impact investing in small-scale aquaculture enterprise
TRANSCRIPT
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