Identifying Blue Economy Opportunities & Threats

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At the core of our work, we believe taking a value chain approach to investing in development is the most responsible and most sustainable. Interlaying this approach with the development of the blue economy will ensure proper assessment of opportunities and threats.

Blue Economy

No single definition of “Blue Economy” exists; like the word “sustainability”, answers are scattered and subjective. To economic theorists, it refers to a type of circular economy where nothing is wasted, but to those involved with oceans or fisheries work, it refers to development and use of marine resources, although even this definition is subjective.

The marine-focused usage of blue economy has numerous definitions and is interchanged with “blue growth”. Many, like WWF, the Economist Intelligence Unit and the World Bank Group include sustainable economic, environmental, and social outcomes, i.e., triple-bottom line outcomes, while others refer to all economic activity generated by maritime industries.

In March of 2015, John Tobin, Global Head of Sustainability at Credit Suisse said,

“The “blue economy” is about conducting economic activity in a way that is consistent with the long-term capacity of marine ecosystems to sustain themselves.”

Figure 1 Fishing vessels, California, USA
Credit: By specchio.nero (San Diego harbor) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Value Chain Approach

While Wilderness Markets’ employs the USAID Value Chain Approach, a value chain approach is, at its core, market systems approach to development. These approaches acknowledge that industries do not operate in a vacuum – outside forces, like governments, resource and labor availability, and similar industries – create a dynamic system in which value chains exist. The value chain approach seeks to understand these so that the principal constraints to competitiveness, which can lie within the system or the environment, can be understood and mitigated. Failure to do so can result in unsustainable growth or detrimental impacts.

Figure 2 Women harvesting seaweed, Zanzibar, Tanzania
Credit: Jada Tullos Anderson

Synergy of the Blue Economy and Value Chain Approach

One of the striking aspects of the multiple definitions of the blue economy is that the definitions imply a comprehensive approach to developing and using marine resources, aligning well with the value chain approach to development. Indeed, considering the main purpose of the value chain approach is to account for the dynamism of an industry or supply chain, then there can be no more perfect example of a dynamic business environment. The natural coastal and marine environment is always in flux and resource availability must be accounted for when considering the threats to a value chain. Similarly, global markets affect most marine-related activities and must similarly be considered when determining blue economy development pathways.

Figure 3 Women sorting catch, East Java, Indonesia
Credit: Jada Tullos Anderson

Applications

Integration of the blue economy and the value chain approach is well-suited to fisheries, aquaculture, maritime services, tourism, and, particularly, to locational development that integrates multiple sectors, such as fisheries, tourism and port development as the unique and common needs of each can be considered as part of a whole solution. This can be useful for government authorities as they seek to cost-effectively develop and regulate coastal areas. Funders and financiers may also be receptive to this approach as it allows simultaneous de-risking through diversity and bundling of financing to decrease transaction costs.

Figure 4 Honolulu and Waikiki Beach economy includes tourism, fishing and shipping, Hawaii, USA
Credit: Jada Tullos Anderson

Final Thoughts

The value chain approach naturally fits blue economy development, offering improved value to developers and funders, while adding to the sustainability of the marine environment for people, business, and nature.

The Finance Gap in Sustainable Wild Capture Fisheries

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Over the past few years, three broad strategies have evolved to address the challenge of achieving sustainable wild capture fisheries. These consist of:

  • Addressing governance, regulation and policy
  • Providing preferential access to markets via certification mechanisms and Fishery Improvement Plans
  • Aggregating mission aligned capital

While each of these strategies have merits in and of themselves, they function best if their implementation is aligned, particularly in emerging markets where parallel or consolidated approaches are more likely to succeed than a serial approach. The implementation of these three strategies independently of each other often result in distortions that misalign incentives. As a consequence, this lack of alignment has resulted in few real world business examples or models that can effectively scale across fisheries, geographies and communities. Despite the attractiveness of economics of fisheries reform in at a macro level, the financial implications for practitioners in the real world have been challenging.

We especially note the development of mission aligned capital for sustainable fisheries in the past year. The Althelia Sustainable Oceans Fund and the Rare Meloy Fund are now either operational, or close to being operational. These new facilities represent important progress in this space.

