“The Financial System We Need”–is it finally here?

by Lawrence Ang

“We always underestimate the change that will occur in the next two years as a change that will happen in the next ten.”    –Bill Gates

Last October 25-26, the biggest names in the global financial industry converged in Dubai under the auspices of the United Nations Environment Program-Finance Initiative (UNEP-FI). The setting could not be more apt. Dubai, a land of extreme heat—and, thanks to some clever government policies, extreme wealth—hosted the world’s leading central bank governors, asset managers, institutional investors, banks, insurance providers, and investment advisories, such as SSG, to check-in on an effort launched last 2012 at Rio+20, that is, to build “the financial system we need.”

In the early 2000s, it became apparent that financing sustainable development required a completely new paradigm—one that is able to drive inclusive growth while genuinely, and maybe even profitably, addressing sustainable development challenges. While the idea has long been floated in the nooks and crannies of UN conferences, in whispers in boardrooms and chants from the NGO sector, its urgency quickly rose into the mainstream with the advent of three major global events.

Three major global events signaling a changing financial system

  1. The landmark adoption of the 2030 Sustainable Development Agenda and the Paris Climate Agreement.
  2. The 2008 financial crisis driving public demand for a more resilient and effective financial system.
  3. The rapid evolution of the financial industry itself in light of post-crisis macroeconomic reforms, the increasing influence of developing and emerging countries, and the rise of disruptive technologies and new social expectations across the financial landscape.

“The Financial System We Need”

  • Overall, it will take an estimated USD 5-7 trillion per year to meet global sustainable development goals, of which 60-70% will need to be channeled to developing countries;
  • As one example, it will take about USD 1 trillion per year to decarbonize energy; USD 400 billion per year to ensure resilient infrastructure; and USD 50 billion per year to halt tropical deforestation;
  • Less than a third of these resources are currently flowing and will therefore need to come from private sources;
  • In contrast, banks alone manage $140 trillion of assets and institutional investors over $100 trillion. Capital markets, including bonds and equities, exceed $100 trillion and $73 trillion respectively.

In light of this major financing gap, re-engineering the global financial system now ceases to be an activity reserved for academics and economic theorists, but instead now serves as a marching order for multilateral agencies, central banks, and financial institutions if these same entities are to stay competitive and relevant to their clients’ new realities. As evidenced by the groundswell being orchestrated by no less than the top financial firms in the world, this transformation will require new thinking, new business models, new assets classes, new products, new services, and new tools possibly already existing within the current system. However, it will now need a long-deserved shot in the arm and some fresh political will.

Dubai Roundtable Sentiments Expressed

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At the global roundtable, key personalities from the financial industry shared how a quiet revolution is now taking hold across various pillars of the international financial industry. To paraphrase sentiments expressed:

  • Public debate has rapidly moved forward. Central bank governors, finance ministers and regulators, and finance sector executives are being pressured to explain their contribution to advancing sustainable development.
  • Public interest institutions are playing a more important role in shaping public debate, for example about the risks of ‘stranded assets’.
  • More members of the public are taking up the opportunities to redeploy their own capital aligned to their values and longer-term interests.
  • Sustainability is becoming a major driver in the development of the world’s financial centers, with global and regional centers including Hong Kong, Nairobi, London, Paris and Switzerland exploring how best to develop rules, fiscal measures and market leadership to guide competition in the midst of new opportunities.
  • Collaborative networks are multiplying, forging partnerships and establishing fora to share best practices, information and experiences, for instance, across responsible investment, insurance, and green infrastructure.

From Momentum to Transformation

But perhaps most encouraging are some of the concrete developments happening directly out of the public and private spheres that altogether point to a sea-change in thinking among financial institutions on how a new “financial system that we need” can indeed look like.

