Indonesian agritech startup TaniHub has identified its next engine of growth — lending

A farmer plants rice seedlings in a paddy field on the outskirts of Yangon. Reuters

Indonesian agritech startup TaniHub Group, which helps farmers get a fair price for their produce by connecting them to buyers, is now betting big on its peer-to-peer lending platform, TaniFund.

So far, TaniHub — the five-year-old online marketplace from where hotels, supermarkets, and individual customers order fresh produce from farmers — has been the group’s mainstay. Most of the orders accepted by farmers on the platform are one-off, i.e. they do not enter into any binding planting agreement with the buyer.

As the group expands its lending business, it expects to enrol more of the country’s credit-starved farmers on TaniFund. The company will require the borrowers to plant a specified crop and produce a specific quantity of it. The firm will also procure the crops and sell them on the TaniHub platform.

In each project that TaniFund finances, the company will take around 3-4 per cent commission from the farmers.

TaniFund will also help the farmers forecast the commodities that will be in demand in the market, and its value.

So far, TaniFund has financed only 5 per cent of the 35,000 farmers in the TaniHub ecosystem, which the group is looking to reverse.

“Today, the share of supply from TaniFund-assisted farmers is small compared to the total amount of commodities traded on TaniHub. We expect this condition to be reversed by 180 degrees in the future — the supply of commodities from TaniFund borrowers will be in the majority and produce from farmer trading partners will be lesser. That way, TaniFund’s role in increasing our revenue will indirectly be bigger in future,” Pamitra Wineka, TaniHub Group’s co-founder and president, told DealStreetAsia.

TaniFund was launched in 2017, but the group recently reformed the management by incorporating a new team immediately after it closed a $27 million Series A round in April 2020 co-led by OpenSpace Ventures and Intudo Ventures.

Rather than tying up with established fintech lenders, TaniHub prefers to go it alone while building its lending platform as it claims to understand farmers better. “Farmers don’t have collateral and they can’t pay loans by installment either. Instead of getting hard on farmers with other fintech players, we created our own [platform, TaniFund], as we have a track record of working with farmers with TaniHub,” Wineka said.

To deepen its ties with farmers, the company will start a feature called TaniFund learning, which educates farmers through online courses on generating higher crop yields at a better quality. While this also helps the TaniHub group’s business, it also poses challenges as rural farmers may not adapt to online learning, or change their traditional farming techniques.

Recovering from the pandemic hit

Even as the plans for TaniFund are taking off, the group still relies on its e-marketplace, TaniHub, to keep the revenue metre ticking. The platform suffered in the early days of the coronavirus outbreak in Indonesia as its four distribution channels — SMEs, hotels and restaurants, modern trade sector, and the food industry sector — were hit. 

However, TaniHub Group reported positive EBITDA in May 2020. 

“This year is the best year for the TaniHub group as we booked positive earnings. Even though the pandemic hit our B2B business for a while, the channels have revived since then. At the same time, there is a significant growth in B2C business during the pandemic,” said Wineka, who founded the group along with Michael Jovan Sugianto, Edwin Setiawan, and Ivan Ari Sustiawan in 2015. 

In September, SME channels were the most prominent sales contributors, It grew 51 percent month-on-month (m-o-m), hotels and restaurants channel grew 37 per cent m-o-m, while modern trade channels grew 18 per cent, while the food industry’s growth was flat.

“Although hotels and restaurants were closed during the early months of the pandemic, the crisis has created many new SME sectors, particularly in the food business. In July, the hotels and restaurants slowly recovered as the government has loosened its pandemic-induced social restrictions policy. Therefore, we could still grow despite the pandemic,” Wineka added.

The company also saw traction from consumers directly buying groceries through its digital channel. TaniHub’s user numbers have shot up from 20,000 users before the outbreak to 300,000 users currently. As a result, the share of the B2C business for TaniHub grew from 3 per cent in 2019 to more than 10 per cent in 2020.

The group also operates TaniSupply, an end-to-end operation entity that is responsible for logistics.

TaniHub plans to close a Series B round funding by the first quarter of 2021. Wineka declined to divulge details but said he expects the new fund to drive the company’s working capital and help it build more warehouses and packing and processing center (PPC) facilities. 

“As a capital intensive industry, we need funding to anticipate a surge in demand. We have to provide working capital for our partners (farmers), yet the customers will pay later. We need to bridge this. We also want to expand our warehouses and upgrade many features and tech systems,” Wineka added.

It targets to build two PPC facilities and two warehouses next year. Currently, TaniSupply is operating one PPC facility in Malang (East Java). It also has six warehouses in Bali, Bogor, Yogyakarta, Surabaya, and Cikarang (West Java). 

According to Crunchbase, TaniHub group has pocketed a total of $29 million from seven investors, including Openspace Ventures, Golden Gate Ventures, Intudo Ventures, BRI Ventures, Tenaya Capital, Vertex Ventures, and UOB Ventures.

Singapore Reporter/s

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.