More than 30 startups have now joined the Indonesian Digifish network, bringing innovation and sophisticated business models to solve problems in every segment of the aquaculture industry.
The wave of digitalization that has swept through various industries over the past decade has reached the aquaculture sector in Indonesia. These innovations, many of which were made by millennials, have produced a variety of products, services, and business models that have never before existed in the industry.
As stakeholders often mention, Indonesia has enormous potential for aquaculture due to its geographic advantages, which is why the sector has often been referred to as a sleeping giant. However, Indonesian production remains the third in the world after China and India. In 2018, aquaculture production reached 5.4 million tonnes, worth USD 11.9 billion (FAO 2020).
Despite this, challenges remain – ranging from issues such as access to capital and production inputs; production problems, such as food inefficiency, disease, seed quality and cultivation technology; and post-production issues, such as low farm gate prices due to long supply chains. Other things, such as inadequate infrastructure and policies, also become a challenge.
Nevertheless, aquaculture remains an attractive sector, as the demand for protein increases and many startups try to unravel the different issues that exist in each segment. These startups joined the industry with great enthusiasm, even though many of their founders had no previous aquaculture experience, and they make fish farming more predictable and easier.
The very early start of aquaculture, eFishing was established in Bandung, West Java, in 2013. eFishery CEO and Founder Gibran Huzaifah has found that manual feed management is often inefficient and can increase production costs. As a result, he developed an Internet of Things-based digital vending machine that can be operated through a farmer’s smartphone and adapted to the needs of the species produced, so that feeding can be more efficient. Huzaifah says its products have now been installed by thousands of farmers in various parts of Indonesia.
Bringing together startups
2017 marked a turning point for Indonesian aquaculture startups, with the emergence of more than 10 new ones, prompting the formation of the Digifish Network – a start-up center for integrated aquaculture business and information networks – in 2018 by Rully Setya Purnama, CEO and Founder of Minapoli.
The network’s vision is to âbecome the leading digital innovation ecosystem for sea and fisheries in Indonesiaâ by inspiring innovation and collaboration, as well as becoming an ecosystem to encourage new innovations.
To date, more than 30 aquaculture and fisheries startups have joined the Digifish Network. Although these cover the entire supply chain, water management and finance are the two most discussed issues.
Jala *, FisTx, AquaEasy, Pictafish, and AquaReader are examples of those companies that focus on IoT-based sensors and devices to check water parameters quickly and accurately. In addition, there are also those that focus on water treatment such as nanobubble.id, Venambak, and Banoo, which provide machines to optimize dissolved oxygen (DO).
With these devices, water quality parameters can be presented in real time or as a series of data, which makes it possible to predict water quality more precisely and intervene in the event of unusual trends. This breakthrough makes fish and shrimp farming more predictable and easier for beginners to practice. It also makes the aquaculture industry more attractive to millennials.
However, according to FisTx CEO Rico Wibisono, the most difficult element in providing water quality monitoring devices, besides ensuring fast and accurate data, is also knowing how to give the suggestions. appropriate to farmers on the action to be taken based on the results of the measurements. He says collecting water quality data is one thing, but using the data correctly is another.
In addition to on-farm issues such as water quality, a key issue outside of the farm is lack of access to finance. Fish and shrimp farming in Indonesia is dominated by small farmers. Aquaculture, which is technically high risk due to low technology and other problems, makes banks and other formal financial institutions reluctant to get started. It’s like a vicious cycle for small farmers, who struggle to thrive because of tight cash flow. Meanwhile, government lending institutions specializing in fishing are difficult to access and require a lengthy application process.
A number of startups are therefore using financial technology (fintech) to connect business players who need a source of capital with investors who want to invest in the sector.
The financing offered by startups is quite attractive to farmers because it is easy to access, has a fast application process and has a relatively large loan ceiling, which can reach IDR 1 billion for an agricultural project cycle. These benefits match the needs of farmers, although the interest rate is two to four times higher than bank loans to small and medium-sized enterprises (SMEs), which can be as high as 2% per month.
Although fintech has a simple business model, the problems in this business area are no less difficult. Especially those who rely on a peer-to-peer (p2p) lending system when managing crowdfunding funds. This absolutely requires transparency and good communication between fintech startups and investors.
Moreover, another challenge in financing farmers is the technical issue itself. Therefore, in addition to granting a loan, fintechs also provide technical assistance to farmers, with the aim of minimizing human errors during production. Startups involved in fintech and agricultural management including Growpal, inFishta, Mina Ceria, Sgara, Sipanen and Alune *.
A more efficient supply chain
Beyond access to finance, access to a fair and well-priced market is also one of the systematic challenges for farmers and fishermen. Small farmers generally have a bad negotiating position when dealing with traders. The supply chain from producer to final consumer is still very long and may include two to four intermediaries. In the process, the freshness and quality of the fish may be reduced as most transport methods do not have an appropriate cold chain.
In this segment there are startups like Fishlog and Aruna. The role of both is to simplify the supply chain and improve farm gate prices. Fishlog tends to consolidate cold stores through an online platform to increase its utility and offers farmers’ fish directly to the processing unit, potentially allowing farmers and fishermen to sell their fish for a better price. Meanwhile, Aruna allows farmers to market their products widely, including for export, through its e-commerce platform.
The presence of startups in the aquaculture sector has brought new optimism to the industry. Although they haven’t solved all the problems, their potential is enormous. With the new enthusiasm and new ideas of the millennials behind them, these startups could take Indonesian aquaculture to the next level in the years to come.
* Jala and Alune are both part of Hatch’s investment portfolio, but The Fish Site retains editorial independence.