impact investing in small-scale aquaculture enterprise

Impact investing in small-scale aquaculture enterprise

A Panel Session

Agenda and Speakers

•  Wayne Rogers – WorldFish Centre –  History, !nancials and business models –  Incubating opportunities and investment

•  Malcolm Beveridge – WorldFish Centre –  Key science social and environmental outcomes

•  Arun Padiyar – aquaculture entrepreneur –  A practitioner's view

•  Esther Luiten -IDH –  Investors perspective

•  Audience dialogue and key questions

A bit of history

•  BACKGROUND –  WorldFish Technology Interventions

§  Success but challenges of scalability and sustainability

–  Work with farmer clusters proves advantages of collaborative “co-operatives”

–  Detailed case studies and !nancing issues –  Financial viability proved –  Aquaculture fund and !nancing partners

Investor Questions

Business investment

model

What is our investment principles/

criteria How

involved will we be in the business?

How is performance

measured and

managed?

How  do  we  know  that  all  

legal  ?  

What  is  our  required  return  and  

exit  strategy?  

What type of investment

will we make?

How will we manage

risk?

The underlying business case

Source RaboBank

•  7-billion people mark recorded in 2011, 9 billion expected in 2050 (1.2% growth per year)

•  Dietary shift towards protein consumption in developing countries •  Urbanization and disposable income growth

•  Arguably one of the few proteins with growing demand in western economies •  “Seafood is the only protein Western consumers wish they

ate more of” Martin Glenn, Birds Eye Iglo Group

0  

50  

100  

150  

200  

Million  tonn

es  

1976   1980   1990   1997   2000   2010   2020   2030  

aquaculture,  China  

aquaculture,  world  excluding  China  capture  fisheries,  China  

capture  fisheries,  world  excluding  China  

Projec'on  

World fish production and food use consumption

source:  hFp://www.seafoodsource.com/newsarLcledetail.aspx?id=12852    

food  use,  World  

Fish demand growth rate 2007-2015

source:  Cai  (2011)  

Annual growth rate of aquaculture 2007-2015 needed to satisfy fish demand

source:  Cai  (2011)  

Industry Summary

•  Demand for !sh increasing quickly •  Limited prospect of increasing wild catch supply •  In the developing world

–  Good technology improvements achieved and continuing

–  Improved use of feed and farming techniques (feed conversion ratio)

–  Much better resource utilization achievable –  Aquaculture pro!tability potentially better than or as

good as other animal production

Some Issues

•  Financing difficult for small scale producers •  Signi!cant levels of assets required

Ponds / Processing / Transport •  Production risk if not quality controlled •  Fragmented production and industry (in the

developing world)

Drivers for an innovative / collaborative funding approach

•  To address the gap between industrial scale producers and small farmers

•  To address environmental issues surrounding aquaculture •  Lift people out of poverty •  Provide a sustainable supply of seafood to local and global

consumers Which means……… •  Identify, work with and build “investment ready”

cooperatives/SMEs •  Assess, qualify and manage investee / investor opportunities •  Build !nancing partnerships

Aceh Experience

•  Investment $USD1.9m over four years (2007 –2010)

•  Net pro!t per farmer increased from USD$73 in 2007 to USD$435 in 2010

•  Pro!table farms increased from 28% to 96%,

•  net pro!t margin from these farms grew from 34% to 64%.

India Experience

•  Financial interventions totaling US$ 272,400 from 2001 - 2006

•  Production increased from 4 tons in 2002 to 870 tons per annum in 2006

•  Farmer annual pro!t increased from US$ 278 in 2001 to US$2648 in 2006

•  The investment has resulted in US$ 8.9 million of revenue from shrimp sales at farm-gate and US$ 3.52 million of pro!ts to farmers

Local conditions

•  Developing country aquaculture is very site and country speci!c – one size does not !t all

•  Different value chains and participants •  Low level farming will not move families out of poverty •  Small producers are squeezed by traders and processors •  Farm gate price drives behaviour on a daily basis

What we have learnt – key elements

•  Management and technology

•  Patient capital (5-7 years) •  Technical and

organizational services •  Farmer organizations –

societies, cooperatives and producer companies

•  Government policy •  Markets

Steps to success

•  Improve farm productivity •  Improving organisation (!ll the management vacuum) •  Access to working & development capital •  Improving market access •  Improved infrastructure •  A viable business model with farmers sharing in ownership and

success •  The intermediary organisation (management glue) •  Facilitation and analysis •  Correct scheduling of development and investment •  Environmental sustainability •  Plenty of time

Detailed interventions & needs

•  Technology and Management –  Signi!cant returns through improved management and access to

technology –  Investment opportunities in efficiencies and more “crop per drop”

•  Partnerships –  Access to knowledge / skills & resources

§  Finance / Technical / Markets §  Right mix at right time

–  Networking efficiencies among investments •  Organizational “glue”

–  Capacity building for collective actions –  Scale efficiencies –  Embedding costs of technical services –  Connecting to services and markets

What we have learnt

In summary •  Patient and targeted intervention required at early stages to

build trust and capacity. •  Early wins achievable using technology. •  These enterprises are pro!table. •  The co-operative model is probably the preferred option

(incentives aligned). •  Vertical integration is key to protect the vulnerable and

ensure enterprise goals aligned. •  Financing the enterprises properly is key using a variety of

partners. Most !nance misses the need and opportunity at the bottom end.

The way forward

•  Coalition building and creating partnerships •  Conducting, sharing, investment in business case research •  Investment in intermediary organisations to build viable

businesses •  Knowledge sharing and wide dissemination of lessons

learned •  Rural communications •  Advocacy of the approach •  WorldFish Incubator •  Aqua Spark & other investment funds