  • In 2009, the Financial Stability Board (FSB) was established under the auspices of the G20 to utilize monetary policies to better manage risk and introduce resilience to the global financial system in light of controversies surrounding the “excesses” of the “current system.”
  • In 2015, a dedicated task force to tackle climate-related financial disclosures was set-up under the FSB to dive deeper onto how the global financial system should be compelled to act on sustainable development and be held accountable for climate change.
  • In 2016, green bond issuances totaled an estimated USD 694 billion and growing, signaling the arrival of a new and truly “green financial product.”
  • In 2016, China, arguably one the world’s most powerful economic influencers, signs a national policy package to create a “green finance system” to transform its own financial system. The EU later follows suit with a policy to create its own green financial strategy.
  • As of 2016, 60 stock exchanges across the world have joined the “Sustainable Stock Exchanges Initiative” (SSEI) under the UN to systematically promote sustainable investment and ESG disclosures.
  • And the list goes on…

SSG Advisors’ Role in Developing Promising Solutions

SSG Advisors, as a global development solutions firm and impact investment advisory, is now participating in a series of cross-sectoral discussions between multilateral agencies and investment practitioners looking specifically at “Positive Impact Finance”—an approach which aims to “finance businesses seeking to make a positive contribution to one or more of the three pillars of sustainable development (economic, environmental and social), once any potential negative impacts to any of the pillars have been duly identified and mitigated.”

SSG’s experience in discovering new business models and facilitating innovative partnerships between the public and private sectors will be shared to the ongoing discourse of identifying practical solutions to solve sustainable development challenges hand-in-hand with businesses and the financial industry. Indeed, impact investing, venture capital, blended finance and environmentally or socially oriented market instruments such as green bonds and development impact bonds will be needed. But as many point out, these may all fall short if the kinds of projects or entities most capable of providing the most promising development returns are not equally capable of providing the typical risk/return profile the mainstream market demands. As part of its participation to the global movement to create “the financial system we need”, we enjoin our colleagues from the private sector to help us imagine creative and profitable ways to make the “unbankable” potentially attractive to mainstream investors as well as connect business to promising solutions in need of urgent financing.

 


lawrence

Lawrence Ang is Director for Asia for SSG Advisors. He brings nearly ten years’ experience at the nexus of sustainable development and private sector engagement in the region.


 

Smallholder Crop Insurance in East Africa: A New Way Forward

Smallholder farmers in East Africa are increasingly vulnerable to risks associated with changing weather patterns. Climate insecurity puts their livelihoods in jeopardy and discourages investment in new technologies. As recent studies have explored, viable business models for crop insurance have the game-changing potential to reduce risks for the 2 billion people that depend on smalholder farms for income and subsistence.

Despite the promise, attempts at developing crop insurance have been rife with complications. Pilot programs have failed to scale for a number of reasons, including: insufficient climate data, low uptake due to lack of affordability as well as poor product design, unfavorable policy environments, high operational costs, and lack of scientific research to determine risk. The few that show scalability, such as the R4 Rural Resilience Initiative in Ethiopia (R4) and ACRE in East Africa, have done so by building inclusive participatory processes with strong institutional partners and by integrating insurance into other risk reduction offerings, but they continue to face a number of challenges, especially with regards to data availability, high operati
onal costs for installing and maintaining independent weather stations, and independent risk assessment.

As an implementing partner with Tetra Tech ARD for USAID/Kenya and East Africa’s PREPARED Project, SSG has developed a comprehensive public-private partnership between Jubilee InsuranceEast Africa, Kenya Meteorological Department (KMD), Rabobank, UNFAO and others to design and launch an Index-Based Weather Insurance product referred to as “Kinga Kilimo” (“Protect Farming” in Kiswahili). The product is designed to provide ICT based Agro-weather advisory to farmers via SMS prior to climatic events to provide forecasts for land preparation, timing for planting, crop variety and cultivars, crop management (fertilizer, pesticide application, cultivation, water supplementing), postharvest management, and soil conservation. It also offers parametric Weather Based Index Insurance for risk management of crop production losses associated with extreme weather events.

Both the partnership and the product are intended to address the challenges and to incorporate lessons learned from the previous attempts at crop insurance. As such, PREPARED has designed the partnership around several critical innovations to maximize success in designing a crop insurance product:

Incorporate Weather Data: To overcome the limiting factors of data quality, the partnership provided capacity building to the Kenya Metrological Department (KMD) in order to produce a blended weather dataset that incorporates over 35 years of data. This dataset uses Potential Evapotranspiration (PET) and GeoCLIM – a geospatial climate data-management and analysis software tool that integrates observed station data with satellite-derived estimates – so as to address both ex-ante and ex-post risk faced by the farmer at farm level.

