Fisheries

South Indian Federation of Fishermen Societies Micro Finance Programme 1. Evolution of the credit programme The credit programme has evolved over the years with many changes due to external and internal compulsions. The following is a brief outline of the history of the programme. a) Marianad Model: Linking marketing and loan repayment In the early seventies, the Marianad Society (the first society of the SIFFS network) pioneered the concept of daily recovery from the fish sales of members for bank loan repayment. Since the members were selling the fish through the society managed auction system on the beach, and got paid for the fish by the society office, it was easy to make source deduction for bank loan repayment. A 10% deduction of the fish sales value became the norm for bank loan repayment. In addition, a 2-3% compulsory savings was also deducted for the benefit of the member, who could then fall back upon it during the lean season. This integration of credit, marketing and savings at the village level became the hallmark of the “Marianad model” which became the basis for the subsequent societies organised by voluntary organisations that were working with the fishermen. This idea remains the basis of all the 100 odd fishermen societies functioning in the SIFFS network today. b) 1970s : Society-Bank direct dealings In the 70s, the federation concept had not been evolved and the few primary societies that functioned developed direct dealings with the banks. Once the banks saw the functioning of the system, they were happy to lend to society members at the recommendation of the society. Long used to fishermen, who disappear after taking a loan, the banks were happy at the availability of a village institution through which they got a reliable link to the fishermen and achieve their “priority sector” targets. The loans were really small at this stage (Rs.1000-3000), and no security was required. c) Early & mid 1980s : Federation as facilitator The formation of SIFFS in December 1980, and subsequently District Federations in 1985 and 1986, led to the federation becoming an important actor in the credit programme. Mainly, the task was to help in interfacing with the banks. The federation was especially involved in taking up loan proposals with the higher levels of the banking hierarchy where proposals from branches took time to get approved. The federation was mainly a facilitator. At times the federation become an agency for recommending the loan as the regional office of the bank felt more confident dealing with a federation than a village society. c) Late 80s and early 90s : Federation as guarantor A major change in the fishing sector of Trivandrum and Kerala was the rapid motorization of fishing craft in the mid-80s. This led to substantial increases in investment in artisanal fishing. The individual loan requirements were earlier below Rs.10,000 and hence did not require a collateral security. However, the new requirements were over Rs.25,000 and hence could not be given without collateral. Since fishermen do not have much landed assets, this became a major problem. Therefore the societies and the District federations had to give the organisations’ assets as collateral and obtain loans. The federation’s role shifted from one of a facilitator to that of a guarantor. d) Revolving funds at district level In view of the increasing difficulties in obtaining bank loans as the number of members increased and the inability to give adequate collateral forced the district federations to develop their own small revolving funds based on grants from donor agencies. While these funds are small and inadequate, they at least give some cushion for the federation to deal with the credit problem. However, some federations do not use the revolving funds in a business-like manner and use them to provide soft loans. e) Entry of SIFFS : new bulk loan concept The post liberalisation period has seen the commercial banks become even more conservative in sanctioning rural loans. But new concepts have emerged wherein the banking sector works as a “wholesaler”, and NGOs and other intermediary organisations act as “retailers” of rural credit. The SHG concept has also taken roots. However, the district federations were finding it increasingly difficult to obtain bank loans and the membership growth suffered in the early 90s. This lead to the issue getting highlighted at the SIFFS level. SIFFS, with its professional management and greater contacts, was considered a better bet in tapping bulk loans from financial institutions. SIFFS also felt that there was a need to streamline the credit programme, which had become central for the health of the entire network and felt that it should apply its professional skills in putting the credit programme on a sound footing. Just when SIFFS was seriously considering ways and means of entering the credit sector, the micro-credit programme (phase-I) was launched by SIDBI, and provided a great opportunity. SIFFS was successful in obtaining a loan of 14.7 lakhs in 1995 from SIDBI and make a breakthrough in its credit programme. Subsequently, SIFFS obtained a second loan of Rs.55 lakhs in 1998 from SIDBI. 