Indonesia’s eFishery revels in farmer financing foray, but there’s a catch

Update on May 25, 2023: Indonesian agritech firm eFishery hits unicorn status with $108m series D

Indonesia’s eFishery is an outlier in Southeast Asia’s startup scene. Unlike most of its peers, the aquaculture company has enjoyed both accelerated growth and a fast track to profitability at the same time.

So when the startup decided to dive into lending – a notorious pitfall for agritech companies – eyebrows were raised.

Fish farmers looking at the eFishery app on a smart phone / Photo credit: eFishery

But now, two years since it launched its financial product, the Bandung-based company continues to grow its lending capabilities, though it has refrained from jumping all in and exposing itself to the full risks and rewards of the business.

The firm’s financial offering, called Kabayan, is a pay-later program that provides fish farmers with credit limits that they can use to buy feed, fish seeds, and any other products through eFishery. The company works with banks and fintech firms to provide these credits.

Before releasing its lending product, eFishery had three offerings: eFeeder (an IoT device that enables automated feeding in fish and shrimp farms), eMall (a marketplace for selling fish and shrimp feed), and eFresh (a B2B commerce business).

The firm forayed into financing in 2020 after identifying access to financial services as one of the pain points for farmers looking to grow their businesses. According to the startup, many succumb to intermediaries and loan sharks that can charge interest as high as 40% per annum.

Kabayan enables farmers to pay for feed and seeds later in the harvest period with an interest of 18% per annum. This frees up some cash for farmers that they can use to expand their businesses, such as adding more ponds and equipment.

For eFishery, the growth of Kabayan has been “amazing” – a success that has evinced partnership interest from a host of peer-to-peer (P2P) players like Alami, Amartha, Investree, and Kreditpro, as well as reputable banks such as OCBC NISP and DBS.

Now, the product is used by close to 30,000 farmers in Indonesia, the company says.

Data as differentiator

Even though there’s interest in the service now, convincing financial institutions to work with the company was no easy task at first. In fact, eFishery describes the process as the biggest challenge in the initial stages of rolling out the product.

Fish and shrimp farming, the company says, are not traditionally funded by banks due to the high risk involved.

“So assuring them that we have the right model was hard,” says Diajeng Reisa, the company’s head of fund and operations. “That was why we started mostly by working with fintech companies that have higher appetite and flexibility on the model.”

No monetization, no problem