Few, if any, crop insurance schemes have had such a comprehensive investment in improving data collection. Mr. Francis Ngari, the Micro-Insurance Manager at Jubilee Insurance, explains the value-added from this approach, noting, “We see this shared value approach to partnership as a big breakthrough in designing crop insurance. Previously we have had challenges accessing climate data and engaging with the Kenya Meteorological Department in designing crop insurance products, however, this partnership has made this possible. Getting credible and more robust blended data from KMD has made our premiums lower and improved the credibility of our products.”

Improve the Service Provision of Government Partners:  Guided by SSG Partnership Specialist Polycarp Ngoje, the  PREPARED project has helped transform the culture of the Kenya Meteorological Department through PREPARED’s Quality Service Improvement Program (QSIP) to be service-oriented and to focus more on potential collaboration and partnership to enhance usage of weather data.

Peter Ambenje, Director of KMD, reflects on the importance of this shift in orientation, stating that “The innovative approach to the partnership design of the Weather Index Insurance Kinga Kilimo product has opened our eyes on how we can engage with the private sector and generate products that add value as opposed to just sharing climate data. The Quality Service Improvement Program (QSIP) has changed the approach and mindset of our staff as far as service delivery is concerned. We look forward to adopting this model in engaging with other partners moving forward.”

Mr. Ngari attests that this partnership is “a breakthrough in agriculture insurance.” The United Nations Food and Agricultural Organization (UNFAO), which has contract farming for legumes and pulses in Eastern Kenya, has also found this partnership approach useful to them for downscaled weather forecast and climatological zoning based on historical data and water requirement satisfaction indexing for various crops. According to Philip Mwangi in the program office in Machaon County, “the partnership has been the missing puzzle [piece] in the contract farming. The scientific tools and downscaled agro weather advisory tool is a great avenue to disseminate crop management information to the farmers from land preparation to post harvest management.”

The new product is being test-marketed in several counties in Kenya this fall with the goal of rolling it out across much of the country for the spring growing season. It is expected to reach over 15,000 smallholder farmers in these pilots alone. Perhaps more importantly, though, the lessons learned from this partnership – including the need to bring the right partners together, the importance of using proper climate data as a base, and the need for government agencies to understand shared value and service provision – could transform crop insurance across all of Africa.

A Multi-Pronged Approach to the Growing Pains of Value Chain Development in Timor-Leste

By Colin Foster and Jeff Halvorson

Like other mountainous and geographically-isolated countries, Timor-Leste suffers from a lack of financial and technological services essential to the creation of a healthy, competitive agricultural market. Therefore, finding solutions to sustainable agriculture production in Timor-Leste is all about identifying missing links/gaps in the marketplace and building trust through relationships that have commercial benefit for everyone along the horticultural value chain.

Timor-Leste has very few established services, groups, and associations that provide basic market information to farmers and SMEs. In response, SSG Advisors and Cardno Emerging Markets recently began laying the groundwork with leading telecommunications companies to build and launch an agricultural database that will be used by farmers along key horticultural value chains that supply both domestic and export markets. This partnership aims to increase the supply of much-needed products by giving rural farmers access to up-to-date market prices for their produce, weather updates, and guidance on relevant good agricultural practices (GAP). Meanwhile, SSG works with leading agricultural buyers to contribute to the content on this platform and brokers MOUs with these farmers, thereby solidifying the market pull that will incentivize these newly-informed farmers to produce what buyers want, when they want it.

The next step will be helping firms in Timor-Leste’s small private sector sustainably integrate these solutions into their core business operations. To address this objective, results from recent ICT and rural finance assessments will provide insights into the incentives banks, MFIs, and other lending institutions need to facilitate the adoption and implementation of these ICT products. In addition, SSG and Cardno address capacity and financing challenges facing farmers, input suppliers, and wholesalers so these groups benefit from ICT solutions and formal purchasing agreements with leading buyers.

