|CERES No. 106 - July - August 1985 (FAO Ceres, 1985, 50 p.)|
by Uwe Tietze
Compared with disappointing results many rural credit schemes for lowe-come groups, a recent experience in Orissa, India, relating to bank lending for artisanal fisherfolk, is heartening and instructive. During the period 1983-86, 22 branches of 10 stateowned banks, supported by 15 marine extension centres of the Fisheries Department will discharge credit worth Rs 7 million to 2000 households covering 10 per cent of the state's artisanal marine fisherfolk who account for more than 50 per cent of Orissa's fish production. A mid-term review of the scheme found that elapsed time between loan applications and disbursements averaged only one month, that productive utilization of the loans was almost 100 per cent, and that loan repayments were at a satisfactory 93 per cent rate.
In Orissa, as in other parts of India, growing demand for fish both for domestic consumption and for export has transformed the artisanal fishing sector into a market-oriented econonomy. As a result, a wider variety of artisanal fishing methods is employed during different seasons of the year, requiring more complex credit arrangements. To take advantage of the seasonal abundance of fish for catching as well as for processing and marketing, fishermen needed credit on short notice: a loan of Rs 500 to buy a new Nyalalla net at the beginning of the prawn season in July, or Rs 4 500 for a small kattumaram and a Kavala net for the start of the sardine season, or, again, a modest Rs 250 any time between October and March to help some fisherwoman start a small headload retail business. Fishing families also depended on credit to discharge social and religious obligations such as marriages and festivals, for household expenses during the lean fishing season, and for emergencies.
But although the thrust of India's rural credit programmes had gained momentum since the nation's independence and especially during the 1970s when the number of bank branches and cooperative societies in rural areas rose sharply, a number of factors curtailed their effectiveness in responding to the needs of the artisanal marine fishery. In the absence of satisfactory institutional credit, a system of informal credit evolved to cater for the growing fishing economy. Though characterized by high interest rates and exploitative conditions concerning disposal of fish, often obliging borrowers to sell their catch for a pittance to their creditors, non-institutional credit offered some important advantages well suited to artisanal fishermen's requirements: the absence of complicated application forms and procedures; quick disbursement of loans; and flexibility concerning purposes and conditions of the loan.
The present credit system is plagued by the absence of these three advantages. Its inefficient multi-agency approach, which is destructive to the individual character of the various agencies, results in apathy and delays. Furthermore, interference from politicians and local leaders ensures that criteria other than that of genuine need or potential for productive utilization are applied in sanctioning loans. Consequently loan recipients are neither able nor willing to repay loans nor even to utilize them properly; and banks become reluctant to extend further loans.
Another drawback of the present system: lack of active participation by loanees. They do not approach a bank by their own decision and intention at a time of need. They have to wait until they are selected by a committee. Thereafter, they are called beneficiaries and are expected to be thankful to those responsible for selecting them. Subsequently they regard the loan as a benefit that does not need to be repaid. More-over, a high dose of subsidy makes rural credit programmes resemble a social welfare programme rather than one that meets the test of economic viability.
After studying these shortcomings and constraints, the Bay of Bengal Programme (BOBP) artisanal fisheries credit project adopted the following principles:
1. Far fewer institutions involved and active role of borrower. Fisherfolk, on their own intention and at any time they choose, either individually or in groups, can approach any of the 22 bank branches involved. The role of the Fisheries Extension Officer is limited to technical appraisal of the loan application.
2. Short time span between loan application and disbursement through quick and technically sound appraisal and processing of loan applications.
3. Genuine multi-purpose character of scheme. A comprehensive artisanal marine fisheries scheme has been worked out, which includes 20 different types of craft, gear, and supporting activities. The scheme gives technical specifications of each craft and gear with details of life span, period, area, mode of operation and sharing system. It lists capital costs, expected earnings and repayment schedules, which take into account lean and peak seasons in fishing. The scale of finance of the scheme ranges from Rs 215 for head-load retail fish marketing to Rs 8000 for a large traditional displacement boat.
4. Proper monitoring and follow-up. Loan applications at branch level and loan utilization and repayment are evaluated three times a year. Field visits are undertaken every fortnight by branch field officers or managers and fisheries extension officers to collect outstanding loan repayment installments and to discuss villagers' questions.
5. Encouragement of institutional savings, to link savings and credit. Work preparatory to actual credit disbursement included executing costs and earnings analysis, devising a credit flow strategy, developing credit application formats, completing demographic and technical documentation on Orissa's fisheries, and publishing and distributing a manual on "Inclusion of small-scale marine fisheries in short-term and term lending at coastal bank branches in Orissa Cooperation was established between bank managers/field officers and fisheries extension officers. Like- wise, horizontal cooperation was initiated between higher-level bank and fisheries hierarchies.
Training was provided to both groups in such areas as fisheries economy, fishing methods and technology, social organization and culture of traditional fisherfolk communities, identification of areas and borrowers, and appraisal and processing of loan applications. Workshops and field trips were held for potential borrowers and representatives of the fisherfolk.
The first positive results of the credit scheme, after 600 households have been covered and Rs 2 million disbursed are: short time span between loan application and positive result (one month), a satisfactory repayment rate (93 per cent), and an almost 100 per cent utilization of the assets.
What the credit scheme means for needy fisherfolk is exemplified by Charana. A fisherman of Avana in Orissa's Balasore district, Charana worked on contract on a Patia boat that fished for Hilsa, receiving a fixed wage of Rs 10 per day. He wanted to own a net of his own, particularly since he felt that there was scope for operating more nets and because idle labour was available in the village, and took a loan of Rs 5000 under the BOBP credit scheme to buy a net. He managed to recruit a crew of three and to hire a boat, for which he pays Rs 200 a month. After deducting all his expenses, including the repayment of the loan, he earns an average of Rs 550 per month, besides providing some income to his three labourers.
On average, one rupee invested in the credit scheme creates more than Rs 3 of earnings (net value added) in a year-a surprisingly high figure.
During a review of branch-level scrutiny of loan applications, which also investigated rejections/cancellations, it was found that most frequently it was the fisherfolk themselves who cancelled or withdrew their applications. Reason: the loan did not come in time. The fisherfolk took loans from a money-lender, despite the much higher interest, so that they did not lose a valuable fishing day. They considered a higher interest to be economically less disadvantageous than loss of a few days' catch, once the season had begun.
To those fisherfolk who really intend to utilize a loan, timely availability of the needed asset (craft or gear), which means a good bank service, is far more important than the amount of interest or subsidy.