How agritech in Indonesia revolutionized the industry

Indonesia’s agricultural sector, known for its abundant commodities like rubber, palm oil, cocoa, tea, and cloves, plays a crucial role in its economy. Despite the challenges posed by the Covid-19 pandemic, agriculture has demonstrated resilience.

Agriculture technology or agritech in Indonesia has contributed significantly to GDP growth. However, the sector is facing hurdles due to urbanization. It results in declining employment opportunities. 

To address these issues and unlock the sector’s potential, foreign investors can play a pivotal role. 

Benefits from agritech development in Indonesia

To make it accessible, the agriculture sector has now evolved into agritech in Indonesia. Therefore, many investors are making good bets in agritech. The focus is bridging the gap between farmers and markets, improving access to capital, and advancing technological skills. 

This article explores the opportunities and challenges of investing in Indonesia’s agriculture sector and highlights how foreign investors can contribute to its rejuvenation.

1. Bridging farmers to the market

Transporting agricultural commodities and directly reaching end-consumers is a significant challenge in Indonesia’s archipelago landscape. The complex trade channels, characterized by numerous intermediaries, lead to inefficiencies, with farmers receiving minimal returns while consumers pay exorbitant prices. 

Agritech companies like TaniHub and SayurBox are addressing this issue by leveraging smartphone applications to connect producers with end customers. These platforms eliminate middlemen, enabling farmers to earn higher profits while offering more affordable prices to consumers. 

TaniHub and SayurBox focus on the B2C market, while Panen ID and Chilibeli’s Chilimart cater to the B2B sector, facilitating direct trading with hotels and restaurants.

2. Improving access to capital

Farmers often need help to secure low-interest loans from banks due to the lack of collateral and cumbersome administrative processes. Agrotech companies are integrating financial solutions into their platforms to overcome this challenge. 

TaniHub, for instance, has launched TaniFund, a peer-to-peer lending fintech that allows users to lend money to farmers and earn reasonable returns. Additionally, several other firms in this field, such as Crowde, iGrow, and TaniJoy, provide financial inclusion and support to farmers.

3. Advancing technological skill

Technological advancements, particularly the Internet of Things (IoT), have opened new possibilities in farming. Farmers can now automate and standardize processes with IoT devices. 

For example, HabibiGrow, a product by Habibi Garden, enables remote and autonomous watering of plants and greenhouse regulations. Companies like MSMB have developed tools like drone sprayers, surveillance systems, and soil and weather sensors. 

These technologies empower farmers to enhance productivity and efficiency.

Challenges in Indonesian agritech

Despite the achievements of pioneers of agritech in Indonesia, the sector still faces challenges in Indonesia. The following vital challenges impact farmers:

1. Lack of digital literacy 

Farmers often need more exposure to modern technologies as traditional agricultural practices prevail. Widespread adoption of agrotech solutions requires educating farmers about these opportunities.

2. Insufficient financial inclusion 

Formal financial institutions hesitate to lend to farmers, especially those without real estate assets, due to perceived high risks. With adequate liquidity, farmers may be able to purchase agritech technologies or invest time in learning their usage, hindering their adoption.

Government initiatives and opportunities

Recognizing the potential of agritech startups, the Indonesian government has launched initiatives to encourage collaboration between conventional players and digital agritech platforms. The Ministry of Information Technology’s “Farmers and Fishermen Go Online” campaign aims to enroll one million farmers and fishermen in digital programs. 

Additionally, venture capital firms, traditionally focused on high-growth consumer startups, are now exploring agritech investment prospects in Indonesia.

Establish your agritech company with InCorp Indonesia

If you are considering investing in Indonesia’s agritech sector, InCorp Indonesia offers seamless company registration services, ensuring a smooth entry into the market. Our expert consultants can assist you in acquiring the necessary business licenses efficiently. 

Moreover, Cekindo provides comprehensive market research and due diligence services to help you make informed investment decisions. Additionally, our tax and accounting services and HR and recruitment support can help reduce the overhead costs of setting up a dedicated department. 

Partner with InCorp Indonesia to unlock the full potential of your agritech investment in Indonesia.