It’s a long-term strategy that involves building the ICT platform infrastructure through multi-stakeholder partnerships between key buyers and sellers so that the former continue using/funding it when the project ends in 2021. We are still at the early stages of this effort but based on interest and commitments thus far, SSG has found a fertile ground for this new technology due to its potential to significantly improve the lives of thousands of Timorese smallholder farmers by connecting them to interested buyers through a transparent system.

Partnering to Make The Business Case For Solar in Cambodia

By Darius Li

35 Picosol- Solar Powered Center[2]The Cambodian Electricity Market
With a total installed electricity capacity of 360 MW, Cambodia currently imports 45% of its electricity from Thailand, Vietnam, and Laos. The high cost of imported diesel fuel, fragmented supply system, and lack of consumer subsidies lead to high tariffs—energy prices in Cambodia are among the highest in the region, second only to the Philippines. In 2011, the retail electricity rates ranged from $0.19 USD/kWh in Phnom Penh, $0.25 – $0.40 USD/kWh in other grid-connected areas, and up to $0.50 – $1.00 USD/kWh in rural areas (mostly diesel generators).

Cambodia also has the lowest electricity access rate of any of the 12 countries PFAN-Asia covers with only 31% of the population currently connected to the grid. The government has set ambitious targets to combat Cambodia’s slow energy sector development, including increasing village electrification to 100% by 2020 and individual household electrification to 70% by 2030. But, between now and then, millions of lives will continue to be adversely impacted by the lack of affordable and reliable electricity.

The enabling environment is also extremely challenging. Not only does Cambodia lack feed-in-tariff subsidies for renewable energy, the national electricity utility does not even allow independent power producers to feed energy into the grid—at any price. Moreover, the national grid extension plans are not clear, causing significant uncertainty and risk for power project developers who are weighing investments that can often require more than ten years of visibility to properly assess.

However, it’s not all bad news for renewables. Cambodia possesses immense natural resources that can fuel substantial renewable energy generation. Hydro, solar, biomass, and biogas are in abundance and comprise the majority of the country’s potential renewable energy resources, including 1,400MW wind, 10,300MW hydro, 6,700MW solar, and 16,400MW biofuels. To date, less than 1% of this potential capacity has been developed.

Cambodia Country Assessment Summary

The Opportunity for Off-grid Solar
Against the backdrop of this challenging environment, we believe there are significant opportunities for pioneering private-sector businesses to develop, innovate, and implement profitable business models using solar photovoltaics (PV) technology that can result in significant social and economic returns. The confluence of the following macro factors provide long-term, sustainable growth in this sector for those that are able to successfully navigate and overcome its implementation challenges:

  • High electricity tariffs – As previously mentioned, electricity tariffs in Cambodia are amongst the highest in the region and vary widely, ranging anywhere between $0.19 – $1.00 USD/kWH (possibly even higher in some areas), and is subject to continuous fluctuation due to a number of variables that impact the cost of fuel for generation.
  • Low rates of electricity access – With large parts of the country yet to be electrified, there remains many opportunities for private-sector businesses to fill in existing gaps.
  • Rapidly increasing GDP – With a forecasted GDP growth rate of over 7% in 2014 and 2015, increasing economic activity in the country will enable greater ability and demand for basic services such as electricity. The growth rate in electricity demand is estimated at around 20% per a year.
  • Declining costs of solar PV With costs having already decreased in the neighborhood of 80% in the past five years alone, solar PV technology development has driven down costs and will likely continue to do so – albeit, perhaps less aggressively – for years to come.
  • Uncertain fossil fuel prices – The continuing depletion of fossil fuel reserves combined with rapidly increasing demand from developing countries and rising global population will result in significant long-term price uncertainty and volatility for fossil fuels.

Partnering with Johns Hopkins University
In partnership with a 4-student team from John Hopkin’s University (JHU) School of Advanced International Studies (SAIS), we have been jointly developing a study on “The Business Case For: Solar PV in Cambodia.” The study will provide in-depth market analysis that will backup our initial hypothesis on the attractiveness of the solar market in Cambodia with real data points and detail the breadth and depth of specific commercial opportunities. This unique partnership brings substantial benefits to both parties involved. For PFAN-Asia and SSG Advisors, the SAIS team represents an extremely capable, highly motivated, and cost-effective team with broad experience from both public and private sectors.

