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Box 6: Microfinance in fisheries and aquaculture"Microfinance can be defined as the provision of a broad range of financial services, including loans, savings and insurance, to segments of the population who may lack access to traditional financial services. Most microfinance programmes aim to promote and protect income and empower these population segments. More specifically, the development objectives of microfinance for poor fishing communities are to enable fishing households to increase their income, smooth consumption, develop microenterprises, manage risks better and enhance their earning capacities, thus reducing their economic and social vulnerability. Because women constitute a significant proportion of poor fishing households, microfinance can also serve as an effective tool to assist and empower women in fishing communities. The demand for financial services in the fisheries sector is diverse and requires differential products and services. Microfinance is just one means in the continuum of financial services provision to cater to that demand. Characterized by small loans, microfinance has inherent limitations in terms of financing the capital investment needs of the fishing industry. It should therefore supplement, not replace, traditional lending products from mainstream financial institutions, as the latter are still required to finance medium- and large-scale investment needs and priorities necessary for the growth and development of fisheries. Microfinance programmes can be a powerful tool also in poverty alleviation. In the case of fishing and fish-farming communities, the alleviation of poverty is an important precondition for their participation in efforts to rehabilitate and conserve the aquatic environment and fisheries resources. The mechanics of microfinance operations basically involve three levels:
The successful operation of these levels is premised on the twin principles of client discipline (where borrowers take responsibility for their decisions and agreements made with the lending institution) and institutional discipline (where the lending institution offers and provides products and services that are characterized by quality, efficiency and commitment). A core principle that has been proved by successful microfinance programmes is that the poor have the capacity to repay loans, pay the real cost of loans and generate savings." Source:
FAO "The State of World Fisheries and Aquaculture, 2004" |
