A coalition of partners multiplies impact to improve the shrimp industry in Banyuwangi, East Java, Indonesia. Different tools will be piloted in Banyuwangi to create a scalable model to improve the profitability of shrimp farmers, reduce risks, attract investment and protect natural resources.
The coalition, consisting of the Ministry of Marine Affairs and Fisheries, the Ministry of National Development Planning, Financial Services Authority; Conservation International, Longline Environment, the Sustainable Fisheries Partnership, and IDH, will together create a public private partnership platform. Potential private sector players in the platform are the Seafood Processors Association of Indonesia (AP51), the Shrimp Club of Indonesia and farmers.
Currently financial institutions are reluctant to invest in aquaculture, as the sector is considered too risky. IDH aims to bridge the gap between financial institutions and the aquaculture sector. We started this work under a grant from the Walton Family Foundation by writing Investment Guidelines for Sustainable Aquaculture, to be adopted by the OJK, the financial authorities of Indonesia. The guidelines explain the risks of the shrimp industry, as well as propose solutions on these risks, and present financial models that mitigate the main risks in aquaculture.
The financial models developed under the guidelines will be prototyped under the Aquascape program in Banyuwangi, East-Java, again under a grant of the Walton Family Foundation. One financial model that could be piloted is for example a risk sharing model where smallholder farmers are financed through a processor. Banks interested in financing smallholder can extend their service through lending directly to feed companies but allowing them to give a provision of credit to individual farmers. Banks thereby increase their benefit because they only lend to trusted parties. This arrangement ensures that quality feed reaches the farmers, hence reducing their production risks.
IDH also aims to lower the risks of shrimp farming by plugging in technological solutions at the farm level. Farmers can for example better predict their yield if they more accurately count the shrimp, for which they can use technological tools. Helping farmers using counting technology can also provide farmers information on when they expect to break even, which can inform banks or financial institutions that these farmers have become bankable. Additionally, IDH familiarizes farmers with banks and the other way around: bankers learn the reality of shrimp farmers, and farmers increase their financial capacity.
The approach moves beyond the level of the farm, as all partners have recognized the importance of the jurisdictional approach. With these efforts we aim to expand the aquaculture sector in Indonesia within environmental and social boundaries.