Developing The Business Case For: Solar PV in Cambodia
Work began in earnest in October 2014. The team’s research highlighted two distinct models that appeared particularly interesting in the Cambodian context:

  • Revenue diversified mini-grids, which are mini-grids that serve a combination of commercial and household clients with one or more anchor clients, deployed in geographies that do not currently have access to the grid, and;
  • Custom industrial applications, which includes replacing or augmenting diesel-powered systems with solar components wherever such systems are already in operation. This also often includes displacing fuel usage in backup generators for large industrial customers.

The SAIS team traveled to Cambodia in January 2015 to conduct additional primary market research, including customer surveys, interviews, and other forms of data collection to validate their report. The team is currently reviewing their findings and compiling the data they have collected into the final report, which will be launched later this month.


About the Private Financing Advisory Network-Asia
The U.S. Agency for International Development (USAID) regional Private Financing Advisory Network-Asia program (PFAN-Asia) assists businesses, governments, and others in Asia’s developing countries to mobilize and scale up investments in clean energy. The primary goals of the program are to mobilize at least $1 billion in funds for clean energy investments and avoid or reduce greenhouse gas emissions amounting to at least 40 million tons of carbon dioxide equivalent. PFAN-Asia seeks to identify promising clean energy projects that have the capability of raising private sector financing.

About The Johns Hopkins School of Advanced International Studies (SAIS) IDEV Program
The SAIS International Development (IDEV) Program has been training international development practitioners for leadership roles in policy and practice for over seventy years. IDEV provides rigorous academic training in the economic, political and social dimensions of development, and practical skills to prepare students for the challenges of a career in international development.

Exploring Agribusiness Partnerships in Haiti

SSG was recently in Haiti conducting a Rapid Partnership Appraisal (RPA) in which we assessed the potential to engage agribusinesses in promoting agricultural development and food security. What we found is not just an inability of agricultural producers to supply the country’s roughly 10.32 million people with basic products like rice and beans, but also a lack of food processing, storage, and distribution infrastructure to transform raw foodstuffs into value-added products and transport goods in a time-effective manner. As a result, Haiti imports approximately 50 percent of its food, according to USAID’s Food Assistance Fact Sheet. This dynamic – or lack thereof – raises a chicken-or-the-egg question regarding the best strategy to promote agricultural development and food security in Haiti. Should donors and implementers prioritize the supply side by working to enhance the productivity of Haitian farmers through provision of subsidized inputs and technical assistance? Or, should efforts focus on the demand side by financing processing plants, storage facilities, distribution systems, and roads?

Agricultural Development in the Mountains

Agricultural Development in the Mountains

Of course, the answer is both. Agricultural interventions in Haiti must balance support for smallholder farmers to increase the productivity crops that constitute dietary staples for most Haitians, while also ensuring that Haitian food processors and distributors have sufficient capacity to store these foodstuffs and make sure their products reach hungry consumers. And, in order to be sustainable beyond the period of intervention, this multi-pronged approach to agricultural development also requires novel financial instruments to help smallholder farmers access credit with which to purchase inputs and pay labor for future growing seasons. All of this is a tall order in a country where, as our field research shows, poor roads are known to more than triple transportation time, farmers have long been accustomed to manual sowing and harvesting, and creditors charge high interest rates to smallholder farmers to guard against risk.

This is where SSG Advisors’ expertise in public-private partnerships comes into play. SSG brings robust experience developing linkages at the smallholder farmer level, as demonstrated by our work providing business planning support and helping small-to-medium-scale agribusinesses in Cote d’Ivoire and Burkina Faso access loans from foreign investors. More broadly, SSG’s expertise in convening community-level and private sector actors in addressing development goals, ranging from sustainable fisheries in the Philippines to technology access in Vietnam, enables us to get companies and beneficiaries speaking the same language and collaborating towards mutual benefit.We use our proprietary methodology towards building Sustainable, Transparent Effective Partnerships (STEP), including the Rapid Partnership Appraisal (RPA) data collection and strategic analysis tool, to swiftly and impact fully assess partnership opportunities, convene stakeholders, and implement and manage lasting partnerships.

In the case of Haiti, this type of robust approach will be essential if supply and demand-side actors in the agricultural value chain are to convene around the task of enhancing the country’s food security. Haitian food processors and distributors are likely to require large-scale, large-volume supply in order to compete with low-cost imports, while farmers will need inputs like fertilizers and equipment, as well as training, that they cannot afford independently in order to enhance productivity. Only by getting these two sides of the equation to collaborate through public-private partnerships can Haiti and the intentional community truly move towards promoting food security and a robust agricultural sector.

Empowering Women through Partnerships in Afghanistan

SSG Advisors is pleased to announce that we are part of the winning Tetratech ARD consortium of the new USAID/Afghanistan Promoting Gender Equity in National Priority Programs (PROMOTE) – a flagship US government investment in fostering the advancement of women to decision-making positions in the public, private and non-profit sectors.   SSG will lead Private Sector Engagement and Partnership -building efforts aimed at empowering women leaders in Afghanistan.

“Over the last decade, tremendous strides have been made by Afghan women against overwhelming challenges.  While many obstacles remain, the PROMOTE project will equip Afghan women leaders with the skills and opportunities they need to succeed in business, in government and civil society.  As a woman entrepreneur who was raised in Central Asia, I understand the tremendous importance of creating meaningful leadership opportunities for women in the region.  I am deeply touched by the goals of PROMOTE, and we are absolutely committed to making it a success for the women of Afghanistan,” commented SSG President Nazgul Abdrazakova.

Women at the workplace in Pakistan 

Agricultural Productivity through Collaboration: Broadening the Market for Seed in West Africa

Despite the fact that nearly 65% of the African workforce earns their livelihood through agriculture, the continent as a whole remains a net importer of food. The total area of land under cultivation has risen in recent decades, and yet food security and nutrition metrics have failed to keep pace. West Africa in particular faces severe food insecurity, largely due to the poor yields that all-too-frequently characterize farms in the region.  One particular factor that underlies West Africa’s yield problem is a lack of access to – and lack of demand for – commercially distributed improved and certified seeds.

Recently, SSG Advisors spent a weekend with stakeholders from the USAID/West Africa, the West Africa Seed Program (WASP), the West African Council for Research and Development (CORAF) and the Economic Community of West African States (ECOWAS) validating a strategy to establish an Alliance for the Seed Industry in West Africa (ASIWA), which will help seed producers, farmer groups, agro-dealers, grain buyers and agro processors work collectively in efforts to increase the quality and availability of improved seed varieties across the region. The ASIWA Strategy, developed by SSG, will be the basis for the structure and launch of the alliance over the next 12 months. While focusing on the seed sector, ASIWA’s success will contribute to USAID and ECOWAS efforts to boost staple crop yields, raise farmer incomes, enhance regional staple trade, and improve food security across West Africa.

The concept of utilizing an alliance model to improve farmer incomes is not a new one. In 2005, the USAID-funded West Africa Trade Hub co-founded the African Cashew Alliance with a consortium of public and private industry stakeholders across the region. Since then, the Cashew Alliance has evolved into a foundational industry player, demonstrating that industry alliances can be effective tactics for spurring economic growth in West Africa. A similar West African example can be found in the Global Shea Alliance.  The Cashew Alliance and Global Shea Alliance examples prove that product-based agribusiness alliances can simultaneously offer real value to private sector companies and development stakeholders alike.

The alliance model undoubtedly offers a wide array of success stories across sectors and geographies. However, the Alliance for Seed Industry in West Africa will address a fundamentally different set of challenges than those that are mitigated by other ongoing alliance efforts. Whereas past alliances have served to aggregate and focus existing demand around particular products, ASIWA will need to push past proven alliance models and craft a strategy for popularizing the use of improved seed in the region to grow demand for certified seeds and strengthen a market that is presently characterized by fragmentation, a challenging regulatory environment, and weak levels of cooperation between the public and private sectors. ASIWA’s success will be determined by the degree to which it can to actually generate new demand for improved seed varieties among West African farmers.