While these represent important steps forward, they do not, as of yet, address the demands of current market conditions, particularly in emerging markets. Based on our field assessments in Asia, Latin America, parts of Africa and the United States, the reality is that the majority of the demand lies in defining, developing and testing sustainable fisheries instruments and models that may, one day, be eligible for the Meloy Fund or the Oceans Fund.

One sequence of fund development is to a) prove a concept, b) grow and refine and c) to deploy large scale capital (courtesy of Dalberg Global Advisors).

  1. Prove the concept – at this stage, practioners are testing financial instruments and models in a variety of settings with a wide variance of risk – returns and a great deal of tail risk. Transactions are often small, with high transaction costs, and with limited to no track record. While the Meloy Fund may most closely approximate these characteristics, the Funds requirements and relatively high return requirements and minimum transaction sizes remain a mismatch for the sector.
  2. Grow and Refine – at this stage, practioners are aggregating small scale proven models into larger vehicles; allocating and pricing risk appropriately; have a track record to demonstrate risk returns and an experienced team.
  3. Deploy Large Scale Capital – at this stage, practitioners are able to deploy large pools of institutional capital towards proven concepts; have more stable returns with lower tail risks and lower transaction costs as well as strong comparable track records for the sector and fund managers.

Based on our reviews, in the absence of financial instruments and model with documented and understandable risk, the sustainable wild capture fisheries sector appears to have a significant funding gap at the “Prove the Concept” stage. Resources are required to define these instruments and models, ideally with existing sector participants, many of whom are searching for approaches to transition NGO driven projects to investable entities with very limited success to date.

In reality, there is a significant pool of potential projects in the form of Fishery Improvement Plans, fishery projects, blue economy projects and alternative livelihood projects in many geographies. While Wilderness Markets has developed a systematic analysis of the potential investment opportunities in a number of fisheries, we have been struck by the rather random approach to this challenges and the lack of resources to systematically support the transition to investable entities that may, one day, be eligible for investment from the Meloy Fund or the Oceans Fund.

A “Second Notice” to Humanity

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Over 15,000 scientists from around the world have issued a somber notice to humanity. As they state:

“Humanity has failed to make sufficient progress in generally solving these foreseen environmental challenges, and alarmingly, most of them are getting far worse,” they write. (Our emphasis added).

We encourage a close reading of the paper, if only for the graphs.  The 25 year graphs provide important context.

If many companies saw these trend lines for their expenses or risk factors, we assume they might react. But  society as a whole (and the current US administration) has so far generally ignored the implications of these trends.

 

 

 

Leverage the Middle for Improved Fishery Management and Revenue

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The New Middleman: Service Provider and Quality Assure

“Middle man — the very term itself is associated with extra hoops to jump through, farmers being cheated, and limited value being offered to farmers and value chains generally. The idea of cutting out the middle man is frequently thought of as a selling point, casting these intermediaries as the “bad guys” of the value chain, worth avoiding whenever possible.” -Robert Anyang, Chemonics

Reading this recently on the Agrilinks blog, I subconsciously substituted “fisher” for “farmer” because the same is true for our marine resources. Our friends at Smartfish, in Mexico, led us to imagine how a “good middleman” could lead to a more equitable distribution of money along the value chain, i.e., greater social impact, while also promoting fishery health, i.e., environmental impact.

Leveraging the Middle

Parallel Approach to Fisheries Development

At Wilderness Markets, we believe that middlemen, whether they are called intermediaries, buyers, or agents, can provide a vital link in low governance fisheries. (We consider simultaneous governance and value chain development in emerging markets as a “parallel approach” to fisheries. You can read more about this here and here.) Processors and distributors committed to promoting responsible fishing can employ “good middlemen”. These can provide services and also act as service providers and informal fishing rules enforcers  in geographies where official government management is lacking.

The Current Role of Middlemen (and Women)

Often viewed as part of the problem, in many instances independent middle buyers often take on a great amount of risk in the value chain. By paying cash for goods, they then take responsibility for ensuring they’re able to make a profit. This may require days of transport, during which any delays or excess heat cause spoilage and loss of value. They also take on the burden of finding the best paying buyer. In Indonesian tuna, snapper and swimming crab value chains, middle buyers also forward cash and supplies to the fishermen they purchase from.

