With Southeast Asia being a hotbed for innovation, the region is experiencing steady and continuous economic growth. This is to be expected given the amount of new and exciting business models sprouting in the region. With a population of over 270 million people, there is no better microcosm for these developments than Indonesia.

The country of over 17,000 islands is expected to grow by 5.4 per cent in 2022 and another 5 per cent in 2023 according to a report by the Asian Development Bank (ADB). But there are disparities in this growth, one of which is the economic growth of rural and urban areas.

Over 80 per cent of Indonesia’s population is currently residing in rural areas. This will change in less than 10 years due to the rapid growth of its cities, which is faster than other Asian countries at 4.1 per cent. By 2025, Indonesia is expected to have 68 per cent of its population living in cities, in an almost complete shift that leaves the rural economy behind.

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As with its Southeast Asian neighbours, this denotes an uneven development between rural and urban areas. While the cost of living in urban and rural areas may not vary by a large amount (about 10 per cent in the 20th century), given factors such as low wages and high prices of goods and services, greater social mobility is afforded in urban centres where most innovation is concentrated, making it a more attractive choice for young professionals.

The key to addressing this disparity is by harnessing smart solutions to empower underserved small business owners and end consumers. Doing so encourages employment, entrepreneurship, consumer patronage, and other drivers of economic growth in rural areas.

Impacting lives to drive economic growth

One company spearheading this mission is Dagangan. Ryan Manafe, Dagangan CEO and co-founder, recently spoke with e27 about his vision of transforming rural Indonesia for the better.

“[Dagangan] ignited an old dream to spend more time and contribute to my country; to create concrete and real impact,” shared Manafe during a call.

Before starting Dagangan, Manafe worked in various companies that exposed him to the challenges that rural areas face, particularly those in logistically-challenged areas.

Having served various roles in various institutions – from his stint at the Indonesian Presidential Work Unit for Development Supervision and Control to starting SUN Energy, a renewable energy developer that would grow into Indonesia’s largest solar company giving rural and remote areas in Indonesia access to sustainable and eco-friendly energy – Manafe’s experiences have helped shape Dagangan as a company that aims to impact lives, especially among people in rural areas.

The Indonesian social commerce platform does that by establishing a tech-enabled hub-and-spoke network that provides small business owners access to goods at affordable prices. The network is based on a trust system that connects community leaders who can cascade information to the rest of the community, as well as establish a reliable platform that provides quick and quality goods and services.

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By promoting and improving “rural commerce”, Dagangan expands opportunities for market access in rural communities and provides small business owners greater access to materials and opportunities outside their area.

One concrete example of how Dagangan has transformed not just on a macro level, but on the matter of individual lives, is the testimony of Mrs Herlina, one of Dagangan’s loyal customers from Magelang, Central Java. After using the Dagangan platform, her daily sales increased three times to more than IDR 1,500 per day.

Social commerce has helped her to expand a high variety of products with a very competitive price, which helps attract more customers and provides more value creation for the products in her store. Mrs Herlina used to have her store inside her living room but now, only two years after working with Dagangan, she has already expanded the store with a dedicated space in front of her house. She was also able to purchase a car to help with her business’ transportation needs. This is only one of the many examples of how Dagangan impacts rural communities.

A vision of growth and impact

“In first-tier cities, there’s greater accessibility to super apps — though none of these apps is accessible in the rural areas. So, our vision is to focus on addressing a key pain point first by providing access to basic necessities at an affordable price. This is done through the supply chain network of hub and spokes, rural commerce, last-mile delivery, educating, and building relationships with the people,” shared Manafe.

Dagangan covers land areas not typically reached by most mainstream e-commerce platforms—within at least an 80,000 km radius—and because of this, has reached 17,000 villages in rural Indonesia in the last 2.5 years alone.

“The last fundraising round that we did was led by the bank BTPN Syariah Ventura. So we leveraged their fintech solutions. We onboarded the existing solutions that have been developed,” explained Manafe.

Because of its model, the business has grown the average basket size by 24% month-to-month in the past year, showing how customers are satisfied with the business and its reliability. This has led to an increase in the share of wallet to improve the purchasing power of local partners.

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Dagangan also recognises that a central pain point is the need to establish trust: in tier three and tier four cities, there is ​​still a lack of trust, which is why part of Dagangan’s solution is to build relationships with community leaders.

The social commerce platform’s hubs have grown by 200 per cent, operating as many as 40+ hubs as of writing. This has led to spurring growth in these areas and allowed the creation of over 300 jobs. The Dagangan team has also grown three times in the last 12 months.

Its exponential growth has given Dagangan more ambitious goals by year’s end: to cover the whole of Java island. Apart from this, it also seeks to expand rural commerce to Kalimantan and Eastern Indonesia within the next 12 months while expanding its team fourfold.

At the end of the day, to ensure that no one is left behind even within communities, it’s important to educate small business owners and their networks about the benefits of rural commerce and to empower these owners with the tools and resources needed to scale. Moreover, apart from the innovative tech component, the main benefit that comes with Dagangan’s solution is its ability to connect, foster, and build trust within the community. It is through this that the larger trade and commerce ecosystem is rendered sustainable.

Dagangan also sees opportunities to partner and work with local producers to bring goods and services across tier-3 and tier-4 villages to tier-1 cities. From these expansive forward-looking targets, the business ultimately aims to transform and accelerate Indonesia’s rural economy, one partner at a time.

The post The future of the rural economy is here appeared first on e27.