Impact investing in small-scale aquaculture enterprise

Impact investing in small-scale aquaculture enterpriseA Panel Session

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

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

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?

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

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

Fish demand growth rate 2007-2015source: Cai (2011)

Annual growth rate of aquaculture 2007-2015 needed to satisfy ﬁsh demandsource: Cai (2011)

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

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)

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

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%.

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

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

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 (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

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

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.

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

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Impact investing in small-scale aquaculture enterprise

by WorldFish on Sep 06, 2012

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Impact investing in small-scale aquaculture enterprise Presentation Transcript