Ralph V. Jones
Fisheries Division
Ministry of Agriculture
in cooperation with the Barbados Development Bank
1. THE FISHING INDUSTRY
Institutional credit has always played an important role in the development of the Barbados fishing industry, facilitating a number of major changes over the last thirty years, mainly in the introduction of motorized fishing boats.
The 1950s witnessed the introduction of a new type of fishing boat varying in length from 7 to 9 m and powered by inboard marine diesel engines with 10 to 44 hp. The fleet of these boats grew to 500 units. From the mid-1960s to 1970s the introduction of a 9 to 11 m fishing craft for day fishing, equipped with engines of 80 to 120 hp, led to further improvement.
In 1978 fishing boats with insulated fish holds (locally refered to as iceboats) which are capable of staying out at sea for several day were introduced. These craft vary in length from 12 to 18 m and are powered by inboard marine diesel engines with 80 to 225 hp. They are equipped with insulated fish holds. At present, there are 78 of these units in operation and they remain at sea from five to ten days. These vessels have revolutionized the fishing industry for the following reasons:
increased capacity;
extended fishing range;
the use of ice at sea, and
increased catches.
The many factors which have promoted the development of fisheries include the competition from neighbouring countries as well as from countries outside the region competing on the same fishing grounds. The growing demand for seafood brought about by a marked change in domestic eating habits and increased tourism has played a significant role in the government's effort to reduce the high level of marine imports through the provision of facilities for fisherfolk to own and operate fishing boats and fish processing facilities.
The Economic Planning Unit of the Ministry of Agriculture, Food and Fisheries estimated the fish catch for 1987 at 9 800 tonnes, which is 6.5 per cent higher than the 9 200 tonnes recorded in 1986. During 1987, iceboats landed 7 200 tonnes or 73.5 per cent of total fish output. This increase was due to the expansion of the iceboat fleet and their improved capabilities.
In 1987, the number of fishing vessels increased by 10 per cent to 745. There were 70 registered iceboats and these vessels accounted for about 10 per cent of the fishing fleet, as compared with 3.3 per cent in 1983.
| Percentage change | ||||||||
|---|---|---|---|---|---|---|---|---|
| Type | 1983 | 1984 | 1985 | 1986 | 1987 | 1985 over 1984 | 1986 over 1985 | 1987 over 1986 |
| Moses or Dories | 200 | 200 | 200 | 177 | 225 | 0.0 | (11.5) | 27.1 |
| Day-launches | 390 | 400 | 400 | 442 | 450 | 0.0 | 10.5 | 1.8 |
| Iceboats | 20 | 37 | 51 | 61 | 70 | 37.8 | 19.6 | 14.8 |
| TOTAL | 610 | 637 | 651 | 680 | 745 | - | - | - |
Source: Economic Planning Unit - Ministry of Agriculture, Food and Fisheries
The current cost of a fully equipped dayboat with a length of 9.5 to 11 m ranges from BDS$ 40 0001 to about BDS$ 75 000. The average annual cost of insurance is about BDS$ 3 000 to BDS$ 5 000 with the owner paying the first BDS$ 500 of any claim made in excess of this sum.
The weekly running costs of a dayboat vary between BDS$ 300 and BDS$ 500. Annual maintenance expenditure on hull, machinery, gear and equipment varies between BDS$ 3 000 and BDS$ 5 000 depending on the size of the boat. Dayboats can depreciate between BDS$ 3 000 and BDS$ 5 000 per annum over a fifteen-year period.
Larger iceboats vary in cost from about BDS$ 120 000 for the fully equipped converted dayboat to between BDS$ 200 000 and BDS$ 250 000 for an originally constructed wood or fibreglass iceboat. The average annual cost of insurance is about BDS$ 7 000 to BDS$ 8 000 with the owner paying the first BDS$ 2 000 of any claim made in excess of this sum.
The iceboats usually make fishing trips of five to ten days (depending on their size and fish-hold capacity); the cost of each fishing trip can vary from BDS$1 200 to BDS$1 500 for fuel, ice and rations.
Iceboats can depreciate from BDS$ 8 000 to BDS$ 10 000 per annum over a twenty-five-year period.
2. THE BARBADOS DEVELOPMENT BANK
The Barbados Development Bank (BDB) is a statutory corporation which
began operations in 1969. One of its main functions is the
development and promotion of the various sectors of the Barbadian
economy, providing financing to industry, tourism, small
manufacturing, small business and fisheries.