Yes, some middle buyers take advantage of the harvesters they buy from – charging exorbitant interest, or not paying a fair amount for the product. This is an opportunity for competitors.

Better Use of Resources: The Role of Intermediaries in Parallel Development

Smart end buyers have started taking advantage of these vacuums as opportunities to assure quality, but this could be leveraged even more. So far we’ve seen a processor in Indonesia who keeps local middle buyer on their payroll; the community knows and trusts her, and she targets the best quality tunas. She pays well and in-cash; however, she does not let the community know she’s actually working on behalf of the processor because they fear the community may either not want to sell to her or may expect higher prices.

In Indonesia, fisheries are generally data poor and enforcement of regulations, if they exist, is lax in most fisheries. As is common, the fishing industry is as or more developed than fishery management. This situation is prime for parallel development, whereby industry, government, NGOs, and philanthropy work together to promote sustainable development of the fishery so that fishers can continue to harvest but not to the detriment of successive generations.

Localized data collection and management are increasingly popular ideas and are of great interest in the blue swimming crab (BSC) fisheries where exporters are trying to avoid overfishing due to its high costs, like smaller and fewer crabs, that may force companies to eventually relocate their operations. Efforts like this is one of the ways to increase enforcement in locations where the government has difficulty doing so. Middle buyers working on behalf of companies affiliated with exporters can promote responsible fishing is by not buying undersize or actively reproducing females.

Leveraging the Middle

Sumatran Fisherman with Blue Swimming Crabs

Using the Middle for Management

We recently worked with one US importer of Indonesian BSC (about 80% of Indonesian BSC is exported to the US) to create a mobile app that allows the picking plants, who are a first or second level “middleman”, to keep track of landings data, including size, fishing grounds, and weight. Among the benefits are the ability to avoid areas with undersize crabs and egg-bearing females. As both have lower quality meat, it means that not only are the plants more able to avoid this lower quality crab, but also that the crab population has more of an opportunity to regenerate. A win for the plants, the fishers (who can make more money) and the environment.

Working together to promote smarter management produces benefits for fishers and the environment which improves stability of the resource for the importers. Companies can gain more agency over the product quality as well as improve fishery management by employing middlemen as agents and intermediaries.

 

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The Wild Blue Crab Investment Model – a case study

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Industry stakeholders understand that overfishing undercuts long-term value and prevents realization of full economic potential in local communities. The question is, what to do about it? Wilderness Markets and Blue Star Foods collaborated on a pilot program to develop one potential solution.

Problem

Rising demand for seafood combined with limited public spending on fishery management systems has led to overfishing worldwide. As of 2013, almost a third (31.4 percent) of fish stocks were fished at biologically unsustainable levels, a 10 percent increase since 1974 (FAO 2016). In 2016, just over 58 percent of fisheries were considered fully exploited, with no expected room for further expansion (FAO 2016). Recent research indicates that these numbers are actually underestimated: FAO statistics do not include thousands of small-scale fisheries, recreational fishing, accidental catch of non-target species, and illegal fishing because they aren’t measured (Costello et al. 2012; Pauly and Zeller 2016). In addition, global trends mask the fact that many individual fisheries have collapsed and fishing boats have moved on to exploit new species (CEA 2012). This undercuts fisheries’ ability to provide long-term social and economic benefits to the local communities.

Wilderness Markets and others in numerous fisheries have conducted extensive value chain research. This research indicates that while the harvesters tend to bear the costs of fisheries management improvements, the economic benefit tends to be captured by participants further up the value chain – aggregators, processors and exporters. This is particularly the case in emerging market fisheries, where several factors collide:

  • The inability to evaluate stock status and fishery conditions, due to the lack of reliable fishery data and track records, make it difficult to assess investment risk and rewards.
  • The current open access nature of fishery and the absence of tenure rights and enforcement mechanisms do not allow the benefits of fishing improvements to accrue to specific fishermen.
  • The large, numbers of individual, unregulated fishermen, who tend to operate opportunistically, making it costly to negotiate and monitor fishery improvement agreements.
  • The lack of successfully tested models for implementing traceability measures means that there are few investment opportunities and few models to emulate.

