Krealogi Digital Ecosystem to Unlock MSME Potential

Indonesian $77 billion digital economy is the largest in Southeast Asia, but, 64 million MSMEs are at risk to be left behind due to their low digital literacy. 

Small Micro Industry (SMI), or sometimes called the Cottage Industry, is a subset of MSMEs that are purchasing raw materials to manufacture their own product. SMI is oftentimes the backbone of the rural economy with significant role in developing world's economies. There are estimated to be over 100 million SMI worldwide.

However, the 8 million SMI in Indonesia, are notorious for their inability to meet deadline & produce in large volume even when demand exists. This is because they manage their supply chain with pen & paper causing them to have difficulties in data-drive decision making & financial reports needed to access financing to grow.

On the other hand, demand for SMI products are rapidly increasing from the current $71 Billion market value. However, large buyers have difficulties dealing with SMIs as they lack resources to deal with multiple small-capacity SMIs and they could not identify the reliable suppliers.

While the Government and many organizations tried to help SMI improve their financial and digital literacy, often times the approach are not suitable to their condition. Some approach try to push rapidly SMI in less developed cities to adopt digital strategies to directly compete with business from capital cities. This demotivates many of them to keep learning as they become disillusioned with harsh competition which they are not ready to face.

Thus, a tech-based disruption with community based approach is needed to help SMI can digitally transform accordingly based on their level of digital & financial literacy and help catch up with the right step in these digital era.

We envision digital inclusion and transformation for Small Micro Industries leading to their improved productivity, sales, and profit. 

Krealogi Digital Ecosystem consists of: 

1. User friendly mobile app for SMI supply chain management, to manage and track order, production, raw material procurement, inventory, and bookkeeping.
2. Business improvement and digital literacy training and online modules 
3. In-app integration with financing, digital payment, and logistics, serving as SMI first gateway to digital services 
4. Market Network: Hyperlocal marketplace connecting SMI to B2B2C and B2B clients that is integrated with data from the app, including reliability ranking and production status tracking.

With our superpowers in Community Engagement and our in-depth knowledge of SMIs, we are able to create not just tech products but also end-to-end solution that fit the SMI needs, making them loyal to our solution. We believe we would be the leading digital tools and tech-enabled supply chain solution for SMIs in Indonesia, Southeast Asia, and beyond.

Small Micro Industry in Processed Food, Crafts, and Fashion in Indonesia is dominated by women owners (54%) and workers (56%), a higher percentage compared to in any other sectors. The SMIs are mostly located in Tier 2 - 4 cities with yearly revenue ranging from $10,000 - $300,000. 

Krealogi digital ecosystem solution increases SMIs knowledge in business management, their access to ICT tools, and access to financing; the 3 main factors identified as the needs of SMI to grow their business, especially in post-pandemic world. As World Bank also points out, digital inclusion for SMIs is very important to ensure that the marginalized community are not left behind to avoid increasing the economic inequality. This in turn will increase women's income, livelihoods, and decision-making power. These impact are in line with SDG 5, 8, and 9, and 10.

Without data and access to financing, it is very difficult for SMI to grow to the next scale of business. Krealogi is built to ease SMI business operations which usually runs by a single entrepreneur, through technology, specifically in tracking, monitoring, analyzing, and planning for order timeline, raw material and finished goods inventory, cost of good sold and price, as well as account payable and receivables.  

This will help SMI to focus on the actual production, maintaining quality and increasing capacity, while Krealogi helps in the digitization of the business process & data analysis, allowing them to use the data to access financing. Krealogi also provides market access for curated SMI products, with the goal of upscaling Indonesia SMI to serve growing demand in both domestic & international market.

We are passionate about Digital Inclusion for SMI, because we have been there, building a micro enterprise from 0, turning it into a small enterprise, and now after 8 years, a medium enterprise in remote parts of Indonesia. Working with rural artisan communities for the past 8 years through Du Anyam has opened our eyes on Indonesia’s potential in SMI growth through technology and access to finance. The fragmented SMI in Indonesia relies heavily on manual process in their production, business operations, and supply chain. This hinders SMI growth and ability to serve market demand. 

Through our first hand experience in handling end-to-end business with SMI in 4th tiered area, from the design process, production, operations, to market access, we understand the challenges that they face and struggle with. We experience ourselves the need to transform from having manual pen-and-paper recording for our inventory, production, and finances to a simple yet insightful data analytics that actually open our access to financing that helps us grow.

Apart from the 2 cofounders who have successfully build the SMI into a medium size enterprise, we are joined by our Chief Commercial Officer with 13 years of experience in FMCG Sales and Marketing, with his last position as Senior Brand Manager of Unilever Indonesia.

The cofounders and all of the team, including our engineers have always speak directly and listen to the needs of the SMIs and the stakeholders, especially from financing and market access sector.

Over 20,000 users have used our mobile app, more than 9,000 MSMEs have directly received our trainings, and almost 200,000 learners have completed our online learning modules for MSMEs.

We are piloting market access partnership with 2 of the largest minimarket chains in Indonesia, namely Alfamart and Indomaret, that have over 40,000 stores across Indonesia. We are starting with 15 stores in Bandung (Tier 2 city) and about 40 stores in Kupang (tier 4 city).

We believe that MIT SOLVE will provide us with valuable mentors, systems, and networks that would be very impactful to our journey and growth. As we have seen the sustainable, large impact of providing income to women in the bottom of the pyramid, we are very dedicated and passionate about supporting women micro- and small entrepreneurs in developing countries. As MIT SOLVE is global, we can also learn form the experiences in other countries all around the world And, we believe that a prestigious program like MIT Solve can bring us to the next level in building sustainable, impactful, scalable tech-enabled solution for them.