1 BDS$ = Barbados Dollar. BDS$ 2 = US$ 1.
The BDB is a major lender of medium- and long-term funds. In addition to providing funding, BDB is also involved in assisting projects to obtain the supportive services (technical, managerial and accounting) which are essential for the successful operation of businesses. As a banking institution, the BDB ensures that projects financed are not only of a developmental nature but are also viable and able to service their debts.
In general, the BDB contributes 60 per cent of the total project cost, while 40 per cent is contributed by the client. However, the BDB's contribution varies depending, among other things, on the financial soundness of projects and their contribution to economic development.
The BDB's interest rate has tended to stabilize over the years. During 1986 the rate was reduced from 13 per cent to its current level of 11.5 per cent for most projects.
2.1. Procedure for loan application/appraisal of fisheries projects
The general procedure for loan application/appraisal for fisheries projects is the following. The client is interviewed and an application form completed. An appraisal is made of the project, with special attention paid to its financial and economic viability, security of loan and seaworthiness of vessel.
The main form of security is a bill of sale on the vessel; if this is inadequate some supplementary form of security is required. Marine surveys of vessels and checks on safety equipment are undertaken.
The existing procedures and method of appraisal are straightforward and have not hindered or deterred borrowers over the years. The BDB's contribution to fisheries projects has often been higher than 60 per cent of the total project cost.
2.2. BDB's lending to the fishing industry
BDB funding to the fishing industry began during the 1971/72 financial year with the approval of a loan valued at $ 10 000 The following year no loans were made but thereafter lending took place unabated until 31 March 1979 when the portfolio was transferred to the Barbados National Bank for a period of four years (1978/79 to 1981/82).
The BDB resumed lending to fisheries during the 1982/83 financial year. During the period 1983/84 to 1987/88 total loans made per annum were in the region of $ 1 million to $ 1.6 million. However, as shown in table 2 below, loans approved to fisheries plummeted to $ 270 600 during 1988/89, a decrease of 76.4 per cent from the previous year's total.
The industry has faced problems of high cost of vessels, intense competition among operators and low catches. These factors are responsible for the low number of requests for funding from the industry during 1988/89.
| Approvals | Loan Portfolio | ||||
|---|---|---|---|---|---|
| YEARS | No. of loans | $ Value of loans | $ Value of disbursements | No. of loans | $ Value of loans |
| 1971–72 | 1 | 10 000 | - | - | - |
| 1972–73 | - | - | - | - | - |
| 1973–74 | 2 | 11 900 | 12 100 | 3 | 11 675 |
| 1974–75 | 4 | 147 600 | 76 400 | 5 | 84 496 |
| 1975–76 | 6 | 135 000 | 20 000 | 6 | 98 612 |
| 1976–77 | 15 | 251 920 | 93 246 | 14 | 186 532 |
| 1977–78 | 28 | 392 530 | 239 711 | 30 | 398 641 |
| 1978–79* | - | - | - | - | - |
| 1979–80* | - | - | - | - | - |
| 1980–81* | - | - | - | - | - |
| 1981–82* | - | - | - | - | - |
| 1982–83 | 5 | 360 000 | 245 089 | 158 | 2 754 557 |
| 1983–84 | 76 | 164 100 | 1 264 384 | 172 | 3 844 773 |
| 1984–85 | 53 | 972 100 | 838 577 | 209 | 4 123 260 |
| 1985–86 | 46 | 1 662 700 | 1 253 908 | 242 | 5 004 018 |
| 1986–87 | 28 | 1 036 185 | 1 521 705 | 248 | 5 220 782 |
| 1987–88 | 23 | 1 146 031 | 956 693 | 271 | 5 762 762 |
| 1988–89 | 10 | 270 600 | 713 248 | 247 | 5 824 611 |
* Portfolio transferred to the Barbados National Bank (BNB)
During the 1975/76 financial year the BDB made its first loan to a fishing project to finance a vessel with refrigeration facilities. However, it was not until 1982/83 that BDB began to finance iceboats. As of to date, approximately 56 of the estimated 80 iceboat vessels currently operating within the industry have been financed by BDB. Of the 56 vessels funded by the BDB, 25 (46 per cent) have been converted to iceboats through the installation of ice box facilities. Funding to iceboats declined by 82.4 per cent from $ 1 095 331 in 1987/88 to $ 192 600 for the 1988/89 period (see table 3).
| Iceboats | Dayboats | |||||
|---|---|---|---|---|---|---|
| YEARS | No. of loans | $ Value | Jobs created | No. of loans | $ Value | Jobs created |
| 1971–72 | - | - | - | 1 | 10 000 | - |
| 1972–73 | - | - | - | - | - | - |
| 1973–74 | - | - | - | 2 | 11 900 | - |
| 1974–75 | - | - | - | 4 | 147 600 | - |
| 1975–76 | 1 | 60 000 | - | 5 | 75 000 | - |
| 1976–77 | - | - | - | 10 | 201 920 | 10 |
| 1977–78 | - | - | - | 28 | 392 030 | 50 |
| 1978–79* | - | - | - | - | - | - |
| 1979–80* | - | - | - | - | - | - |
| 1980–81* | - | - | - | - | - | - |
| 1981–82* | - | - | - | - | - | - |
| 1982–83 | 2 | 305 000 | 2 | 3 | 55 000 | 15 |
| 1983–84 | 8 | 576 100 | 18 | 62 | 1 038 100 | 55 |
| 1984–85 | 13 | 587 700 | 9 | 30 | 384 400 | 17 |
| 1985–86 | 17 | 1 174 100 | 30 | 25 | 488 600 | 31 |
| 1986–87 | 10 | 692 400 | 7 | 12 | 343 785 | 15 |
| 1987–88 | 15 | 1 095 331 | 31 | 5 | 89 500 | 4 |
| 1988–89 | 4 | 192 600 | 3 | 6 | 77 900 | 4 |
| TOTAL | 70 | 4 683 131 | 100 | 193 | 3 315 735 | 201 |
* Portfolio transferred to the Barbados National Bank
| No. of loans | 263 | No. of iceboats | 31 |
| $ value | 7 998 866 | No. of dayboats upgraded to iceboats | 25 |
| Jobs created | 301 | ||
| No. of dayboats | 136 | Total no. of iceboats | 56 |
During 1982/83 the BDB financed two of the first fibreglass vessels to be locally made. Their local manufacture seems to be the reason for the relatively high prices of vessels in that year. By 1984 the average cost of fibreglass iceboats and the total project cost had decreased substantially. Despite increases in later years, the cost of vessels and the average loan size in 1987/88 were still below the 1982/83 costs (see table 4).
| Year | Av. loan size $ | Average annual % increase/decrease | Av. project cost $ | Average annual % increase/decrease | BDB's loan as % of project cost |
|---|---|---|---|---|---|
| 1982–83 | 152 500 | - | 228 800 | - | 68 |
| 1983–84 | 105 000 | -31.1 | 130 625 | -41.4 | 80 |
| 1984–85 | 94 000 | -15.2 | 129 000 | -1.2 | 73 |
| 1985–86 | 102 129 | 8.6 | 149 833 | 16.1 | 68 |
| 1986–87 | 109 200 | 6.9 | 174 286 | 16.3 | 63 |
| 1987–88 | 131 000 | 20.0 | 201 020 | 15.3 | 65 |
| 1988–89 | - | - | - | - | - |
| Year | Av. loan size $ | Average annual % increase/decrease | Av. project cost $ | Average annual % increase/decrease | BDB's loan as % of project cost |
|---|---|---|---|---|---|
| 1982–83 | - | - | - | - | - |
| 1983–84 | 22 600 | - | 25 655 | - | 88 |
| 1984–85 | 14 757 | -34.7 | 23 783 | -7.3 | 62 |
| 1985–86 | 39 560 | 168.1 | 50 666 | 113.0 | 78 |
| 1986–87 | 43 120 | 9.0 | 43 326 | -14.5 | 100 |
| 1987–88 | 44 750 | 3.8 | 57 860 | 25.1 | 77 |
| 1988–89 | - | - | - | - | - |
2.3. Purpose of BDB funds
BDB funding to the fishing industry during the 1970s was mainly for the construction and equipping of inshore motor vessels. As larger vessels were constructed, funds were also used to purchase more powerful engines and safety equipment.
Loans to the industry over the past five years have been mainly for the:
replacement of engines;
financing of fishing gear and safety equipment;
conversion of dayboats to iceboats through the installation of icebox facilities, and
construction and purchase of fibreglass iceboats.
