EduTech and the Effort to Solve Indonesia's Education Gap

Over 50 years ago, Indonesia was one of the poorest countries in the world. Today, it’s a middle-income country with an average annual GDP growth of 5.6%. However, despite being the country with the highest population in Southeast Asia and housing more than 4000 higher education institutions (Indonesia Ministry of Research, Technology, and Higher Education, 2019), Indonesia still lags behind its neighbors in terms of university enrollment. According to the World Bank, in 2018 only 36% of the population received some form of higher education, compared to 45% in Malaysia and 89% in Singapore. One of the many reasons for this is inaccessibility of tertiary education for most of the population.

Although Indonesia’s middle class is growing rapidly, 76% of them are still concentrated in urban areas in the island of Java. As a result, much of the development is concentrated in urban areas while rural areas struggle to keep up in terms of infrastructure development and access to education. In 2016, for example, 70% of the middle class in urban areas had access to internet connection in comparison with 46% from rural areas.

It has not been all despair, and the accessibility to education has been improving. According to the latest data from the OECD, spending for education per student rose to US$ 3,765 in 2015 from US$ 2,965 in 2013. In an interview with Schoters, provider of end-to-end solutions for studying abroad have become more prevalent. According to Radyum Ikono (Co-Founder and CEO of Schoters), more students are showing interest in overseas education. This trend extends even to students from remote areas such as Nunukun in North Kalimantan, Sumbawa, or even Merauke.

Moreover, some have identified the low university enrollment and education accessibility gap as an opportunity. As a result, the education sector is highly sought-after by startups developing unique solutions through EduTech and investors’ capital. According to Dr. Gerald Ariff, Co-Founder and Chief Partnership Officer of HarukaEdu, provider of affordable and quality learning for the vocational and higher education sector, the “largely uneducated population, combined with a rising young demographic and middle class” is one of the many reasons why the EduTech is a a popular and growing sector. Radyum from Schoters added that the sector has been growing exponentially and receiving significant traction within the last 1-2 years.

2020 had been a good year for the EduTech sector. Previously, one of the biggest problems for the adoption of EduTech was the mindset that education can only be accessed through traditional schooling. However, COVID-19 has brought up the need for online learning, thus leading to the sudden need for rapid technology adaptation. Radyum from Schoters added that the pandemic has forced people to adopt to the digitalization of education 3-5 years earlier than expected. Many traditional learning institutions were unprepared for the sudden change – this is where EduTech players come in.

The outlook for the EduTech sector seems positive. The continued rise of Indonesia’s middle class will increase people’s willingness to spend for education. Moreover, with the rising middle class already used to carrying out a huge part of their daily activities online (including receiving their education), EduTech will become a permanent fixture in our society stated by Dr. Gerald.

As mentioned before, due to the opportunity and exponential growth, EduTech has also been a target for investors, including venture capitals. Many VCs who originally did not include EduTech in their investment thesis, have been shifting gears and started looking into the sector, as mentioned by Radyum. Dr. Gerald gave a slightly different opinion. Although he agreed that EduTech is a sector that investors look at, they very much still see it as a short-term investment, expecting a three to five years return. He added that investors expect a rapid commercialization of the service; this is not realistic and can potentially result in deteriorating product quality.

Nevertheless, this is only the beginning for the EduTech sector with many more startups and investors entering the field in the coming future. We should expect that the sector will continue to become more and more attractive as the adaptation of technology continues along with the growth of the middle class. This last quote from Radyum sums up why EduTech is and will continue to be an interesting vertical: “The joy of getting financial gain while at the same time, helping people succeed is what makes working in EduTech contagious.”