Impact investing in small-scale aquaculture enterprise

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A panel session at the Seafood Summit 2012 in Hong Kong, Friday 7 September. Participating in the panel discussion is Wayne Rogers (WorldFish), Malcolm Beveridge (WorldFish), Arun Padiyar (aquaculture …

A panel session at the Seafood Summit 2012 in Hong Kong, Friday 7 September. Participating in the panel discussion is Wayne Rogers (WorldFish), Malcolm Beveridge (WorldFish), Arun Padiyar (aquaculture entrepreneur), Esther Luiten (IDH) and audience members.

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  • 1. Impact investing in small-scale aquaculture enterpriseA Panel Session
  • 2. Agenda and Speakers•  Wayne Rogers – WorldFish Centre –  History, financials and business models –  Incubating opportunities and investment•  Malcolm Beveridge – WorldFish Centre –  Key science social and environmental outcomes•  Arun Padiyar – aquaculture entrepreneur –  A practitioners view•  Esther Luiten -IDH –  Investors perspective•  Audience dialogue and key questions
  • 3. 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 financing issues –  Financial viability proved –  Aquaculture fund and financing partners
  • 4. Investor Questions What is our investment principles/ criteria How How will we involved will manage we be in the risk? business? Business investment How is What type of model performance investment measured will we and make? managed? What  is  our   How  do  we   required   know  that  all   return  and   legal  ?   exit  strategy?  
  • 5. The underlying business case •  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 Source RaboBank
  • 6. World fish production and food use consumption 200   Projecon   aquaculture,  China   aquaculture,  world  excluding  China   150   capture  fisheries,  China   capture  fisheries,  world  excluding  China  Million  tonnes   food  use,  World   100   50   0   1976   1980   1990   1997   2000   2010   2020   2030   source:  hFp://    
  • 7. Fish demand growth rate 2007-2015source:  Cai  (2011)  
  • 8. Annual growth rate of aquaculture 2007-2015 needed to satisfy fish demandsource:  Cai  (2011)  
  • 9. Industry Summary•  Demand for fish 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 profitability potentially better than or as good as other animal production
  • 10. Some Issues •  Financing difficult for small scale producers •  Significant levels of assets required Ponds / Processing / Transport •  Production risk if not quality controlled •  Fragmented production and industry (in the developing world)
  • 11. Drivers for an innovative / collaborative fundingapproach •  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 financing partnerships
  • 12. Aceh Experience•  Investment $USD1.9m over four years (2007 –2010)•  Net profit per farmer increased from USD$73 in 2007 to USD$435 in 2010•  Profitable farms increased from 28% to 96%,•  net profit margin from these farms grew from 34% to 64%.
  • 13. India Experience•  Financial interventions totaling US$ 272,400 from 2001 - 2006•  Production increased from 4 tons in 2002 to 870 tons per annum in 2006•  Farmer annual profit 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 profits to farmers
  • 14. Local conditions•  Developing country aquaculture is very site and country specific – one size does not fit 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
  • 15. 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
  • 16. Steps to success•  Improve farm productivity•  Improving organisation (fill 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
  • 17. Detailed interventions & needs•  Technology and Management –  Significant 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
  • 18. What we have learntIn summary•  Patient and targeted intervention required at early stages to build trust and capacity.•  Early wins achievable using technology.•  These enterprises are profitable.•  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 finance misses the need and opportunity at the bottom end.
  • 19. 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