During the 1988/89 financial year, no loans were approved for the construction or purchase of iceboats or the upgrading of dayboats.
2.4. Disbursements to the industry
Disbursements to the industry during the 1970s did not appear to keep abreast of approvals. Total disbursements during this period amounted to $ 441 457 or 49.1 per cent of total approvals ($ 898 450). The main factors contributing to the delays in disbursements during the period were as follows:
the time lapse between the approval of loans and finalising of legal requirements;
delays in the construction of vessels, and
the difficulty experienced by borrowers in raising their equity contribution.
An acceleration in the implementation procedure mainly due to an intensification of staff efforts during the 1980s resulted in an improved disbursement rate. Between the period 1982/83 and 1988/89 total disbursements were $ 6.8 million or 95.8 per cent of the $ 7.1 million approved. It should be noted that a small percentage of disbursements recorded during this period relates to loans which were approved by BNB but not fully disbursed at the time the portfolio was returned to BDB (see table 2).
2.5. Repayments
Repayments on fishing loans were not satisfactory during the 1970s. Of particular concern were fishing enterprises involving inshore motor vessels. The repayment record of these operations was so unsatisfactory that the BDB suspended funding to this activity during 1974/75.
The suspension of funding was lifted the following year mainly due to numerous requests made during the 1974/75 period. However, the BDB adopted better security requirements for new loans, and encouraged the construction of larger vessels which were capable of travelling farther off-shore and obtaining larger catches in an effort to boost revenue.
The poor repayment performance of fishing projects has continued during the 1980s, despite the operation of larger and better-equipped vessels and adoption of methods to stimulate repayments. One such method adopted involved the ballooning of payments - the requirement to repay higher amounts during the fishing season when more revenue is generated.
Repayments for the period 1983/84 to 1987/88 showed marked fluctuations, while there was a decrease of 68.2 per cent in repayments in 1987/88 from the previous year. Repayments for the 1988/89 period and following years are anticipated to be low in view of the disappointing status of the fishing portfolio (see table 5).
| Years | No. of new iceboats units | $ value | Units upgraded to iceboats | $ value |
|---|---|---|---|---|
| 1982–83 | 2 | 305 000 | - | - |
| 1983–84 | 6 * | 615 800 | 2 | 45 200 |
| 1984–85 | 2 | 188 000 | 8 | 119 300 |
| 1985–86 | 9 ** | 878 900 | 5 | 197 800 |
| 1986–87 | 4 | 436 800 | 4 | 179 000 |
| 1987–88 | 6 *** | 580 000 | 6 | 257 800 |
| 1988–89 | - | - | - | - |
| TOTAL | 29 | 3 004 500 | 25 | 799 100 |
Note: * Includes two wooden iceboats
** Includes two wooden iceboats
*** Includes three wooden iceboats/funding forcompletion of two fibreglass boats.
| Year | Repayments |
|---|---|
| 1983–84 | 174 168 |
| 1984–85 | 560 090 |
| 1985–86 | 375 150 |
| 1986–87 | 1 304 941 |
| 1987–88 | 414 723 |
2.6. Portfolio
The BDB's fishing portfolio grew from $ 10 000 in 1971/72 to $ 398 000 when it was transferred to the Barbados National Bank.
During 1982/83, when the BDB resumed lending to fisheries, the portfolio was valued at $ 2.8 million. The portfolio expanded each year to reach $ 5.8 million during 1988/89 (see table 2).
The BDB's fishing portfolio is not performing satisfactorily. Analysis of the portfolio (table 6) as of 31 March 1989 revealed that only 15.5 per cent (37 loans) of total loans to the industry can be considered satisfactory, as these represent loans that are two months or less in arrears of interest and/or principal. On the other hand, some 65 per cent (155 loans) fall into the BDB's credit classification category referred to as non-performing loans. This category represents loans that are twelve months or more in arrears of interest and/or principal. The principal balance of these loans was $3.3 million with outstanding arrears of interest and principal of $682 945 and $1.3 million respectively.
