Bali cashew factory changes villagers' fortunes

If your mental image of Bali is of exotic beaches and luxury resorts, Ban village on the slope of the island's majestic Mount Agung feels a world apart from them.

Most of its 9,000 villagers do not have high school diplomas. Many of the women did not finish primary school. Electricity only came to the village two years ago and power cuts are still frequent.

Rice and many of the other foods that the people here eat do not grow on its dry land. But cashews do.

The villagers started growing cashews in the 1990s after discovering that the soil was perfect for the plant, and there was a high demand for the commodity.

But as one of the farmers, Nyoman Kantun, says, it is only in the past two years that cashew nuts seem to have brought a real hope of prosperity to the village.

"I used to sell raw cashews to traders, and they paid us about 9,000 rupiah (75 cents; 48p) per kilogram. But now I'm getting 14,000 rupiah per kilogram and I can pay more attention to better ways to grow the cashews," he says.

East Bali Cashews factory, Indonesia's first large-scale cashew-processing facility, is the new buyer that made the difference.

Its founders launched the social enterprise in 2012 after seeing that most Indonesian cashew nuts were exported raw to be processed in Vietnam and India, bringing very little benefit to villages such as Ban.

Before the factory was opened, the villagers had formed co-operatives to attempt to process the nuts and make more out of the commodity, but they had largely failed.

By contrast, East Bali Cashews is on track to exceed $1m (£625,000) in revenues this year, and is aiming to double that in 2015.

One of the founders, American entrepreneur Aaron Fishman, says the difference is that the company had access to capital that was needed to bring in modern technology.

A big break came through US private equity giant Kohlberg Kravis Roberts (KKR), which was looking for a social enterprise to help as part of its corporate responsibility programme.

With KKR assistance, East Bali Cashews drew up a business plan that allowed it to attract bigger investors with even loftier ambitions than its original owners had envisioned. The KKR-vetted strategy helped the company raise more than $2m.

"It paved the road for us to grow from six machines to now we're going to 40 machines," Mr Fishman says.

"It put us on the right track, to focus on what kind of capital we need, what kind of debt, how to structure it. That's something I had no experience with previously, so it's very important."

East Bali Cashews now employs about 300 staff to crack, pry, peel, roast and bag the cashews.

Most of them are women who have never had salaried jobs before. They make between 1.2 to 1.5 million rupiah ($100-$125; £62.50-£78) a month, around the minimum level for a decent living standard set by the Bali government.

It is far from a life with modern comforts, but a huge step up in a village that previously gave its residents no job prospects.

Wayan Suni and her husband moved back to the village upon hearing about the factory, after working odd jobs in the city. She is now employed as a pryer and her husband a driver.

"Without this job, we can only farm in this village, and we would not have made enough for our family," Ms Wayan says. "Now I can afford to buy more food, celebrate holidays and send our kids to school."

Ms Wayan's second child goes to the company's pre-school, the first early childhood learning centre in the area.

When I went to visit, I saw a dozen four to five-year-olds singing and counting in Indonesian and English - an improbable skill at such a young age, given none of the generation before them are able to.

Rezal Kusumaatmadja, one of East Bali Cashews' original owners, believes in the power of social enterprises - businesses that aim to make a profit and give back to the communities they serve.

In fact, "social enterprise" has been dubbed the coolest phrase in universities in Indonesia.

Recent graduates have earned international recognition for coming up with ways to provide safe drinking water in remote coastal areas, to connect farmers to digital information about agriculture, and many other useful services.

But few have been able to flourish like East Bali Cashews because of a lack of expertise and access to capital.

There are many more villages like Ban that could benefit from strong social enterprises and Mr Fishman is determined to reach those places.

"By bringing the factory here to a very difficult place to work, a very small village with bad roads, limited electricity and no water, what we're trying to do is to create a prototype that can be replicated throughout Eastern Indonesia," he says.

"We want to build processing centres everywhere there are cashews being grown, using this technology and system."