,000 farmers

Crowde still faces plenty of challenges, not least convincing jaded investors and farmers that it is a legitimate organisation determined to make a difference. “People don’t see farming as a business,” Yohanes says. “We need to educate them that it can be.”

In its 2019 Impact Report, Crowde noted that farmers enjoyed on average a 5% income increase for one cultivation cycle after receiving access to capital. Furthermore, eight out of ten farmers joining Crowde were better at managing their finances, the company said, with more than half saving money for their next project.

In the last few months, Crowde has started to turn a profit. It makes money in three areas: management fees charged to investors; margins on discounts received from buying fertilisers and seeds in bulk; and bonuses from investors and buyers for hitting certain targets.

The company also collects data on its platform throughout the value chain, from farmers, supply shops, offtakers (who commit to buying future output from farmers at an agreed price) and lenders.

Crowde has opened for Series B funding in 2021 to finance growth plans and bolster its tech capability. The company is also looking for more investors with a tech, agricultural and finance background, as well as a regional Southeast Asian perspective to assist in expansion beyond Indonesia.

Expansion overseas

The company is working on pilot projects with a partner in the Philippines, although those have been hampered by the Covid-19 outbreak, while also looking for other partners in Southeast Asia.

There are other peer-to-peer digital lending services catering to smallholder farms in Asia, including FarMart in India and Cropital in the Philippines.

Getting more financial expertise on the team could strengthen Crowde’s long-term prospects, suggests Paul Voutier, knowledge and innovation director at agriculture-focused NGO Grow Asia, pointing to a potential threat from bigger fintech players.

“There are over 70 million smallholder farmers in the Asean region,” Voutier says. “There’s potentially billions of dollars on the table.”

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Yohanes S

Yohanes Sugihtononugroho

CEO, Crowde.co

Nick Measures

Freelancer, Writer, Producer

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