Since the pandemic, there has been a lot of MSME-focused tech solutions in Southeast Asia. However, many of them have not survived because they are using Marketing & Acquisition strategy that are normally being used in developed countries and/or for users with higher digital literacy than the MSME. These start-ups hardly ever use Community Engagement approach and oftentimes use financial incentives to onboard users rather than educating them and giving them value that is really important for the MSME, resulting in high turnovers or even fraud. Krealogi focuses on acquiring users through partnership with MSME communities and associations as well as providing education and additional value that is really important for them, such as market access.

On the other hand, there has been a lot of trainings for MSME, but these are mostly one-offs, and focusing on things like digital marketing and photography for the MSME. Krealogi is the first end-to-end digital ecosystem focusing on SMI, that not only provide education, but onboard them to our mobile app in order to help ease their day-to-day operations while leveraging their data to connect them to financing, B2B2C and B2B clients, and later on to logistics, raw material procurement, and digital payment.

We are combining the best of the two worlds, the technology with the education and community engagement to ensure that MSME are not left behind in this digital era.

Our goal in 1 year is to digitize 30,000 SMIs, 50% of which are women, and providing financing to 500 SMIs increasing their income by 20% in average, and up to 2x for curated SMIs.

In 5 years, we aim to digitally transform 500,000 SMIs, 70% of which are women, and provide 20,000 SMI with financing, increasing their income by 30% in average, and up to 10x for curated SMIs since they first join our market access program.

The indicators that we measure are follows:

• Increase of SMI sales and income 
• Value and number of SMIs receiving financing
• Number of SMI integrated into value chain 
• Increase in SMI business knowledge, number of trainings, and SMI trained
• We are also measuring each indicators for women-owned SMI

Krealogi goal is to build sustainable and impactful end-to-end digital ecosystem for Small Micro Industries to Reduce Inequality, Strengthen Industry, and Promote Economic Growth.

The followings are our main activities, outcomes, and output:

• Boosting SMI Productivity with Simple Mobile Apps where we increase SMI, especially women access to ICT Tools, that we measure by the number of SMI users and activities inside of the app
• Digital Literacy & Business Skills Training where we increase the digital literacy, financial literacy, and business knowledge of the SMI
• Curate, aggregate, and connect SMI to B2B2C and B2B buyers where we will increase SMI income and number of SMI integrated into value chain
• Utilize data from the app as alternative credit scoring to provide financing in collaboration with Fintech and Banks, where we will increase the value and number of SMI getting financial access

These will directly address SDG 5,8,9, and 10

Krealogi core technology is our user friendly, simplified ERP mobile app for SMI allowing them to track, monitor, analyze, and plan for their orders, inventory, production, and finances.

We are also able to use the internal web app to release orders from B2B2C and B2B clients directly to the SMI.

Utilizing the data recorded in the app, we are able to gain and provide the following:

• Alternative credit scoring for fintech and banks
• Curation and order allocation to fulfill B2B2C and B2B demand
• Raw material & packaging utilization data to aggregate supply and achieve economies of scale
• Logistic integration to optimize shipping & warehousing cost & operations

Krealogi always embrace diversity and inclusivity, as 67% of our C-level are women, with 50% women managers and overall 70% women employees. As Krealogi works to support MSME in 3rd and 4th tier cities in Indonesia, our team are located remotely not concentrated in Indonesia's main cities such as Jakarta only and we also partner with youth on more than 190 areas across Indonesia that Krealogi works at. With team members and facilitator partners distributed in different areas, Krealogi allows equal opportunities for youth around Indonesia to work with our head office team, shareholders and also stakeholders.

Krealogi helps B2B Buyers (Brands, Retailers, and Hospitality Businesses) to reliably source form Indonesian Small Micro Industries (SMI). With Krealogi simple ERP mobile apps, SMIs can digitize their operations, increasing their efficiency and reliability as suppliers. Krealogi leverages data from the app to curate and allocate orders to the SMIs as well as providing them with necessary financing and raw materials to help them grow.

As a platform, we decided to work from the Supply / SMI side first. We have launched Beta Version of the simple ERP app for SMI in Mar 2021, which we have revamped significantly in Jan 2022. The app now have 30,000 downloads, 18,000 registered users, and 5,000 MAUs.
We have just started to pilot the Demand side in the past month, and we are finalizing a deal with 7 hotels worth $100,000 annually. We are also trying to pilot with Alfamart, the 2nd largest Retailers in Indonesia, to sell our SMI products.
We currently have a team of 20 experienced, passionate professionals from Tech and SMI Development background.

As we diversify from our current revenue stream of SMI education, we plan to be financially sustainable from:

1. Market linkage: 20-30% Gross Profit Margin from the B2B2C and B2B outsourcing model (we handle the quality assurance and logistics of each deals).
2. Financing: By partnering with Fintech & Banks, we will get 1-5% margin from lead generation fee, providing data for credit scoring, and distribute invoice financing to SMIs
3.  Freemium: premium features in our SaaS

We project to have $ 1.5 million revenue in 2023 and $145 million revenue in 2026.

We have generated approximately USD 1,200,000 revenue from our Education program for MSME since 2020 that we have used to bootstrap our development.

We have also received pre-seed funding of USD 175,000 from ARUN Seed Japan (Impact Investors) and 2 Angel Investor in Indonesia. We are in discussion with the Northstar group to invest to Krealogi from their impact fund. Lastly, we have also received USD 35,000 in grants from the DBS Foundation and the Ministry of MSME & Cooperatives of Indonesia.

We are starting our pilot partnership with Alfamart, one of the largest minimarket chains in Indonesia, this month.