Old Rope

Share this post

EdTech in Indonesia 🇮🇩- The way forward

www.oldrope.club

EdTech in Indonesia 🇮🇩- The way forward

Indonesia is home to ~50M students in K12 category, making it a large enough market for Education industry. Let's understand the unique growth drivers in Indonesia to visualise the potential of EdTech

Rahul Maheshwari
Jul 20, 2021
11
1
Share this post

EdTech in Indonesia 🇮🇩- The way forward

www.oldrope.club

Welcome to Old Rope. I write on emerging trends from the East! 🌏 Subscribe to stay updated.


Indonesia is the fourth most populous country with over 276M people spread across  five major islands and about 17,507 archipelagos.

It is home to ~50M K12 students- making it a large market for the education sector. Having seen potential of e-commerce, ride hailing etc., it might seem Indonesia would have a huge population for K12 education, but let’s explore this further.

Map

Description automatically generated
Indonesia’s Map 🇮🇩

Outlook of Indonesian Economy 📈

Indonesia is a fast-growing economy with 5% GDP growth annually (pre-covid) and GDP per capita of $4135 and a young population with high internet penetration (73%).

Chart, line chart

Description automatically generated
Source: World Bank
A picture containing diagram

Description automatically generated
Highlights of Indonesian Economy
Chart, pie chart

Description automatically generated
Indonesia is a predominantly Islamic country

Education and Government 🏫

Indonesia hosts a large population of students in K12 (50M) and university (3M) with schooling majorly dominated by the public schooling system.

A picture containing PowerPoint

Description automatically generated

While the government’s spending on education has been increasing, but there is still room to meet other economies.

Chart, line chart

Description automatically generated
Education Spend by Govt (World Bank)

There are two kinds of schools in Indonesia differentiated on the basis of curriculum they follow- National curriculum or Religious curriculum, with the former dominating in terms of student enrolment.

Chart, pie chart

Description automatically generated
Diagram

Description automatically generated

It’s harder for EdTech companies to target the Islamic Curriculum schools whereas National Curriculum schools are more open for exploring partnership with EdTech companies.

Levels of Education 🎒

Following the standard format, school education is divided as follows:

Graphical user interface, text, application

Description automatically generated

The Enrolment rate drops significantly towards senior secondary school with increase in private education, though public schools dominate the system.

Vocational Education 🧑‍🔬

After grade 9, students have an option to either apply for Senior High (SMA) or Vocational High (SMK).

  • Vocational high schools offer over 140+ specialisations- agri-business tech, business and management, etc.

  • Graduates from vocational high schools are ready to join the workforce or they can pursue higher studies

Chart, pie chart

Description automatically generated

Examination System 💯

The Indonesian Education Ministry has recently introduced a new system for national assessment- AKM, focusing on all-round development. This has been done post the discontinuation of the Ujian Nasional National Exam (Grade 9 and Grade 12) in 2020. The key driver has been a need to reduce emphasis on academic learning and shift towards overall student development. 

Graphical user interface

Description automatically generated with medium confidence

Students need to appear for a national level University Entrance Exam which is called UTBK, similar to GaoKao (高考) in China, or JEE in India. Private universities might have their own entrance exam. 

Diagram

Description automatically generated
  • Students may change schools with AKM from junior secondary to senior secondary

  • There is no equivalent of Zhong Kao (中考), reducing the pressure on students

As mentioned above, the enrolment ratio reduces significantly at secondary education level. It reduces further as students go to university.

A group of people in a room

Description automatically generated with medium confidence
Students appearing for UTBK

It is important to note that the minimum wage guaranteed to workers in Indonesia with minimum qualification is $310 per month.

EdTech Market in Indonesia 🧑‍🏫

Given its large population, the Indonesian EdTech market seems very large at first sight, but it seems to be growing at a slower pace compared to China, India, etc.

Chart, bar chart

Description automatically generated
Source: Ravenry

Assuming $100-$200 annual expenditure, it seems the K12 market for EdTech in the long term can be $5B- $10B. 

However, it is important to note that unlike India or China, there is less peer pressure and competition for parents and children.

Graphical user interface, application

Description automatically generated
Source: Tech In Asia

After-school tutoring: Hottest sub-sector so far 🔥

Just like other EdTech markets, after-school tutoring has been popular in Indonesia, and local players lead the bandwagon. However, the average revenue per paying user is relatively low and monetization has been a key challenge, unlike in India and China.

Table

Description automatically generated
Afterschool tutoring landscape
Shape

Description automatically generated
Graphical user interface, application

Description automatically generated
Ruanguru seems to be inspired from Yuanfudao from China

Language Learning: International competition 🌐 

English/ Mandarin as a second language is an exciting opportunity as Bahasa is the dominant mother tongue in Indonesia. Even then, no company has broken out locally, given the competition from international players. For example: Lingoace mentioned below is a Singapore-based company.

Language learning landscape
A picture containing graphical user interface

Description automatically generated

LMS Platforms: Competitive Space with Limited TAM 💻

Several LMS Platforms operating with SAAS business model have gained early traction and have been distributing with government relationships across many public schools. Usually schools pay $5/- per student per year, which imputes a market size of $250M (50M students). Additional content led upsells can be built in but that competes with the after school players and it is unclear whether the distribution advantage really helps or not. 

Table

Description automatically generated
LMS Landscape
Shape

Description automatically generated

Extra curricular education: Blank Canvas 🎨

There are not many players focusing on extracurricular education locally. Given the policy push and less peer pressure, extra curricular could be a thriving sub-sector in Indonesian EdTech landscape. 

Some international companies like Brightchamps, etc. have been offering coding classes to children in Indonesia. 

A picture containing text, person, indoor, hand

Description automatically generated

By the way Brightchamps is hiring across roles, in case you are interested reach out to: recruitment@brightchamps.com

Conclusion 🖊️

EdTech in Indonesia will evolve in the coming years. In the meantime, it will be crucial  to closely watch the trends and behavior of students and parents. Listed below are the key takeaways:

  • Important to evaluate the depth of sub-sector(s) and future potential with policy alignment 

  • Upstream capital has been relatively limited so far, but the larger funds have been getting active since 2020 <Sequoia, GGV, GSV, Shunwei, Northstar, etc.> 

  • Monetization is still a challenge and business models in B2C business are driven by large top of the funnel systems; for B2B/ B2B2C models, the government plays an important role 

  • Parents and students in Indonesia are not under deep pressure as seen in India and China, with minimum wage guarantee from the government resulting in less competition for opportunities

  • Extra-curricular education seems to be under-penetrated with lots of potential! 

If you are a founder building an exciting EdTech company, please feel free to reach out- rahul@beenext.com

Appeal: Indonesia is currently going through a tough time due to the Covid-19 pandemic, you can show support here (or any charity of your choice)

1
Share this post

EdTech in Indonesia 🇮🇩- The way forward

www.oldrope.club
1 Comment
Laurel
Jul 14, 2022Liked by Rahul Maheshwari

I get a lot from the blog, thk you!

Expand full comment
ReplyCollapse
TopNewCommunity

No posts

Ready for more?

© 2023 Rahul Maheshwari
Privacy ∙ Terms ∙ Collection notice
Start WritingGet the app
Substack is the home for great writing