The Sea Green Blog

Financial Inclusion and the aquaculture industry in Indonesia:

The need for holistic end-to-end digital solutions

Sea Green End to End solution
1.7 billion adults remain unbanked across emerging economies and in South East Asia, this figure is around 438 million individuals (73% of adults). Financial exclusion for MSMEs in Indonesia has a fairly similar outlook, with only 12% of the estimated 58 million MSMEs in the country holding any formal access to lines of credit. Add to this, financial literacy rates of 38% in Indonesia and tackling this huge financial inclusion gap appears unfathomable to development actors and the financial service sector combined. Despite this, the Global Findex report 2017 found that 515 million adults worldwide opened an account at a financial institution between 2014 and 2017, meaning that there are now 69% of adults worldwide with a financial account.
Existing barriers to ensuring financial inclusion have been accessibility, affordability and awareness, but the rapid economic growth of ASEAN countries, with Indonesia as a prime example - 5% GDP growth in 2019 alone and a drop in national poverty headcount from 19.1% in 2000 to 9.8% in 2019 – has suggested there is cause for optimism. Combined with the exponential growth of smartphone penetration across the region – 663 million potential new mobile internet users across Asia-Pacific by 2025 and an estimated 44% of account owners in developing countries already using digital payments – and there appears to be an enormous opportunity for expanding financial services for all.
There are still large-scale challenges facing the expansion of financial services for vulnerable populations though, in the form of regulation, supply chain inequality, digital infrastructure and community power relations. One such example of these barriers in practice is highlighted throughout the seaweed sector in Indonesia. 85% of the global population engaged in the fisheries and aquaculture sector live in Asia and in Indonesia there are an estimated 250,000 households (1 million smallholder farmers) in the country deriving their income from seaweed production.
Sea Green are shining a light on the imbalanced seaweed supply chain in Indonesia, where outmoded practices and fractured supply chain management exacerbate the financial exclusion of many farmers up and down the country. Farmers are largely undervalued in the supply chain, with poor job security and little to no control over processing and quality management. Transaction activities with buyers are also only arranged at short notice, within three to six month periods, meaning that prices are volatile (particularly during periods of economic hardship e.g Covid-19) and farmers are forced into short-term non-binding contracts, leaving farmers with no financial certainty to invest in their future. Compounding this apparent inequality is also a lack of compatible financing schemes and innovation from financial institutions to facilitate the economic growth of seaweed farmers.
Enabling and empowering the collective economic growth of seaweed farmers under these circumstances is challenging, but Sea Green and partner organizations throughout the region are tackling this challenge head on by promoting ethical working practices for farmers and transitioning current systems from biased and exploitative to distributive and restorative. Developing a digital ecosystem capable of disrupting and rebalancing the value chain for not only seaweed farmers, but also across the agricultural sector in the developing world, is a fundamental element in these collective efforts and has the potential to deliver end-to-end holistic solutions.
Sea Green partner non-profit organization, Micra, for instance, specialize in financial training, management skills and strengthening livelihoods for MFIs, MSMEs and smallholders and is a great example of value-added solutions that go above and beyond the remit of traditional financial service offerings. Micra’s educational work here is central to ensuring the necessary enabling environment for encouraging economic growth, whilst also creating demand for financial products that are capable of safeguarding economic resilience for farmers and their families.
A strong financing capacity underpinning the financial ecosystem is also essential in supporting the seaweed business, starting from pre-harvest financing for the farmers up to warehouse and trade finance. FinTech platforms help to ensure this inclusivity for farmers, by using smart algorithms, machine learning and data analysis to deliver these needs-based financial products that are easily accessible and affordable, with cost reductions of up to 80% observed through the provision of digital banking for consumers and a potential revenue increase of 45% for microfinance institutions.
The link between the social impact and the provision of FinTech services has never been stronger and in line with the UN’s ambitious Decade of Action, there is an urgent need to accelerate efforts to close the finance gap through holistic end-to-end sustainable solutions.


Paddy Tarbuck