Bankability of aquaculture - insights from other commodities

Bankability  of  aquaculture    

–  

Insights  from  other  commodi9es  

Esther  Luiten  Senior  Program  Manager  Aquaculture  

1) Value chain needs to be streamlined 2) Farmers need to save 3) Certified farmers control risks better

Insights on bankability of small

holders:

Business has great leverage

Top  200  mul*na*onals  15  key  commodi*es    35  most  threatened  regions    

v

An emerging business case

•  Accelerating + up-scaling sustainable trade •  Convening impact oriented coalitions •  Co-funding private investments to achieve

sustainable production •  Stimulate private sector development •  Impact on MDG1, MDG 7 and MDG 8

Profile Founded in 2008 Investment package Euro 600 M for 2011-2015 12-16 commodity programs International coalition: -  70 companies, -  10 NGOs

Endorsed by Dutch (and other) governments 35 staff members

Scaling impact

Accelerating

Reaching ‘tipping point’

IDH in a glance

•  Accelerating + up-scaling sustainable trade •  Convening impact oriented coalitions •  Co-funding private investments to achieve

sustainable production •  Stimulate private sector development •  Impact on MDG1, MDG 7 and MDG 8

Profile Founded in 2008 Investment package Euro 600 M for 2011-2015 12-16 commodity programs International coalition: -  70 companies, -  10 NGOs

Endorsed by Dutch (and other) governments 35 staff members

Scaling impact

Accelerating

Reaching ‘tipping point’

IDH in a glance

Public Co- Impact Commercial grants funding investing finance

Bankability of commodities Bankability = the ability to pay back = the ability to meet the

organizational objectives

Certification = more robust management = increased ability to meet organizational objectives (less risks, less costs, higher profitability)

Ecological Social Business performance

•  ↓ use of agro-chemicals •  Control use of feed •  Nature and bio-diversity conservation •  ↑ Productivity •  etc.

•  Contracts with workers •  Community relations •  Insurances •  etc.

•  Quality mngt •  Health mngt •  Monitoring of farming •  Farming protocols •  ↑ Supply chain links •  Traceability •  Market positioning •  etc.

“Cautious due to past experiences” Finance and aquaculture

•  Country risks Difficult for (foreign) lenders to register collateral Macro economy: fast growth and high trade deficit lead to growing inflation

•  Market risks aquaculture Price volatility: raw material and farm-gate prices Increased international competition Difficult to differentiate through quality

•  Farming risks Diseases Production failures Environmental and social risks

•  Financial and currency risks Informal financing (small holders shrimps) High interest rates (for farmers)

Finance and cocoa

•  Economic growth •  Employment •  External balance

•  Environmental preservation •  Reduce pressure on land clearing

•  Secure long term supply

•  Fertilizer business opportunity

•  Profitability •  Community

welfare •  Food security

Finance and cocoa

1.  Farm finance: The farmer group takes a bank loan for fertilizer for its members, with risk-sharing from the other supply chain agents

2.  Fertilizers-for-beans: The cocoa supplier is partially paid in fertilizer upon delivery of beans to the trader

3.  Cash-and-carry: Building on the supply chain infrastructure, fertilizer is made available at selling points close to farmers to buy in cash

Finance and cocoa

Need for innovative financing models:

•  Robust •  Efficient •  Outreach

Finance and aquaculture

Source: OECD-FAO Agricultural Outlook 2012-2021, 2012

Average annual growth in global per capita food consumption, 2012-2021:

Finance and aquaculture Feed Seed

Farming

Middle-men

Proces-sor

Middle- men

FI Policy & regulation

Need for innovative financing models:

•  Robust •  Efficient •  Outreach

•  Savings •  Organising capacity building & training •  Aggregation •  Certification as risk-mitigator?

On farm

•  Risk assessment profiles in aquaculture •  Risk-sharing arrangements (supply chain) •  Professionalization of suppliers and chain

management

Finance inclusive supply

chain partnerships

•  Support farmer aggregation •  Clarity on land-titles •  Patient money for investments in capacity building •  Diseases: monitoring & control

Government & Investors

Finance and aquaculture: de-risking

1) Value chain needs to be streamlined 2) Farmers need to save 3) Certified farmers control risks better

Insights on bankability of small

holders:

1) Value chain commitments increase access to finance 2) Certification is a tool: ‘aggregating receptive farmers’ + streamlining value chain + risk-tool

Key messages: