Ships ahoy in Indonesia!

08-02-2023

Written by Guido Guerra, Team Lead Planning Monitoring Evaluation and Learning department

Since 2018, Agriterra in Indonesia has been working with the Ministry of Cooperatives and Small-Medium Enterprise (MoCSME) to strengthen farmer cooperatives in the country. The Ministry has the goal to increase fishermen income by an average of 10% through 350 farmers’ organisations until 2024.

In 2022, as a part of this effort, the Ministry selected 10 cooperatives to participate in a pilot project aiming at developing a working model to support and scale up cooperatives to reach industrial scale with professional management and good governance systems in place. Agriterra was invited to support this pilot project. Therefore, in mid-June 2022, the local cooperative advisor, accompanied by the Ministry staff, performed a scoping review of Koperasi Mino Saroyo.

Fishery cooperative

Mino Saroyo is a fishery cooperative based in Cilacap, Central Java, with more than 8,000 farmer members, to whom it provides fuel and water and facilitates fish auctions. Although the cooperative has been active since 1942, it still only trades and does not process.

During the scoping exercise, the local cooperative advisor found out that the cooperative had a clear ambition (goal) to build a cold chain fish processing factory for local and export markets and purchase ships. But, although this goal was realistic given its financial capability, it lacked a clear business plan.

Thus, Agriterra proposed the cooperative and the Ministry to perform an in-depth analysis which was carried out a week later. This assessment showed the potential to create an integrated fish processing business, including fish catching, cold chain processing and selling, with a capacity of 200 Tn of fish per month, defining two critical action points:
(1) develop a solid business plan
(2) increase member commitment and investment in the cooperative, both of which were to be supported by Agriterra.

Business plan

Immediately, Agriterra´s team of local cooperative advisors in collaboration with Mino Saroyo´s management, developed a business plan with several projected financial scenarios; a pessimistic, a moderate and an optimistic one. The moderate scenario showed that by purchasing one ship the cooperative could double its income within four years. Besides, Mino Saroyo could invite members to invest in this opportunity and foster internal capitalisation, increase its equity and decrease its debt ratio. In addition, based on these business scenarios, Mino Saroyo developed four incremental steps to escalate its business model: a local retail market, a premium market, a national market and the step towards export.

These findings and projections were shared with the Ministry, who in turn granted the cooperative an IDR 10 billion soft loan (approx. EUR 600,000) at the end of July 2022 via its financing agency LPMUKP. As a result, at the end of July 2022, part of this loan was used by Mino Saroyo to purchase two fishing ships (21 m long, 5 m wide, 30 Tn weight) from a local supplier, for a total value of IDR 7.5 billion (IDR 3.75 billion per unit). With these ships, which are able to carry up to 20 Tn of fish per trip, the cooperative will be able to capture and supply enough fish to supply its projected processing facility and reach economies of scale.