Breaking the Rural Barrier: A New Approach to Rural Agents Brings Digital Payments to Indonesian Cocoa Farmers
How we partnered with GrabKios, Cargill, and Mercy Corps to extend CICO to the last mile in Indonesia
Imagine if the digital economy became the norm in rural communities
Around the world, cash-in/cash-out (CICO) agent networks are crucial for extending digital financial services, making it accessible for all kinds of people to make the transition between cash and digital. Yet extending these agent networks outside of cities to rural communities has been notoriously challenging. In rural areas, it seems like the CICO agent network model falls apart: sparser populations mean lower transaction volumes, which lowers the incentives for agents.
Yet, in a recent collaboration with GrabKios, Cargill, and Mercy Corps, IDEO’s Last Mile Money has proven that it’s not only possible — but viable — to operate rural agent networks.
In a series of pilots based in rural Sulawesi, Indonesia, we activated farmers to serve as trusted agents, distributing faster payments and introducing digital services to their communities. The results greatly succeeded targets set up by GrabKios and Cargill — and offered some surprising insights for building out other viable last-mile networks. One of the most inspiring takeaways has been the tangible positive impact this pilot has had on the lives of agents and farmers within the community in Sulawesi — an impact that we hope to continue.
In this piece, we’ll share more about our project and what we learned in the process. Though the pilot was successful in doing something that had never been done before, we believe there is still a lot to be learned about activating various last-mile networks, and we’ll share our thoughts on what we hope to see next.
Setting the stage: Cocoa farming in rural Sulawesi
Indonesia is the third largest producer of cocoa beans in the world. Cargill, in an effort to promote organic farming, pays a premium for organically-grown cocoa beans centered in Sulawesi, and over 10,000 cocoa farmers receive payments for their harvest each year.
But getting premium payments can be a slow process, often taking seven months or longer. Farmers prefer getting paid in cash, which is slower to distribute and logistically more complex. In the past, Cargill has experimented with bank partners like BRI to set up agents to serve cocoa farmers, but limited rural access, high account dormancy, and the pandemic have stifled effectiveness. A delay in payment can have a major impact on a farmer, whose income can be unpredictable and highly vulnerable to challenges with bad weather, low yield harvests, and other challenges.
“So far, this is the most promising digital pilot that we have ever created.” — Fadhil Akbar Kurniawan, Sustainability Partnership Manager, Cargill Indonesia
Finding an opportunity with the right partners
In order to try something new, there’s power in the right partners. Pulling from our experience of designing for CICO and the last mile, we saw an opportunity to bring together a handful of different collaborators to test out a new model for a rural agent network, where farmers could act as local GrabKios agents and assist with distributing Cargill premiums.
Here’s who we worked with, and how they benefited from the collaboration:
- Cargill: As a major player in the cacao landscape in Indonesia, Cargill was keen to find ways to seamlessly distribute cocoa premium payments that aligned with their stringent audit processes, while at the same time being cost- and time-effective. Cargill also sought to increase loyalty and build long-term relationships with farmers enrolled in Cargill’s cocoa sustainability program.
- GrabKios: GrabKios was interested in extending its agent network from urban to rural markets, with a focus on learning how to onboard agents, acquire customers, and customize GrabKios products and services for rural communities.
- Mercy Corps Indonesia: Mercy Corps was crucial for on-the-ground activation to identify and onboard rural agents for the pilot. They also helped with conducting baseline needs assessments and exit surveys, recruiting, offering training field resources to carry out the pilot programmatic activities, and assisting agents with ad-hoc and on-demand support for the GrabKios app.
- Indonesian farmers and agents: Agents were interested in tools that would provide immediate monetary value and incentives, supported by easy onboarding to a new digital financial service. Farmers were interested in new processes that would allow them to get paid sooner, without the time and costs associated with traveling to a bank.
- IDEO Last Mile Money: The LMM team brought a design lens and expertise building experiences for agents and customers promoting financial inclusion. Through this new type of venture design, our aim was to build a product expanding on the strengths of the 2021 micro-pilot to achieve scale in rural emerging markets.
Together, we asked: How might we activate key farmers as trusted agents to distribute digital payments and introduce digital financial services in rural areas?
Proving the viability of rural agent networks in Sulawesi
After an initial micro-pilot in 2021 where GrabKios agents were able to distribute Cargill premiums within days rather than months, we set our sights bigger: What could we learn from a larger pilot about the viability of rural agent networks at scale? What levers would need to be designed to make this a feasible business opportunity for all involved?
