Indonesia’s eFishery dives into risky waters of farmer financing

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Hi readers,

Over the past few months, I have been closely following the troubles around TaniFund, the peer-to-peer lending business of Indonesian agritech startup Tanihub.

Tracking the developments at the company have put me in touch with quite a few TaniFund lenders. They are basically individual investors who choose to grow their money by lending to farmers through the TaniFund platform, and then retrieve their principal plus interest over a period of time.

While it was all rosy at the start, many TaniFund lenders failed to get their money back in the end. It is extremely unfortunate, but this wasn’t an isolated event. Investors that loaned money to farmers through another platform called Tanijoy also experienced the same problem.

So when I had a chance to converse with these investors, one of my first questions was an obvious one: Of all the options available, why lend to farmers?

The most common response showed a noble goal – they wanted to help farmers and play a part in growing Indonesia’s agriculture sector. And of course, make money while doing so.

But the problem with giving loans to farmers is that the risk is pretty high. A lot of factors contribute to this, such as bad weather and pests as well as farmers’ capability and trustworthiness.

Startups do try to mitigate these risks, but it has proven to be difficult.

So when I learned that eFishery, one of Indonesia’s most successful startups, had ventured into lending for farmers, I was pretty surprised. What surprised me even more was that they had managed to convince top – read: highly risk-averse – banks like OCBC NISP and DBS to join the project.

The third bit of surprise was the fact that after doing all the risk mitigation work and roping in notable lenders, eFishery is actually not making any money from this service – well, not directly, at least.

While essentially offering farmers a financial service similar to TaniFund, it’s clear that eFishery is playing it differently. Since its main business is already profitable, the company can afford to take a safer route. It may be the best approach to take in this space, given the pitfalls that eFishery’s peers fell into.

— Ardi Wirdana, journalist at Tech in Asia

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Image credit: Timmy Loen