Crowde's platform offers small investors direct access to Indonesia’s US$25 billion agricultural sector, transforming the way traditional farmers fund, run and grow their businesses
Started by an ex-chicken farmer, Crowde joins a growing number of crowdfunding and peer-to-peer (P2P) lending startups offering investors the once rare opportunity to invest directly in Indonesia's agribusinesses.
In particular, it targets novice investors who do not have much spare capital or are new to the crowdfunding scene. The minimum investment required is a relatively low IDR 10,000 (US$0.70) per project. Absent is the complicated paperwork that usually accompanies stocks, bonds and real estate investments traditionally favored by the increasingly affluent Indonesian middle class.
With over 23,000 investors on its platform so far, the startup channelled a total of IDR 51 billion (US$3.63 million) in 2018 to over 10,000 partner farmers and enterprises who list their projects – which range from crop cultivation to rearing farm animals and sourcing of farm supplies – on the Crowde platform.
The startup is backed by GREE Ventures, a Southeast Asian-focussed fund that counts Indonesian e-commerce unicorn Bukalapak in its portfolio.
Investors can choose to park their funds in a basic loan program, with distributes interest of 10–15% per year, or a sharia-compliant profit sharing arrangement that gives a 5–10% annualized return; the latter is run in partnership with local Islamic financial institution Bank Muamalat.
Each project is worth between IDR 20 million and IDR 180 million, while investments typically take 30 to 180 days to mature. For each successfully funded project, Crowde earns a 3% service fee.
To help investors choose the right project, Crowde performs its own risk assessment, displaying the results in an easy-to-understand format that ranks the projects by their risk profiles.
The platform does not disburse cash to its partner farmers, so there's no risk of funding misuse. Instead it uses the money to buy them agricultural tools, which the company sources at wholesale prices.
From farmer to entrepreneur
Co-founder and CEO Yohanes Sugihtononugroho established Crowde after experiencing first hand the challenges faced by small-scale farmers in his country.
After running a fashion business and graduating from college, Yohanes operated his own chicken farm with some degree of success. However, the intrepid business graduate was forced to shutter his business when the market price for chicken meat suddenly plummeted.
Yohanes then spent several months travelling across Indonesia, where he noticed that rural folk were often unable to obtain the capital needed to start or operate a business due to their poor credit history, something Yohanes learnt was not a result of their own doing. "In rural areas, people often 'lend' their name to relatives seeking credit to buy motorcycles and the like. This puts them in a bad position in the eyes of the bank [as the lender]," Yohanes said.
At some point, the intrepid business graduate even met a farmer who had used his daughter as collateral to secure a IDR 2 million (US$141) loan. "That was something that I just couldn't process; it's horrifying," Yohanes recounted.
In developing the concept for Crowde, not all of Yohanes' experiences have been negative, however. Yohanes has clearly taken a leaf from his college project, in which he and his teammates had helped a widow start a mushroom business. The team purchased the mushroom cultures, taught the basics of starting a farm and connected the budding farmer to willing buyers.
Within six months of launching her business, the newly minted mushroom entrepreneur had even earned enough to sponsor her child through nursing school. Meanwhile, Yohanes had a solid business model upon which to launch Crowde.
Help for the grassroots
Crowde is not alone in tackling the agriculture sector’s need for funding. iGrow, founded a year earlier in 2014, has also made a name for itself in the agribusiness investment sector. Unlike Crowde, however, iGrow users pay to "sponsor" the cultivation of a unit of produce. For IDR 1.5 million, investors in an iGrow precision farming project are entitled to the returns from one square meter of crops cultivated in a greenhouse.
Regardless of their approach, Crowde, iGrow and other similar startups collectively plug the financing gap for small-scale agribusinesses, offering valuable, alternative sources of liquidity to a sector that employs 40% of Indonesian's citizens in low-income jobs.
Without access to conventional loans, needy unbanked farmers often resort to illegal “loan shark” moneylenders who demand exorbitant interest rates. Many also fall prey to exclusive middleman arrangements that force them to sell their produce at punishingly low prices. Crowde centrally sources for bulk buyers to ensure farmers receive a fair rate, which in turn stabilizes farm prices and gives farmers a much-needed income boost.
Crowde now requires partner farmers to receive training throughout the funding cycle, as part of a local group or community that the farmers must first join. These efforts are likely to translate into improved farm yields, potentially improving the livelihoods of the 100,000 partner farmers Crowde plans to bring on board and enhancing the resilience of Indonesia's agricultural sector as a whole.
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