Using Blue Swimming Crab in Indonesia as an example, research shows that while processors in the value chain stand to benefit from improved BSC management, these companies do not typically invest directly in helping fishermen transition to sustainable practices due to the above factors. While many processors are interested in supporting sustainability, it is difficult for them to demonstrate reliable return on investment (ROI) to their investors to justify financing these efforts.

Because of these hurdles, fishery improvement efforts end up relying on ongoing philanthropic support or government subsidies, without reliable economic incentives for change built into existing business models.

Parallel Approach

Sumatran Fisherman with Blue Swimming Crabs

Wilderness Markets teamed with Blue Star Foods, a Miami, Fla.-based distributor of quality crabmeat, to explore creating an industry-led sustainability initiative within the BSC fishery in Indonesia, Indonesia with the hope it would provide a blueprint for other fisheries.

Approach

The first step in our approach was to gain a clear understanding of the concerns and needs of impact investors, believing this understanding will allow development organizations, NGOs, and others, to better sequence their interventions (that is, through their risk instruments, matching capital, public and concessional financing, technical assistance, and macro-level reforms, and policy initiatives) to encourage private sector participation while leveraging and preserving scarce public dollars for critical public investments.

We specifically explored the central challenges that keep impact investors from participating in sustainable fisheries:

  1. A lack of reliable fishery data
  2. Ineffective fisheries management
  3. Unreliable infrastructure systems
  4. A paucity of investment-ready enterprises

The team analyzed the current state of fishery data collection, resource management, infrastructure systems, and enterprise capacity in the fishery. We found that — like many fisheries in emerging markets — the BSC fishery lacked reliable data and, despite new national fishery policies, functioned largely without effective management and enforcement. We also found strong, established commercial and social relationships within the value chain that point to the power and influence of a small group of 16 processors that buy BSC from 400 mini-plants that, in turn, purchase crab from more than 65,000 fishermen.

Using the data collected, we identified and analyzed three models for sequencing and combining different sources of capital to overcome obstacles:

  1. Serial approach: Public and philanthropic funders first support the establishment of strong governance arrangements, improved data collection, and fishery management. Once these initiatives mitigate some of the risk associated with a fishery investment, then return-seeking investors are incentivized to finance sustainable infrastructure projects (often through public-private partnerships) and/or enterprises along the value chain, focused on outcomes that achieve a triple bottom line: social responsibility, economic value, and environmental impact.
  2. Consolidated approach: Governments negotiate agreements with a single private sector entity or cooperative to delegate fishery management responsibilities. The private firm or cooperative then simultaneously invests in fishery data, management, infrastructure, and triple bottom line enterprises.
  3. Parallel approach: A range of investors and other stakeholders (for example, governments, nonprofit organizations, fishing collectives) develop coordinated investments to improve fisheries data, management, infrastructure, and triple bottom line enterprises. Efforts can be separately funded, but they work in tandem and share the ultimate goal of achieving sustainable catch with an appropriately capitalized and profitable fishing sector.

Outcome

Based on our findings, we identified the “parallel approach” as the most appropriate for the BSC fishery in Indonesia. We coupled this with a “lead firm strategy,” in which a “market maker” firm ensures market access and aligns economic incentives for change. This industry-led sustainability initiative draws on the experience Wilderness Market has in a number of other sustainable agricultural markets.

In this case, the strategy works with a U.S. based lead firm, to create financial and social incentives to

Lead firm and harvester

Lead firm and harvester meeting

enable fishermen to transition faster to sustainable fishing practices and improve management. Through its purchasing power and economic and cultural relationships, the lead firm is in a strong position to influence the practices of a range of processors, who have commercial and cultural relationships with a network of mini-plants, collectors, and fishermen.

