FinTech Solution for Indonesian Farmers
Happy National Farmers’ Day! This special day dedicated to Indonesia’s farmers is commemorated every September 24. The country is home to 26.14 million farming households and these farmers play a great role in Indonesian society, but many face enormous challenges in their daily life and business environment, from poverty to lack of formal land ownership and access to finance.
A great deal of the responsibility to tackle the problems faced by Indonesian farmers lies on the government’s shoulder. But innovative minds in the country are doing their share too, by turning a problem into an opportunity.
On the Decline
Indonesia is an agrarian country and agriculture is an important aspect of its culture. Unfortunately, within the last decade or so, this sector’s productivity has been on the decline. Bank Indonesia’s economic and monetary policy executive director Dody Budi Waluyo was quoted by Kompas.com as saying that in 1990, the sector contributed 22.09 percent to Indonesia’s GDP. But by last year, this figure has decreased to about only 13 percent.
To make matter worse, the agriculture sector is also seeing a nationwide decrease in employment. In 1990, this sector employed more than 55 percent of the total workforce in Indonesia. The number dropped to 45.1 percent in 2000 and continued to fall to 31.9 percent in 2016.
The industry is now facing an aging workforce. A 2013 census reveals that the majority of Indonesian farmers are between 45 to 54 years old and a recent survey conducted in three farm villages in Central Java by the Indonesian Institute of Sciences (LIPI) shows that only three percent of children from farming households in the region went on to become farmers.
Lack of Access to Finance
One of the main factors behind the agriculture sector’s low productivity is the fact that the majority of Indonesian farmers are considered unbankable. To this day, lack of access to finance remains a major constraint for the development of Indonesian farming communities.
A researcher from LIPI, Yeni Saptia, said that study finds that only around 15 percent of Indonesian farmers have access to bank financing, while 33 percent get their financing from government-sponsored micro credit programs such as the National Program for Community Empowerment (PNPM Mandiri) or the KUR micro loan program. However, the 52 percent majority still raise their own small business capital by borrowing cash from their family or from their personal savings, or by taking a loan from a cooperative or other non-bank financial institutions.
A Fintech Solution
In recent years, financial technology companies such as Mekar (PT Sampoerna Wirausaha) have been playing an important role in the efforts to empower and support the growth of Indonesian farming businesses. Peer-to-peer lending platforms such as one that Mekar manages are on the rise, offering a unique solution to the financing problems faced by our farmers.
Mekar’s peer-to-peer lending platform, Mekar.id, connects farmers and other small business owners in Indonesia who need financing with investors who are looking for a safe, secure and profitable investment alternative.
Mekar does this by partnering with savings and loans cooperatives that have solid experience in lending to small business owners in many regions in Indonesia. The cooperatives, Mekar’s lending partners, interact directly with borrowers on a daily basis. They have an average NPL rate of less than 2 percent, which means defaults are very rare. Furthermore, they provide a 100% guarantee on Mekar’s investors’ principal, making the P2P lending platform a safe and comfortable environment for investing in small business loans.
Mekar offers a win-win solution for everyone; the farmers are getting the financing they need to grow their business and make a positive impact for their natural environment and local community, and the investors (individuals and companies) can take comfort in knowing that their money is working for them, managed by a professional lending platform to achieve their financial goals while doing their share to develop Indonesian small businesses.
Mekar’s Initiative for Farmers
As an emerging P2P lending platform, Mekar puts great importance on innovation and initiatives that serve to offer a ground-breaking solution to the financial problems facing the country.
Among the programs involving Indonesian farmers that Mekar is running is an agreement signed in July this year with several other finance institutions to provide micro loans to hundreds of rice farmers in two regencies in West Java.
Under the MoU, Mekar will channel money from investors to Koperasi Mitra Dhuafa (Komida) and the latter will distribute the funding to at least 500 rice farmers in Purwakarta and Majalengka regencies.
Such initiatives, run by companies with expertise in financial technology like Mekar, are making a difference in the farming communities across Indonesia by reaching out to the traditionally unbanked population through largely non-traditional tools, thus increasing access to finance and improving financial inclusion. This kind of solution is expected to increase productivity in the agriculture sector, and hopefully, we will see more and more young Indonesians taking to agriculture to ensure a brighter future for the country’s economy.
Want to do your share in supporting the growth of Indonesian farmers? Visit www.Mekar.id and invest on a small business loan today.
