Startup create a shrimp aquaculture financial ecosystem

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INFOFISH

Tuesday, 08 September 2020 10:22

INDONESIA: Shrimp farming in Indonesia is a $4 billion

industry employing over 3 million people, yet it is an industry, which has been slow to adopt technology, and financial loan terms do not meet the needs of farmers. Alune is making shrimp farming more efficient and sustainable by offering loans that meet the needs of farmers and enable new technologies and improvements on farms, whilst offering investors access to an SDG aligned asset class.

The following is an excerpt from Nossa Capital that interviewed Alexander Farthing, CEO and Founder of Alune Aqua Ltd. (Alune Aqua is a startup based in Indonesia that is improving the aquaculture industry by offering loans that meet the needs of farmers).

What led you to founding Alune?

“I started Alune just under two years ago. I’m a marine biologist with a masters in sustainable aquaculture systems. After a few years in London’s start-up scene, I understand the power of business combined with science to drive innovation, and importantly, the adoption of that innovation. We see a vacuum today in aquaculture between technology availability and adoption, due to a lack of suitable financial partners.

Alune is for people and planet. I find it unmotivated to get out of bed for businesses that don’t have an impact motive attached to them. Most (businesses) can positively move their customers, partners and teams to make an impact. It feels lazy if organisations are not attempting to do this. At Alune, it’s built into our very core as we drive financial inclusion with an environmentally aware investment framework.”

What is the fundamental problem Alune is trying to solve?

“Aquaculture is a $400Bn USD industry which is under-banked and under-served by the financial sector. Shrimp farms in particular, are an asset class many traditional finance provider are unsure how to approach and risk adjust. BCG estimates only 6% of shrimp farmers have bank financing.

The result is that many farmers are unable to access finance on terms that fit their needs, leading to lower infrastructure and technology investments, which holds back productivity and prevents moves towards sustainability.

Alune has built the credit, risk, partnerships, value chain and impact components required to enable capital into the industry at scale.

Today we are enabling capital to enter the market, with a focus on technology and infrastructure developments. As an early leader in aquaculture finance, it is right that our investments and motives are SDG aligned and designed for people and our planet.”

Our mission: Create the aquaculture financial ecosystem for people and planet

What is Aquaculture: Aquaculture is the equivalent of agriculture for seafood products. “Farms” in the sea, inlets, or other bodies of water hold fish, shrimp, crustaceans, seaweed or other seafood products which are grown and then harvested. Aquaculture often involves processes to enhance the productivity of farms or mitigation of losses by protecting the organisms from predators, feeding, and ensuring the environment and conditions are optimal for the organism being farmed.  

“Aquaculture as an industry has been flourishing in the last 30 years, and now produces over 50% of the seafood we consume. There is still some way to go in terms of developing the scientific infrastructure required to make it as effective and efficient as agriculture, however today's knowledge and technology is creating stable, scalable businesses for well financed farmers. Aquaculture’s financial infrastructure has been lagging behind it’s scientific innovations, this has created a mismatch between product availability, known best infrastructure and the finance available to enable it.

When we look at aquaculture as an industry and compare it to agriculture, we find thousands of financial institutions with products tailored to farmers, whereas aquaculture simply does not. We are creating the distribution channels, technology and partnerships to enable risk-adjusted capital into aquaculture at scale.”

How do you educate potential investors about the aquaculture market?

“Agriculture is a helpful benchmark, given the problem parallels and the significant value that solving problems in a fast growing, young industry can create. An industry which in Indonesia alone employs 3.3 million people, growing 7-9% per year.

Aquaculture presents unique challenges when compared to Agriculture, at a production level water is a fantastic growth medium for your crop, but also supports rapid proliferation of pathogens. This means farms need additional biosecurity steps as well as comprehensive disease management plans which requires expenditure on innovative products and the application of up to date science.

Banks and existing financial solutions have not developed the tools and teams to invest into the sector at scale, to do this, lenders must be able to accurately assess risk, securities loans and generate network effects through the value chain to shift risk profiles. This is our vision.”

How does your method differ from traditional microfinancing?

“The methods of microfinancing are quite diverse; a key difference today is simply loan size. Most microfinance loans are up to $10,000 per loan. Our customers typically need a loan between $75,000 to $200,000. We price our loans using a revenue sharing model, which is effective in generating returns which align well with farmer and investor’s needs."

Source: FIS

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