Together with the lead firm and local harvesters, we developed a pilot model based on a partnership between the lead firm and a producer organization or fishing cooperative. The model brings together limited amounts of philanthropic capital and relies primarily on private capital to provides financial, social, and environmental returns. This return-driven model includes:

  • Purchase commitments based on price, quality and standards
  • Investments in fishermen cooperatives to motivate gear improvements and sustainable practices
  • Improved fishery data collection and traceability
  • Support for harvest control compliance

The pilot project is designed to align and attract private, return-seeking impact investment to the fishery and complement ongoing work by NGOs in the region to improve fishery management. Critically, it is designed to address the lack of loyalty in relationships between local harvesters and the supply chain, thus providing a basis to address the return on investment for improved fishery management.

Provision of ice is a key concern

We expect this approach will enable local fishermen to better organize, adopt sustainable practices faster than waiting for the government to create and enforce management changes on its own, and address the economic hardships fishermen face when resolving changes in fishery regulations. It will also help bolster local business and community support and advocacy for more effective fisheries management policies and enforcement through a legal, local cooperative structure.

The new facility focuses on utilizing good data to address a prioritized sequence of fishery management measures related to size, sex and seasonality in BSC fisheries in Indonesia[1], where illegal and destructive fishing practices are pushing crab populations toward collapse. By strategically investing capital in priority data, fisheries management[2] and harvest related changes, the facility proposes to share the upside of recovery with local harvesters and business through the value chain.

Vessel tracking unit to improve traceability

This impact initiative is aligned with local regulations in Indonesia[3] to further assure social, environmental and economic impact.

As a result of better data collection, alignment of economic incentives and effective supply chain management, the fishery will produce higher yields of BSC. It will also provide a traceable, sustainably harvested product that will have a competitive advantage in key U.S. and E.U. markets where the lead firm and supporting investors will be able to recoup their investments in sustainable practices.

Ultimately, we hope to help establish a management or governance unit of key stakeholders — including fishers, mini-plant operators, district and provincial heads, processors, scientists and APRI representatives (the association of Indonesian crab processors)  — in order to address factors in the enabling environment, which will strengthen this pilot.

Why It’s Successful

We believe this pilot will help overcome a key roadblock in creating sustainable fisheries in emerging markets: it provides a concrete, “proof of concept” that can demonstrate the financial success of sustainability investments and encourage other fishing industries to design similar programs.

By embedding sustainability requirements within existing value chain relationships and practices, we will:

  • Demonstrate the financial viability of investments in fishery data collection and management, thus attracting additional private sector action and corporate investment in, and support for, these practices.
  • Create new norms in the fishery that are sustained because of their business value rather than relying on ongoing philanthropic support; government subsidies or inefficient enforcement to succeed.
  • Provide clear and reliable financial benefits for small-scale harvesters to make gear changes, follow harvest control measures, and take on other sustainable fishing practices. This alignment of immediate economic well being with sustainability practices will improve compliance and reduce the short-term, negative impacts of fishery restrictions on local economies and communities.
  • Test a new, “parallel” investment model for combining philanthropic, government, and private sector funding to address fishery management issues. If successful, this model can be tailored and applied to other fisheries in emerging markets.

While we are starting with BSC fisheries Indonesia, the problems these fisheries face are common in a number of emerging market fisheries. We are building a model that can be rapidly modified, applied and scaled in a variety of fisheries around the globe.

We believe the pilot BSC program will help overcome a key roadblock in creating sustainable fisheries in emerging markets because it provides a concrete “proof of concept.”

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[1] “Indonesian Blue Swimming Crab Value Chain Summary”. 2015. Wilderness Markets. http://www.wildernessmarkets.com/portfolio/indonesian-blue-swimming-crab-value-chain-summary/

[2] Jeremy Prince. 2015. Indonesia BSC Spawning Ratios. Unpublished data from personal communication.

[3] RPP Rajungan, decree number 56/Permen – KP/2016 for BSC Fisheries Management

Coral Reefs and Ocean Health

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Every so often, we run across reports that force us to stop and question our assumptions. Recent papers on global warming and the impact on oceans is a topic we have been monitoring for a couple of years now, with each new paper more depressing than the last.