Critically, the ASIWA platform will provide a forum in which seed producers, certification agencies, farmers, processors, and end-product buyers can discuss solutions to specific challenges and weaknesses within the West African seed market(s). SSG Advisors is working closely with the West African Council for Agricultural Research and Development to frame and implement the alliance, which will launch a community of practice and host national and regional seed stakeholder forums during its first year. Drawing on SSG’s broad experience with development alliances and their own technical expertise in the West African seed sector, CORAF is equipping ASIWA with industry-leading tools and approaches for seed partnership development.

ECOFISH Project Kicks Off Partnership for Sustainable Blue Swimming Crab Fishing Assessment in the Philippines

On January 30, ECOFISH staff kicked-off a partnership to conduct the first ever species-specific assessment in the Philippines for blue swimming crab (BSC) in the Danajon Reef. The assessment comes as part of a larger partnership among the Philippines Bureau for Fishery and Aquatic Resources (BFAR), industry representative Philippine Association of Crab Processors, Inc. (PACPI), US-based National Fisheries Institute (NFI), and USAID through the ECOFISH project.

BSC

The blue swimming crab is the fourth most important fishery export of the Philippines. An increase in demand has led to unsustainable fishing of the crab, significantly decreasing incomes for fisherfolk who rely on the crab for their livelihoods. Declining trends in volume and crab size can be attributed to the drastic depletion of BSC breeding stocks since the 1990s.

The partnership among BFAR, PACPI, NFI, and USAID is based on common objectives to increase the sustainability of blue swimming crab fishing, specifically through management of the BSC stock and marketing of the commodity.

Utilizing a grassroots-based tool designed to measure fishery stock, the assessment will evaluate the current state of blue swimming crab fisheries in the Danajon Reef hand-in hand with fisherfolk communities and local government units. The approach will employ simply trained, human-focused “barefoot ecologists,” to measure fishery stock at a local level using the “Spawning Potential Ratio” (SPR) method, a new cost-effective technique for generically assessing coastal fish stock and will allow the partnership to effectively address sustainability challenges facing blue swimming crab fisherfolk.

The SPR approach will address the difficulty of tracking BSC stock in a high number of coastal fishing communities – a current gap in capacity to assess and manage small-scale resources leaves government bodies and universities under resourced to assess and manage fishery stocks on a large scale.

The planned assessment comes in the wake of last October’s earthquake in Bohol, which devastated coastal communities, making fishery initiatives such as this all the more salient.

Tech Partnership Improves Fishing Communities in the Philippines

Fisheries and TV White Space Broadband? The linkage between fishing communities in a developing country and a cutting edge Internet technology may seem tenuous to the uninitiated.   However, using SSG’s Sustainable Transparent Effective Partnerships (STEP) methodology, the USAID/Philippines ECOFISH project has created a unique partnership with the Government of the Philippines and Microsoft to use the new TV White Spaces broadband technology to deliver better services to fishing communities in five outlying municipalities in Bohol in the Philippines.

On the surface, the rationale for such a partnership is far from obvious.  However, STEP focuses on uncovering the shared value for the private sector, for development objectives, and for stakeholders.  This approach enables us to identify ‘outside of the box’ opportunities that may not seem obvious at first glance.

In this case, let’s examine the potential intersection of interests among the private sector, stakeholders and the development community:

  • The Private Sector Opportunity. TV White Spaces is a disruptive technology.  It has the potential to deliver broadband levels of connectivity wirelessly over great distances and at extremely low cost – making it a very promising ‘last mile’ solution in developing countries that typically lack the physical infrastructure (ie phone, cable and fiber optic lines).  To date, there have been a small number of pilots of the technology – mostly in Western countries.  What the technology industry needs is a field deployment of the TV White Spaces technology under real world conditions.
  • Stakeholder Needs/Demands: The Government of the Philippines, as part of its Smarter Philippines Initiative has the ambitious goal of providing Internet access to the entire country by 2015.  If effective and economical, TV White Spaces technology has the potential to enable the government to reach even very remote areas.
  • Development Objective: Fishing communities in the Philippines are often remote and cut off from essential government services.  Working together, the Bureau of Fisheries and Aquatic Resources and USAID’s ECOFISH project are seeking to enhance fisherfolk registration and, thereby, improve access to government services.  If outlying fishing communities are connected, it will greatly improve registration and access to government services.

