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ndonesia is among 31 countries in the world that are unlikely to meet global targets for reducing malnutrition by 2025. Over 36 percent of children under the age of 5 are stunted and suffer from chronic undernutrition. At the same time, obesity rates are rising among the urban population.

According to a global study on obesity published in 2014 by medical journal The Lancet, over 21 percent of men and 30 percent of women over age 20 in the country are overweight or obese. This dual burden of malnutrition, which encompasses undernutrition and overnutrition (overweight and obesity) places immense stress on public health systems and endangers the development of the population, especially as obesity and lifestyle-related diseases are expected to rise.

Indonesia'€™s low-income communities are struggling to afford safe and nutritious food and continue to suffer the devastating impacts of nutrient deficiencies, which lead to high infant mortality, stunting and wasting and delayed development and impaired cognition. Concurrently, rising urbanization and per capita income in cities have caused a shift to an increased consumption of processed foods and '€œfast food'€.

Wider reverberating effects may be felt by national and provincial economies in terms of lost productivity and higher business costs, and ultimately, a hit on economic momentum.

Nutrition practitioners who participated in a workshop on nutrition finance organized by the Milken Institute in 2015 acknowledged that the enormity of the challenge requires scaling up existing nutrition interventions. Governments, NGOs, philanthropic organizations and private companies have invested in nutrition-specific interventions such as promotion of breastfeeding, improved sanitation, access to fresh and healthy foods and public health campaigns to promote healthier lifestyles.

In spite of this, funding for nutrition interventions in Indonesia has seen declining overseas development assistance and institutional funding, since progressing from the low-income category to middle-income. The increased prevalence of obesity weighs heavily on healthcare costs and is compounded by the prevalence of smoking and a foreseeable rise in lifestyle-related diseases such as cardiovascular disease, diabetes and cancer, which will make up over 87 percent of deaths in Indonesia by 2030 according to the World Health Organization.

Figures on the amount of additional funding that Indonesia requires for nutrition interventions are unavailable due to inadequate documentation of existing spending. Among others, additional injections can be expected to fund: data collection and analysis of local and regional contexts to better-inform nutrition investments and advocacy programs; and clinical trials to substantiate investments in food and nutrition, which includes research of plant-based proteins and alternative foods.

Given the acute funding gap and limited funding sources, the Milken Institute Asia Center is examining ways to engage new forms of capital that could broaden the pool of investors willing to support high-impact nutrition programs. Innovative financing options such as volume guarantees, the social impact bond model, and the small and medium enterprises (SMEs) or impact investment fund may be applicable.

A volume guarantee ensures purchase of nutrition products at a pre-determined quantity and price to encourage investment in production. As profit margins for food companies are generally low, profits diminish further when selling to low-income communities.

The guarantee, usually from a donor organization such as the Bill and Melinda Gates Foundation, can help local producers manage business risks and generate more attractive profits. This could, in turn, appeal to investors and provide growth capital to reach more markets. The challenge of applying a volume guarantee lies in accurately mapping market demand and identifying suitable interventions and marketplaces that will benefit from this type of funding incentive.

Social impact bonds can be useful to reach new investors and new sources of funding, but tend to be less popular in Asia as these new instruments are perceived to be extremely risky. The model is dependent on data that articulates a link between a nutrition intervention and its cost-savings to a government or donor.

Unfortunately, insufficient data exists to prove a direct causal relationship to justify the structure of a social impact bond. A reduction in stunting rates, for instance, may be a result of several interventions such as improved nutrition, education and sanitation.

Impact investment or SME funds are seeded by institutional investors, development finance institutions and banks to provide growth capital for social enterprises or companies with both a financial and social mission. A nutrition-focused investment fund could help to catalyze investment into nutrition projects that run for a minimum of five years or typically longer and generate below market or near market returns for investors.

Currently, SME funds have yet to be effectively targeted towards nutrition partly due to the lack of investable companies, which are either too small or not adequately profitable. To create a more robust pipeline, an incubator or acceleration program could be created to provide technical assistance to entrepreneurs and existing companies working in nutrition.

Malnutrition threatens the development of individuals and limits their means to a secure and stable livelihood. The debilitating effects may be lifelong and puts a strain on national health budgets and labor productivity. Increasing the momentum to address malnutrition will largely depend on the availability of additional funding, which goes beyond the budgets of traditional funders such as governments and donor agencies.

As philanthropic activity grows in Indonesia and other parts of Asia, local and regional foundations and philanthropists could provide a much needed boost to the nutrition agenda. A concerted effort to demonstrate the inter-linkages of nutrition with child and maternal health, education, food security, gender and health promotion, will also be helpful to achieve greater alignment with investors, donor agencies and governments.
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Belinda Chng is associate director of innovative finance and program development at the Milken Institute Asia Center and Caitlin MacLean is director of innovative finance at the Milken Institute. This piece is adapted from the forthcoming Milken Institute'€™s Financial Innovation Lab report on '€œInnovative Finance to Address Nutrition in Southeast Asia'€.