Can Tanzanian Small-Scale Fisheries Benefit from Financial Institutions?

By Dr. Kassim Mhina

Key points

  • Small-scale fishing communities are among the poorest due to a history of lack of support and failure to appreciate the importance of fisheries
  • Most of what we refer to as small-scale fishers are crew members and get a share of the catch
  • An insufficient supply of credit is an important constraint against increased production, value addition, and livelihood improvement
  • Challenges in obtaining affordable financing in the form of start-ups, investments, or working capital do exist
  • Loans can be made available to small-scale fishermen through community-based organizations, cooperatives, and small and medium-sized enterprises (SMEs) that are capitalizing the sustainable business in fishery value chains
  • To attain this goal private companies must be involved to link small-scale fishers and the financial institutions

More than 90 percent of small-scale fishers and aquaculture farmers live in developing countries, and they account for approximately 85 percent of total capture fisheries production globally. The value created by small-scale fisheries seems little but big value. It is for this reason the World Food Organization (FAO) has declared the year 2022 the International Year of Artisanal Fisheries and Aquaculture.

Let me provide some facts and statistics for the benefit of new readers of my series of publications on Tanzanian small-scale fisheries and just for the purpose of understanding this subsector. The small-scale fisheries subsector provides food and employment while contributing 2.6 percent of the national economy’s GDP. According to Ministry of Livestock and Fisheries statistics, the country has 238,053 fishermen, with 149,018 in fresh waters and 89,035 in marine waters, employing over 4,000,000 people in jobs such as boat builders, fish processors, and net and engine repairers.

Despite having abundant fisheries resources, there are only a few people in Tanzania involved in the small-scale fisheries value chain, including fishers, processors, boat builders, traders, and so on. An enabling environment for sustainable harvesting of marine resources must be created for successful blue economies.

Contrary to popular belief, the small-scale fishery subsector is generally profitable and vital to the economic and social well-being of many coastal communities. Nonetheless, earnings from fishing are insufficient to keep households above the poverty line due to insufficient support from the community and the government. Financial empowerment and economic resilience of vulnerable; marginalized small-scale fishing communities are critical in gaining access to credit and contributing productively to the blue economy.

Small fishermen have historically had difficulty obtaining credit services. The vast majority cannot provide collateral and thus cannot obtain credit from traditional financial institutions. As a result, fishers faced not only lower earnings but also job and food insecurity; as well as increased vulnerability to economic shocks.

Like any other business, working capital is essential for obtaining fuel, equipment, fishing gear and other expenses. Inadequate of these resources makes them vulnerable to exploitation by bad money lenders as they cannot afford these expenses. Because of their debt, these informal moneylenders frequently retain control over the fishers’ right to sell their catch and provide credit at high-interest rates. As a result, fishermen and their families are frequently trapped in a vicious cycle of poverty and debt. The author believes that if the fishers can organize themselves in groups under their cooperatives; they can identify suitable fibre boat builders and process the loan using their assets and government structures to guarantee their loans. The company has recently made up a very good link between fishers and financial institutions.

Today the government has made up a very good link between fishers and financial institutions. However, most people are unable to find this information. There is an African proverb that says, ‘if you want to hide a banknote put it in the book’ This literally means there is no culture of reading among Africans. Besides the increasing rate of illiteracy, yet search for knowledge among fishers and farmers is quite limited. Coming back to our main topic, financial institutions can help small-scale fishers to build their savings through various wealth management option plans.

Loans to small-scale fishers can be delivered in a variety of ways; including community-based organizations, cooperatives, and small and medium enterprises in Tanzania (SMEs). These models are typically accepted by the majority of stakeholders. How does this financing model work? Typically, registered groups operating a fishing business, such as fish cooperatives, SMEs, or any other formal self-help group, identify a suitable financial institution that meets the needs of the business. This is because each institution has its own lending policy. Some may, for example, require the cooperative to secure the loan, which is then distributed to individual cooperative groups. In this case, only the cooperative is required to provide the loan guarantee. While other institutions require both the individual and the group to accept responsibility for the loan, some are hesitant to lend to these communities due to a lack of experience or a lack of understanding of Tanzanian small-scale fisheries.

This financing model has the advantage of increasing household income, resulting in greater food security. The ability of the community to accumulate assets improves when a financial institution is involved. Another surprising topic is the encouragement of saving behaviour. The fishermen believe that the sea has no limits and that they have no need to save money because they can fish anytime they wish to.

 Giving credits to small-scale fishers encourages them to participate in sustainable fisheries management and conservation; as well as the rehabilitation of coastal and aquatic environments. Finally, this financing model improves not only small-scale fishers’ access to market and trade information, but also their managerial and technical skills.

Finally, private companies, particularly boat manufacturers, traders, and processors, must be involved in bridging the gap between small-scale fishers and financial institutions. This can be accomplished by identifying opportunities in the small-scale fisheries value chain and ways in which they can assist financial institutions in reducing the risk of loan defaults.

The Author is Dr Kassim Mhina, Head of Consulting, Dar es salaam Merchant Group


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