Through STEP, SSG Advisors engaged the partners in a series of facilitated negotiations, which enabled them to see the Shared Value opportunity of a partnership.  Once that value was understood by all parties, our team then worked with the partners to negotiate the terms of their collaboration – resources to be contributed, partner responsibilities, governance and timelines.  With the partnership concept finalized, we then facilitated the development of a memorandum of understanding among the partners.

The result: The TV White Space Supported Fisherfolk Registration in the Danajon Reef Partnership will use TV White Space –unused TV broadcast channels – to establish connectivity in remote areas and facilitate mobile fisherfolk registration in five municipalities in Bohol.  This partnership will significantly increase the ability of municipalities to register fisherfolk in outlying communities and provide improved access to government services.

As a partner, Microsoft seized the chance to demonstrate the power of the new TV White Space Technology in the Philippines – one of Asia’s fastest growing markets – represents a significant business opportunity.  According to Karrie Ilagan, Managing Director, Microsoft Philippines, “TV White Space technology is an example of how untapped resources such as unused television channels can be empowered to improve peoples lives like our fisherfolk with a better registration and convenient registration system.”

The new partnership is also enabling USAID to reach beneficiaries in a way not previously thought possible.  According to USAID Mission Director Gloria Steele, “This groundbreaking initiative demonstrates how win-win solutions for the environment and the business sector can be both profitable for the business sector and sustainable.”

Though the deployment of the White Spaces technology is too soon to make any definitive conclusions, the potential to benefit underserved communities is enormous.  Stay tuned in the months ahead as we provide updates from this cutting edge partnership.

Update: see more about the success of this project here.

Findings from the Field: Food Security Partnerships in Central America

Central America is not usually a region associated with food insecurity.  The region exports large quantities of fresh fruits and vegetables to markets in North America and around the world.  Yet, despite this success, the region’s rural communities face significant food security challenges, particularly in remote areas that are not integrated with markets.  To address these challenges, USAID forged a number of innovative partnerships with supermarket chains, including Wal-Mart, La Colonia and Super Selectos.  These partnerships are meant to improve market opportunities for small-hold farmers, increase their incomes and improve food security for the farmers and dependents.

 

This past year, USAID/Latin America asked SSG Advisors to conduct an analysis of these partnerships with supermarket chains, identify best practices and make recommendations on how they might be improved.  SSG’s team, led by Alberto Abadia, examined USAID supermarket PPPs in four countries: El Salvador, Guatemala, Honduras and Nicaragua.  We interviewed farmers, supermarket chains, cooperatives, governments, NGOs and wholesalers to better understand the value of food security partnerships with supermarkets.   Our analysis identified several key findings:

  • Partnerships with supermarket chains appear to increase small hold farmer income through increased sales volume and improved quality and handling of produce.
  • The supermarket chains are motivated by two factors.  For most, the primary motive is CSR, but there is also a desire to increase the availability, quality and quantity of fresh fruits and vegetables.
  • While these partnerships are effective, their impact may be limited as supermarket chains make up only a portion of sales for small hold farmers with exporters, processors and informal markets making up significant portions of sales.  In many countries, supermarkets are a comparatively small part of the market.
  • In a related point, the most effective PPPs took a ‘whole of eco-system’ approach whereby they not only partnered with supermarkets, but engaged wholesalers, distributors, exporters, processors and local governments.
  • Partnerships need to address country and market-specific issues, while regional collaboration needs to focus on trade, market information and knowledge-sharing.

 

As the findings suggest, there is shared value in collaboration among donors and supermarkets to address food security concerns.  By integrating other elements of the market eco-system, partners can significantly enhance the value proposition for themselves and small holder farmers alike.