It is our view that the role of ocean warming on stock health, and by extension, investment risks associated with stock health is either ignored or underestimated in most wild capture fisheries investment models.  However, with little information on which to base this assumption, it has been difficult to express this disconnect. Furthermore, most of the impacts are felt at the base of the supply chain  – by fishers and fishing firms.

A recent open paper in the journal Nature provides some interesting context. Titled “Coral reef degradation is not correlated with local human population density”, the research appears to “suggests that local factors such as fishing and pollution are having minimal effects or that their impacts are masked by global drivers such as ocean warming” and …. “findings indicate that local management alone cannot restore coral populations or increase the resilience of reefs to large-scale impacts. They also highlight the truly global reach of anthropogenic warming and the immediate need for drastic and sustained cuts in carbon emissions.”

If these findings are true – and we are unsure there is scientific consensus around them – it will have significant implications for wild capture value chains, local populations and for the range of local and community based efforts attempting to address overfishing through local management.

We would welcome comments or thoughts on this paper, which can be accessed at this link.

Bruno, J. F. and Valdivia, A. Coral reef degradation is not correlated with local human population density. Sci. Rep. 6, 29778; doi: 10.1038/srep29778 (2016).

Sustainable Fisheries – the role of the fishermen

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Significant attention is being paid to the oceans. Between the UN Oceans Conference as the recent Economist leader, attention is (finally!) being given to the significant and numerous benefits and threats to the worlds oceans.

At a time of increasing populations, increased demand for healthy proteins – and arguably a climate imperative – human consumption of seafood is increasing exponentially. Wild capture seafoods are increasingly losing ground to aquaculture raised seafoods, for better or worse.

So why should we continue to care about wild capture seafoods? Isn’t sort of like expecting we should still live off wild buffalo and antelope?

It is – and the problem is, many emerging market countries are still dependent on wild capture fisheries for social, political and economic outcomes. Many emerging market economies depend on a sustained source of seafood to address social and poverty concerns. Fisheries related political decisions –in the form of subsidies and / or gear – are good politics at election time. And the national and global supply chains themselves are valuable sources of foreign currency in many countries.

While significant progress has been made to improve fisheries management in developed countries with strong rule of law, challenges remain on the open ocean and in many emerging markets. As summarized in a series of reports we completed, these challenges cut to the core of why fisheries remain “unmanaged”. We would argue that a developed world, legal first approach (which we call the “serial” approach) will not work in many emerging markets.

What is instead needed is a concerted effort to engage fishermen, gather reliable data and find culturally appropriate solutions in conjunction with the supply chain. These efforts can be complimentary – and inform – efforts to address legal and regulatory requirements in “parallel”, allowing fishermen to realize the benefits of changes in practices, presenting value chain actors and regulators with clear data on landings, and doing so in a culturally appropriate manner.

Our recent efforts in the United States and in Asia continue to support this theory.

In the United States, now that the west coast groundfish fishery is in recovery, fishermen face the reality that the market price is below the cost of landing the fish as management costs have increased while revenues have remained flat (or declined when adjusted for inflation) for the higher volume species. The market, in effect, compares US groundfish to imported white fish and sets the price at the lower of the two, in large part due to the volumes, but also due to the lower costs of imports. Unless prices and market access improve for US groundfish fishermen, its unlikely many of them will remain in business (and this in turn will imperil the funding of the fisheries management system).

In Indonesia, the bigger challenge relates to the lack of registration of fishermen and vessels, poor landings data and limited data on fishing sites and practices, particularly in artisanal fisheries which are increasingly being drawn into national and global supply chains due to the increased demand. In many countries, fishermen are essentially unregistered, have limited access to services and are not legally recognized. In nearly all the emerging market value chains we reviewed, the first legally recognized stage of the value chain was the aggregator or middle person. This legal recognition is important – it enables access to government and private services and it allows managers to define and engage with users.

It will continue to be challenging to manage these historically productive fisheries unless these challenges are addressed in a culturally appropriate manner.

Wilderness Markets is developing a range of measures building on the interests of fishermen that address these challenges in US and developing country fisheries. These include improving market access and recognition for fishermen with industry; addressing fishermen registration and organization; ensuring good data is collected and made available to all relevant parties as well as aligning economic incentives. An essential underpinning of all this work is the need to engage with, and facilitate, changes in practices in existing firms.

