Credit and microfinance
Women in Bangladesh learning about a credit programme
The fishery industry regularly invests in the modernization or replacement of fishing craft and gear, fish aggregating devices, in navigational and safety equipment, equipment for on-board preservation and handling of catch, on-shore facilities, fish processing plants and facilities, purchase of raw materials, fish transportation and marketing facilities as well as in promotion of fishery products.
A part of the investment funds comes from savings within the industry or from informal sources of credit such as fish traders and processors. These sources, however, particularly in developing countries, are not sufficient to meet increasing investment needs. Firstly, informal sources are limited regarding the type of credit they supply as they generally meet short-term credit needs rather than medium- and long-term financial requirements. Secondly, their terms of finance are often disadvantageous for fishers as they charge high rates of interest and credit is frequently linked to unfavourable terms of trade.
Investment problems in fisheries
The ability to generate enough savings within the sector is seriously hampered by the fact that in fisheries, income patterns are unpredictable and rarely match the needs for investments. Moreover, low profitability and poverty, particularly in the case of small-scale fisheries in many developing countries, makes it difficult if not impossible to meet investment requirements originating from structural changes in the industry and processes of adaptation to these changes.
For example, at present and in the near future, even small vessels and their equipment will have to be upgraded to meet more stringent rules for the purpose of safety at sea. At the same time, environmental controls are being formulated to reduce the effect of gas emissions from diesel engines. Meeting these requirements could be costly and when incorporated in fishery regulations, fishing boat owners will be forced to comply or go out of business. Without appropriate credit facilities, it is for the small-scale fishery sector, particularly in developing countries, to adapt itself to the changes required by new regulations.
More importantly, the introduction of responsible fishing practices and the implementation of measures for the rehabilitation and conservation of fisheries resources and the coastal environment requires further credit support to facilitate related investments such as for the diversification of fishing effort away from over and heavily exploited resources to less exploited ones; in support of occupational shift from capture fisheries to aquaculture or to occupations outside the fisheries sector; for generation of self-employment opportunities for women in fishing communities and for the promotion of value-added processing and marketing with the objective to make better use of scarce or presently underutilized resources.
Without appropriate institutional credit arrangements, an important link is missing in the fishery industry and the optimum utilization and allocation of human and marine resources and capital in the fishery industry is hampered. Credit programmes need to be designed so that they fulfil the criteria of timeliness, simplicity and flexibility/demand orientation and meet the actual needs of the fishery industry. They also need to be financially viable and sustainable as to encourage the growth of economically and financially viable fishery enterprises and not to contribute to over-capitalization of fisheries and resulting over-exploitation of fisheries resources.
Credit and savings in the form of microfinance also play an important role in poverty alleviation and in efforts in support of livelihood diversification and food security in fishing and fish farming communities. The United Nations, in its General Assembly Resolution 52/194, passed on 18 December 1997, noted in particular that in many countries of the world microfinance programmes have succeeded in generating productive self-employment by providing access to capital for people living in poverty, as well as increased participation in the mainstream economic and political process of society.
Microfinance is defined as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance. services. Most microfinance programmes are generally aimed to promote and protect income and empower specific sectors of the population.
More specifically, the development objectives of microfinance programmes for poor fishing communities are to enable fishing communities to increase income, smoothen consumption, develop micro-enterprises, manage risks better and enhance earning capacities, thus reducing economic and social vulnerability. Because women constitute a significant proportion of poor fishing households, microfinance programmes should also serve as an effective tool to assist and empower women in fishing communities.