Micro-Finance Opportunities and Access to Credit Facilities. | The State of the Fisheries Resources of Lake Victoria and their Management: Proceedings of the Regional Stakeholders Conference, Entebbe, 24-25 February 2005.

The fisheries of the Lake Victoria basin are dominated by capture fisheries from the lake itself. Efforts are however being made to develop aquaculture in the lake basin, and the potential for cage culture in the main lake is being explored. Both capture fisheries and aquaculture were originally subsistence and required low-cost inputs. The situation has changed. Capture fisheries have become commercialized requiring heavy investments in fishing gear, boats, outboard engines, refrigerated vehicles, landing facilities, ice, and factories. Similarly, it has been recognised that for aquaculture to be profitable, it has to be commercialized. This requires investments in pond construction, procurement of cage materials, seed production and purchase feed production and purchase of drugs. The businesses in the fishing industry range from subsistence to Small-to-Medium Enterprises (SMEs). The present over-capacity in the fisheries is partly a result of the fishers' lack of investment culture and access to appropriate credit facilities. For the industry to optimize its operations, it is essential to have a well-developed financing mechanism that addresses the needs of the various categories of operators. This paper highlights credit opportunities available to the fishers and other fishery related SMEs, and provides a basis for policy makers to appreciate the measures required to improve credit access. The main sources of credit in the fishery industry are banks, micro-finance institutions and in the case of Lake Victoria fisheries other stakeholders such as fish factory owners. The conditions for providing credit varies between these institutions. Micro-finance institutions (MFIs) operating among fisher communities in the lake basin include AGAFTA, UFISACCO, FAULU, UWFT, PRIDE and OSIENALA. In comparison to commercial banks, these institutions are the more appropriate sources for lending to SMEs in fisheries because of the size of business and mode of operations. Besides, these micro-finance institutions tend to be sector-owned and less profit-motivated. The type of services offered include loans, accounts operations, and safe custody. The loans in this category target small borrowers without complex requirements and collateral. Purposes for the loans tend to cover costs for nets, boats, engine repairs and fuel for fishers; boats, containers, ice, final and working capital for fish traders, and, insulated trucks/vans, ice and working capital for fish agents. However, borrowing for consumption is also common among the target categories in the sector. Accessing credit among fisher communities poses a number of challenges. Some MFIs include a compulsory saving of 25% to 30% of the loan before disbursement. Others require collateral security including household items, short loan repayment periods of up to only 12 months with weekly repayment schedules. These conditions are cumbersome, carrying hidden high interest rates and risky because of the nature of fishing and fish farming thus leading to concealment of genuine reasons and requirements by borrowers. In turn, MFIs face problems ranging from high operational costs, bad debts, migrations of fishers, low saving culture to diversion of loans and concealment of information on assets. In order to ensure adequate supplies, fish processing establishment provide credit to agents (insulated vans, ice, fuel, capital and guarantees to commercial banks), Fish Traders (insulated boats, fishing gear, ice fuel and working capital) and to fishers and boat builders. The main concerns of processors with respect to credit include lack of absorption capacity.

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