As we are seeing in our work, systems change is possible, it takes the combination of a bottom up approach and a systematic assessment of metrics to keep everyone on track.

Lessons Learned – Indonesia’s Blue Swimming Crab Fishery

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Wilderness Markets has recently completed a “lessons learned” document regarding our experiences working with a lead firm in Indonesia to develop and implement sustainable fisheries practices for the Blue Swimming Crab fishery in Lampung Province.

The presentation provides an overview of our theory of change, our focus and goals and the key lessons learned during the course of this work. Building on the “parallel” approach to fisheries reform, it specifically integrates harvesters, communities, local leadership and industry representatives in developing and implementing sustainable fisheries practices.

The English version of this report is available for download, as is the Bahasa Indonesia version.

We are grateful to the David and Lucile Packard Foundation for their support of this work.

How Crabs, Fishermen, and Bankers Benefit from Better Data in Indonesia

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In our previous post, we discussed why we and others have concluded that good data is crucial to fisheries management and investment decisions. This post dives deeper into our work to incorporate better data collection, analysis and availability into the Indonesian blue swimming crab (BSC) fishery.

How many fishermen are there? Where are they fishing?

Is this gear actually catching larger crabs? Is the gear cost-effective?

If we want to invest in improvements, how can we figure out if there will still be enough crabs to catch in the future to provide revenue? How risky is the investment?

These questions are ones we asked as we started working with a lead firm in Lampung, a province in South Sumatra, Indonesia. The answers to these questions were not available. Therefore, we’re helping to find the answers through a mobile data collection app to create better data.

About the fishery

Blue swimming crabs (BSC) is an important source of revenue for fishermen who sell their landings into the export-oriented BSC value chain. Since BSC first started being harvested commercially in the Lampung area, crab sizes at capture are reportedly getting smaller and there are fewer of them, indicating a stock that is or is becoming overfished.

BSC only require a short time between successive generations (less than 2 years). That, combined with their relative lack of mobility, mean that conservation efforts will have more immediate results than a fishery like snapper or tuna.

Why this fishery is a target for impact investment

The high value of crabmeat and the short time window for stock recovery translate to higher likelihood of return on investment. Investments in fisheries, if done from an impact orientation, can readily incorporate triple-bottom line outcomes that incorporate environmental, economic, and social returns.

Environmental: Improve the availability of crab through improvements to stock health.

Economic: Achieve a market premium through differentiation based on transparency, traceability, and sustainability

Social: Involve harvesters  in management and compensate them for the costs associated with adopting more sustainable practices

Each one of these impact areas requires better data for design and monitoring and evaluation.

What we’re doing to improve investability

The fishery needed more data to help with management and de-risking investments, but the mechanism had to be:

  • easy to use
  • affordable
  • replicable
  • scalable

The data needs to:

  • answer questions about stock health
  • provide traceability and transparency
  • be easy to access and share with multiple stakeholders, including private companies, multiple governments and NGOs.

Working with our lead firm partners, we created a mobile app for use on Android or iOS devices. The app will provide information to prove both transparency and traceability. Because of the platform, it can easily be tweaked to use in other geographies and fisheries as well as being useable offline – a must for developing country fisheries.

Value chain use of the data

Industry can use the data for monitoring and enforcement of regulations. In Lampung, there are agreements not to land or buy crabs that will negatively impact stock health. These agreements forbid landing berried females and crabs less than 10cm. There are also agreements to support gear change from gill nets which will allow for a more selective harvest. Data collected through the app will therefore be used by individual companies to validate and verify these requirements.

Companies will use the data collected to guide buying strategies to protect stock health and increase price premiums. Data indicate where the best size crabs are being landed and the firm encourages buying from those areas. They are also planning to provide rewards to help fishermen to purchase sustainable gear.

Environmental impacts of the data

On the more environmental side, data can be accessed by fishery managers for determining appropriate access and effort controls which will impact stock health. Managers can use the data for determining local seasonality based on size and sex of the landings; this, in turn, can help determine the crucial times and locations for fishery closures. The efficacy of gear change on landings can also be assessed using the data.

