Microfinance in Fisheries
By Suchitra Upare | Suchitra is an MSU Associate in charge of the ICICI/UNDP Fishery Value Chain project in Orissa.

Despite MFI penetration into rural areas, a large number of informal credit markets still operate widely within these areas. Fishers are one of the most vulnerable targets and often enter into exploitative relationships with money lenders that inhibit them from investing in production, establishing micro-enterprises, or scaling up their activities. One of the most frequently observed money lending schemes is operated by intermediaries. Under this system, fishers borrow money from an intermediary to purchase or repair a boat or to stock up on food and supplies for long fishing voyages. They are then required to sell the catch to the intermediary at 20 to 30% less than the market price instead of selling it directly on the open market. This acts as both principal and interest repayment. Fishers often receive credit from the same intermediaries in case of emergency to cover the expenses of marriage, to repair damaged equipment, or to purchase a new boat. In such situations, borrowers pay interest rates from 60 to 100% per annum. It is common to find fishers who have been unable to break out of the debt cycle and who continue to borrow in order to repay debt. Another practice is one where a boat-less fisherman borrows a boat from a rich person with several boats. The boat owner decides whether to rent the boat out or not after reviewing the expertise and the past record of the fisherman. Under the terms and conditions of acquiring the boat, the fisherman is required to provide a share (65-75%) from the catch to the boat owner.

One of the factors accentuating the money lender dependency is that there is often intense competition amongst fishers. Fishers are hunters and gatherers competing for a common yet easily depleted resource. While there are plenty of fish in deep waters, small scale fishermen are unable to reach that distance since the boats they use only allow them to go a limited distance from the shoreline. As a result, people in fishing communities, do not network as much to assist each other in times of need and, in the absence of these safety nets, fishers increasingly turn to moneylenders. Having no access to formal channels of credit or collateral to do so only aggravates this situation.

Small scale fishermen, traders and fish processors face the same problem as any other person from poor and marginalized communities: they require small frequent loans and are unable to match collateral requirements of formal financial institutions. Additionally, formal financial institutions do not have the required outreach in terms of branch networks in the areas where small scale fishers live. Apart from business-related loans, there is also a big demand for consumption loans within fishing communities. In short, fishing communities are a good potential target customer segment for MFIs; given that credit products can be developed to service the specific business needs of these communities, there is ample scope for MFIs involvement.

In the state of Orissa there are over 100,000 fishermen (both marine and inland) clustered into approximately 4,000 fishing villages. Note that women also play an active role in this sector and that they are typically engaged in post harvest technology within the fisheries sector. Once the fish lands on shore, it is the women's responsibility to process and market the catch brought by her husband or relative. There are around 170,000 fisherwomen involved directly in post harvest activities associated with fisheries.

The CMF is currently undertaking a project in six coastal districts of Orissa to address the gaps in the provision of credit access to fishers and is helping fishers to develop skills and knowledge through tie ups with training institutions, consisting mainly of government entities. More importantly, such institutions would be able to guide them with respect to quality, grade, and size requirements of the fish variety that is demanded in national markets. Moreover, the CMF is seeking to improve the market linkages for fishers either by directly linking producers to markets that will offer a better price or by supporting the development of cold chain infrastructure. The main areas of focus have been:

     1.Boats and nets finance (inland and marine fisheries)
     2.Fish culture in small (sometimes leased) ponds of up to 1 ha water spread area (WSA)
     3.Shrimp culture in ponds (up to 1 ha WSA)
     4.Market linkages for low cost value added product (dry fish)

In Puri, the CMF is also working with KAS Foundation and the Gajlaxmi Primary Marine Fisherwomen's Co-operative Society (GPMFCS). GPMFCS is an exclusive fisherwomen's cooperative, registered under the government's STEP scheme (Support for Training and Empowerment of Women Program).The women are engaged in fish vending. The fish is either sold in fresh form or undergoes a curing process whereby fish are dipped in salt and left to dry before being sold in nearby wholesale market. The women have been trained for processing and packaging of hygienically dried fish on elevated platforms. The elevated wooden racks serve as means to dry the fish in a hygienic way since most women were drying the fish on the sand before that and got a lower price due to poor quality. After conducting an assessment of needs for the vendors, CMF approached KAS Foundation to find out whether they would be interested in developing a customized product that would address the requirements of this community. KAS responded by distributing loans of Rs. 5,000 /per member to a cluster of 85 women (grouped into 5 Self Help Groups consisting of 17 members each). The loan amount, which is larger than the general loans that KAS disburses (3,000-4,000 Rs. / member), is now large enough for the women to use as working capital. Clients have to repay over a period of 24 months. This is the first step toward livelihood finance that KAS Foundation has engaged in. As a result of this initiative fisherwomen are now able to purchase more supplies of fish which they can process in a better manner and sell at a higher price (20-30% increase). The next step is to identify a better market for their produce. Already, GPMFCS has been approached by a trader based in Assam who has contacted the group to purchase a monthly requirement of at least 10 tons/month of hygienically dried fish for 7 months/year at a price that is 60-140% higher than what they used to get.