In the summer of 2022, we reached 10x the number of agents and 20x the number of farmers compared to our micro-pilot — for a total of 100 agents and 1,000 farmers, resulting in a grand total of 50 million Rupiah distributed, 10x bigger than the micro-pilot.
Our go-to market design approach enabled us to focus on agent sustainability to achieve a truly viable rural agent network that can be replicated in other markets. Because of agent proximity, farmers were able to receive their premiums locally, without taking the time to travel to a bank. For agents, this opened up a new supplemental source of income with competitive profit margins for other financial transactions. Below are some of our key insights from the pilot.
Insight: Building a rural agent network makes sense (and cents!)
Overall, the results were outstanding, and we saw a real business case emerge, benefitting Cargill, GrabKios, agents, and farmers.
- 99% of the premium payments were disbursed by agents successfully, reaching Cargill farmers in as little as three days.
- Agents achieved 111% higher revenue than expected, or $83 in Gross Merchandise Value (GMV) per agent per month, much more than a $38 target set by GrabKios and Cargill for the pilot. And, this even out-performed the GMV target for agents in Tier 1 urban areas.
- Beyond premium disbursements, we saw our rural agents tapping into additional markets by providing digital financial services such as mobile top ups and electricity token payments, acquiring a total of 800 new customers.
- Rural demand and new customers emerged for GrabKios: During the pilot, agents acquired 91% new customers outside Cargill’s farmer network, and 38% of those became repeat customers.
Insight: Rural agents are viable and can recover onboarding costs in a year
While these numbers are impressive, it needs to be said that rural agent networks can be expensive to set up. Our Customer Acquisition Cost (CAC) on the onset was $20 — $12 over the desired GrabKios acquisition cost.
Where does this money go? Rural networks need higher upfront costs to address the need for field officers, promotional materials such as brochures and pamphlets, and the hybrid training that we created specifically for this pilot. However, as top-performing agents, which we called “Star Agents,” emerged, driving up transaction numbers and volumes, it is possible to recover these costs in 2–3 months. For agents that are not top performers, it is still possible to recover the upfront investment in under a year, around 4–10 months.
Insight: A trusted partner can ease the transition to new fintech platforms
In the needs assessment phase, we quickly found out that the inherent trust in Cargill was crucial for making headway in a rural setting and that we could build on this existing trust to introduce new partners. Although GrabKios is a big name in urban Indonesia, many customers in rural areas had never heard of the platform.
In addition, farmers were wary of trying new fintech platforms, based on prior negative experiences with traditional financial institutions which could expose them to phishing, scams, and risk of fraud. Agents were willing to give new services like GrabKios a try because they were introduced to it through trusted and known partners — a key element that helped make our pilot successful.
“I was not interested the first time and didn’t believe in GrabKios as I was afraid of being scammed. The Field Officer Edy convinced me, and I also spoke to my cousin who is a GrabKios courier in Makassar. Now I am happy with the app — lots of vouchers and transactions, compared to apps like (Dana app).” — Agent Bo Arpina
The outcome: Farmer and agent financial empowerment
We know that rural agent networks are transformational for end users. Through models like the one in our pilot, rural agents can grow their business and increase farmers’ access to digital services.
During the pilot, hundreds of new customers completed mobile top up transactions via GrabKios agents in their neighborhoods. For most of these users this was their first interaction with GrabKios and they loved the ease and speed of transactions. This brand equity with hundreds (and soon thousands) of new customers who are hearing about GrabKios for the first time can pave the way for new services introduced by GrabKios.
“This project was very aligned with our mission as Grab was founded on the belief that a technology company could run both profitably and create sustainable impact.” — Yasaka Rani Mustika Putri, Strategy & Planning Manager, GrabKios
What’s next for rural agent networks
Because of the potential of these networks and the exciting results from the pilot, GrabKios is continuing to invest in the region through to the end of the year to study whether rural agent networks continue to be viable. Although we have seen some churn and slight drop in agent retention, it has been interesting to see the boost in the monthly GMV and higher productivity among the remaining agents. For the month of September, our business model predicted a GMV reach of $92 which our agents have been able to exceed by closing the month on a GMV of $135.
On a separate note, Last Mile Money is in talks with the Cocoa Sustainability Partners to extend this program to other cocoa companies to collectively establish and benefit from these thriving agent networks, helping farmers and their agricultural investments to thrive.
We’d love to hear from you: Have an insight to share? Interested in partnering to extend the digital economy to farmers and agents at the last mile? Reach out Last Mile Money and get in touch with our team.