Not only can government use the data, if aggregated appropriately, the NGO community and private companies can use it for their conservation and development programming.

Social implications of data collection

The app collects data about the fishermen, including their basic contact information, landings data, and vessel affiliation. The landings data for individual fishermen will serve as a record of their income from BSC fishing. Accordingly, financial institutions, like banks, can use this data to determine their bankability.

Circling around – how does this relate to the broad issues of improved management and investment?

Management will benefit from better data on size, sex, landed weight and geography for localized management plans. Stock assessments will also improve with better data. Also relevant, the process of data collection has helped identify unregistered fishermen. Because of this, they can be provided with the opportunity to register for their federal fisher i.d. card (“Kartu Nelayan”). Among other things, this gives fishery managers a better sense of the number and characteristics of fishermen in the area so that efforts to manage the fishery will include them.

Implications for investment are multi-level. At the company or even industry level, investors can use the landings data for individual companies. In addition, the improved stock assessments and record of the expected recovery will serve them when determining value chain investment risk. Correspondingly, at the personal level, the data contributes to financial inclusion for the fishermen: it serves as a record of income for fishermen to banks and having their Kartu Nelayan gives them the opportunity to receive potential government benefits.

What’s next for better data

In this fishery specifically, we’re working to address legal issues related to data collection, ownership and sharing in cooperation with the ministry of fisheries and aquaculture and NGOs active in the fishery. At the same time, we want to ensure the ongoing usefulness of the data mechanism we’ve helped to develop.

We’ve also developed an investable model, designed for philanthropic and impact investors.

To stay updated on our efforts to capture better data or learn more about the investable model, subscribe or send us an email. Both options are below.

How Poor Data is Holding Back Fisheries Reform AND Impact Investors

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The Problem(s)


Poor management of fisheries is calculated to result in losses of USD $83 billion to the world economy each year. As cited in many other fisheries papers, data indicates an alarming proportion of fisheries, nearly 90 percent in 2013, are fully overfished, depleted or recovering, an increase from 75 percent just eight years prior.  Investments in fisheries could provide net benefits of USD $54 billion per year.

 If developing countries fisheries are to continue their role as a primary source of protein and income for millions, more than just public and philanthropic money must be invested in recovery and management.  Reform needs private capital. Unfortunately, there is a dearth of investable, risk-adjusted entities in sustainable fisheries that can meet triple bottom line goals. This then hampers participation of impact investment capital. Simply put, although there are investors with money, there are not nearly enough viable entities in which to invest. This challenge is further compounded by poor data.

The Role of Data for Management and Investment


Often bypassed in fishery initiatives, capturing good data is critical to both fisheries management and investment. Among other data points, management requires data about size, sex, species, nursery areas and seasonality to be able to manage the fishery to ensure continuity of the resource. Investors need to be able to assess risk to their prospective investments. For fisheries, this means understanding how well the fishery will perform in the future, i.e., whether there will be more fish in the sea and how many. Management data and investment data go hand-in-hand.

Indeed, in “Towards Investment in Sustainable Fisheries”, the three key enablers of sustainable and profitable fisheries are secure tenure, sustainable harvests, and robust monitoring and enforcement, each of which relies on robust data. Investable entities and risk management are key requirements for investment that build off these enablers. Encourage Capital’s strategy for small-scale seafood investments also relies on interventions driven by data, including catch accounting systems, and product tracking and traceability.

 Lack of data is identified as one of the major concerns with regards to stock health and effective resource management in the major domestic and export fisheries of Indonesia, the number two producer of wild-caught fish in the world. Indeed, for industry, the lack of clear recommendations and supporting data is a significant issue from a decision-making perspective. This lack of data and analysis directly affects efforts to build consensus and accountability at all levels of the value chain.

Stay Tuned…


Data is critical to ensuring food security and income through better managed fisheries and investments thereto, which is why data collection, analysis and sharing is one of the focus areas of our work in Indonesia. Follow us to see our next post, where we share what we’re working on in to get better data in Indonesia.