Analysis of loans in the non-performing classification revealed that some 75 per cent (122 loans) were approved for financing dayboat operations. While the greater number of loans within this category went to dayboat operations, the loans to iceboats account for the greater portion of arrears within this category (61 per cent and 50.3 per cent respectively).
| Principal balance $ | Interest due $ | Principal due $ | Credit* rating | No. loans | % of loans |
|---|---|---|---|---|---|
| - | - | - | M0 | - | - |
| 986 077 | 8 792 | 31 927 | M1 | 37 | 15.5 |
| 310 917 | 4 898 | 27 842 | M2 | 15 | 6.3 |
| 331 313 | 1 753 | 19 610 | WA | 8 | 3.4 |
| 447 676 | 13 888 | 45 763 | RE | 12 | 5.0 |
| 428 041 | 29 343 | 62 340 | CR | 12 | 5.0 |
| 3 232 030 | 658 770 | 1 271 180 | DF | 142 | 59.4 |
| 74 850 | 24 175 | 64 643 | LG | 13 | 5.4 |
| 5 810 904 | 741 609 | 1 523 305 | 239 | 100.0 |
| Principal balance $ | Interest due $ | Principal due $ | Credit* rating | No. loans | % of loans |
|---|---|---|---|---|---|
| - | - | - | M0 | - | - |
| 144 372 | 1 619 | 9 185 | M1 | 21 | 13.0 |
| 53 955 | 624 | 6 249 | M2 | 6 | 3.7 |
| 1 606 | 47 | 1 606 | WA | 3 | 1.9 |
| 23 585 | 226 | 6 785 | RE | 4 | 2.5 |
| 80 197 | 5 632 | 12 542 | CR | 6 | 3.7 |
| 1 106 354 | 241 505 | 598 943 | DF | 109 | 67.2 |
| 74 850 | 24 175 | 64 643 | LG | 13 | 8.0 |
| 1 484 919 | 273 828 | 699 953 | 162 | 100.0 |
* See Overleaf for key to credit rating
| Principal balance $ | Interest due $ | Principal due $ | Credit* rating | No. loans | % of loans |
|---|---|---|---|---|---|
| - | - | - | M0 | - | - |
| 841 705 | 7 163 | 22 742 | M1 | 16 | 20.8 |
| 256 962 | 4 274 | 21 593 | M2 | 9 | 11.7 |
| 329 707 | 1 706 | 18 004 | WA | 5 | 6.5 |
| 424 091 | 13 662 | 38 978 | RE | 8 | 10.4 |
| 347 844 | 23 711 | 49 798 | CR | 6 | 7.8 |
| 2 125 676 | 417 265 | 672 237 | DF | 33 | 42.8 |
| - | - | - | LG | - | - |
| 4 325 985 | 467 781 | 823 352 | 77 | 100.0 |
Key: M0 - Loans with interest or principal less than 1 month inarrears
M1 - Loans with interest or principal 1–2 month in arrears
M2 - Loans with interest or principal 3 months in arrears
WA - Loans with interest or principal 4–5 months in arrears
RE - Loans with interest or principal 6–7 months in arrears
CR - Loans with interest or principal less than 8–11 monthsin arrears
DF - Loans with interest and/or principal 12 months or overin arrears
LG - Loans subject to legal process for recovery of amountsdue to the Bank.
3. CONCLUSION
The BDB has made significant contributions to the growth of the local fishing industry in Barbados. Its developmental emphasis was seen early in its lending to the industry, when it encouraged and made funds available for fishermen to purchase larger and better-equipped vessels.
The BDB has remained at the forefront of development through financing some of the first iceboats locally constructed. The introduction of iceboats is one of the major developments to have taken place within the fishing industry to date.
The BDB's involvement within the industry continues to be essential particularly in the light of escalating costs of iceboat vessels and the high cost of safety equipment and insurance.
A recent development within the industry is the reportedly lucrative activity of longlining. There are already a few longlining vessels within the local fleet and the BDB has received inquiries concerning this activity. As interest and confidence in longlining increases, the BDB will be required to contribute to its development. The capital outlay for a longlining operation is reported to be between $ 500 000 and $ 600 000.
The local fishing industry still faces chronic problems of poor distribution of produce, inadequate processing facilities and price instability. Recently the industry has also been experiencing poor catches. The commencement of operations of a new fishing port during 1989 is anticipated to bring much relief to the industry.
Notwithstanding the problems and difficulties facing the local industry, based on the reasonable repayment record of some fishing projects, it does appear that the repayment patterns of more of BDB's clients can be improved. One way in which this can be done is through the appointment of an officer whose duty would entail closer monitoring of projects and direct collection of funds on a regular basis, particularly during the fishing season.