2. Existing channels of credit for members The SIFFS network is composed of fishermen societies operating in highly diverse conditions over a 1000-km coastline. Moreover each district federation has its own distinct history and style of functioning. Hence a single centralised credit system run by SIFFS cannot cope with the diverse needs. SIFFS therefore sees its credit programme as one additional channel/source of credit flow to the members rather than as something aimed at replacing the existing sources/channels. The following are the various sources at present. Table3: Channels for institutional credit available to society members |Source |Description |Quantum |Purpose |Terms | |Village Society|From accumulated |Rs.1,000-3,000 |Mainly for emergencies like|Normally interest free; to be | | |funds of society and|normally; exceptional |loss of net, engine repair,|recovered from fish sales with | | |member savings |societies give |illness, etc; for new |considerable variation in | | | |10,000-35,000 |equipment in some societies|periodicity | |Bank loans |Given to members by |5,000-10,000 for non |Purchase of fishing |4% for small loans under DIR; | | |banks on the basis |motorised units; |equipment (mostly for |12-14% for other loans; three year | | |of guarantee of |25,000-40,000 for |replacement) |repayment period; society deducts | | |society/federation |motorised units | |10% from daily sales for repayment | |Federa-tion |From federation’s |Same as a bank loan |Purchase of fishing |Interest varies from Federation to | |loans |revolving funds for | |equipment (mostly for |federation: some give soft loans at| | |credit | |replacement) |6%, others at14-15%; other | | | | | |repayment terms similar to bank | |SIFFS loan |From SIDBI bulk loan|Same as bank loans |Fishing equipment |14% to fishermen, from which 2% | | |and some own funds | |Ice boxes. |given to federations as service | | | | |capital for fish vending |charges for their work; 3 year | | | | |women |period; loan recovery through | | | | |Small businesses for |society at 10% of catch value plus | | | | |fisherwomen |lump sums whenever repayment | | | | | |through fish sales is poor. | As per estimates taken from the three established federations (Kanyakumari, Trivandrum and Quilon) during the last three years (1995-95 to 1997-98), the total credit flow to members of societies was Rs.5.46 crores, of which 43% was from the societies themselves, 35% was from local banks, 12% from the federation funds and 9% from SIFFS. However, the actual credit needs and the extent to which they are being met is a different story. It is estimated that only about a half of the actual production credit needs of the members are being met by the societies, federations, banks and SIFFS put together. This problem is reflected in the members using local moneylenders to supplement the credit from institutional sources, taking loans at 36% and above per annum. Moreover, members are using their fishing equipment beyond the economic life and this is affecting their incomes also. SIFFS credit programme: the objectives The overall objectives of the credit programme through the societies can be summed up as releasing the fishermen from the clutches of the moneylenders and merchants, and in turn to improve fishermen incomes. However, the intervention of SIFFS at present has some other specific objectives. The following are the main objectives of the SIFFS credit programme. • To close the credit gap that exists due to the inability of other channels of institutional credit to cater to the needs of the members. • To remain an additional channel rather than to eliminate existing channels of institutional credit to members. • To use the SIFFS credit programme to introduce professionalism in the credit programmes of the district federations and societies, by example and through training and other forms of support. • To improve the credit worthiness and absorption capacity of the societies and members by introduction of new concepts and methods in selection, monitoring, etc. • To give a boost to the expansion of the SIFFS co-operatives and their membership which is stagnating due to difficulties in accessing credit for members. • To use credit as an instrument for fisheries management to the extent possible, supporting appropriate technologies and discouraging the finance of inappropriate technologies. • To support fisherwomen groups, who have historical links to SIFFS, to have access to credit for their fish vending activities and also to promote alternate employment among fisherfolk, especially women and youth. 3. Lines of credit operated by SIFFS The loans given by SIFFS can be categorised in different ways according to purpose, size, sex of beneficiaries, and group/individual loans. The following table gives details. Table 4: Details of different types of loans given by SIFFS* |S.No. |Purpose of loan |Purpose-category |Benefici-aries |Loan amount |Group or |Loan per | | | | | |(Rs.) |individual |head | |1. |Purchase of fishing equipment|Production |men |25,000-40,000 |Group |6,250-10,000| | |(motorised unit) | | | | | | |2. |Purchase of fishing equipment|Production |men |5,000-10,000 |Individual |5,000-10,000| | |(non motorised) | | | | | | |3. |Purchase/ installation of ice|Post harvest |Men/ women |5,000-35,000 |Individual/ group |5,000-10,000| | |boxes | | | | | | |4. |Construction of insulated |Post harvest |men |25,000-40,000 |Group |5,000-10,000| | |fish holds | | | | | | |5. |Purchase/ installation of |Production |Men |10,000-25,000 |Individual/ group |5,000-10,000| | |navigational and safety | | | | | | | |equipment | | | | | | |6. |Working capital for fish |Post harvest |women |1,000-10,000 |Individual |1,000-10,000| | |vending and curing | | | | | | |7. |Alternate employment (small |Alternate |women |10,000-20,000 |Group |5,000 | | |businesses other than fish |employment | | | | | | |vending) | | | | | | It is important to note that the loans to fishermen for purchase of fishing equipment on motorised units are shown as a group loan. In artisanal fishing around 4-5 fishermen got as regular crew on board a fishing boat and share the income according to certain traditional sharing systems. The crew is often made of family members and close relatives. Formally ownership is with the male head of the household, but need not be treated as individual ownership as the “owner’s share” is meant to be used for maintenance, replacement, and for loan repayments. Hence SIFFS considers loans to the motorised units as group loans even though the records are maintained in the names of individual fishermen. A word about the alternate employment loans to women is necessary. While in many instances fisherwomen are involved in fish vending and fish curing (drying/salting), many others are unemployed and wish to earn an income. Hence SIFFS is encouraging women to take up alternate employment through small business loans. So far the loans have been given to women’s organisations in Quilon which have organised businesses in small groups. The various aspects of the loan scheme given above (e.g. quantum of finance) are as per current norms. SIFFS does not consider these parameters rigid and will keep making changes in tune with the emerging needs. 4. Loans : Terms and conditions Certain loans are considered term loans and are given a three-year repayment period, while others are considered short-term loans and given just a 12-month period for repayment. Term loans : These are essentially for purchase of fishing equipment, both motorised and non motorised. The repayment period is three years, which is the period within which the equipment will still be in good condition and bring good revenue. After three years, the nets get damaged, the motor needs replacement and the boat will need major repairs. Some of the loans for alternate employment are also given as term loans. Short term loans : Generally the loans for post-harvest activities are given as short term loans for a 12-18 month period as these can be repaid within that period without much difficulty. The loans for alternate employment are also given as short-term loans as they are mainly for working capital needs and for small investments. The loans for navigational equipment and safety devices is also given for a 12-month period as the amount involved is very low in comparison with the total investment in the fishing units concerned. Margin money : In general, loans to fishermen cover only part of the equipment cost and they are expected to contribute the balance themselves. One can look at the share of the loan for the particular equipment to be purchased as well as the share of the loan in the total investment in the fishing unit. The following table gives some examples. Table5: Loan amount vs. cost of fishing units |Item |District |Cost |Cost of full |Loan amount |Loan as % of |Loan as % of | | | | |unit* | |item cost |unit cost | |Out Board Motor-10 hp |Trivandrum |57,000 |1,75,000 |35,000 |61% |20% | |Plywood vallam |Trivandrum |60,000 |1,75,000 |35,000 |58% |20% | |Kattumaram (motorised)|Kanya-kumari |10,000 |1,00,000 |6,000 |60% |10% | |Kattumaram+1 net (non |Trivandrum |15,000 |40,000 |7,500 |50% |19% | |motorised) | | | | | | | |OBM-8 hp |Quilon |55,000 |1,50,000 |40,000 |73% |30% | *Full unit means craft and nets (and motors, if it is a motorised unit) From the examples it should be clear that the cost of the fishing unit varies from area to area due to differences in configuration. However, the loan amount is normally around 60% of the cost of the equipment being purchased and around 20% of the value of the full unit. The fisherman has to contribute the extra 40% for purchasing the equipment, which in most cases would be supplied by SIFFS or the member federation. It is a fact that the current loan amounts given for the different equipment are inadequate and members have to sometimes borrow from private sources to make up the shortfall. However, given the current scarcity of institutional credit, SIFFS has been unable to hike up the loan amount for fishing equipment. Interest : The SIDBI loan was availed at 9% interest p.a. and is being passed on to the district federations at 12%. In turn the loans are given to members at 14% by the federations. The societies do not normally take any additional interest as they get service charges of 3% from fish marketing and that covers all the society overheads. The own funds of SIFFS that are there in the credit programme are also lent at the same rate of interest, as SIFFS prefers not to have a dual system. 5. Institutional arrangements, procedures, rules, etc. With SIFFS being a three tier co-operative organisation, all the three tiers of the organisation come into full play for implementing the SIFFS credit programme. The system of fishermen loans being handled by societies and district federation continues with only an additional level being added. The following describes the process by which SIFFS loans are disbursed. Loan disbursement procedure (fishermen loans) • Whenever a SIDBI loan instalment is due, based on the loan amount available, SIFFS initiates a dialogue with the district federations and assesses their immediate loan requirements. As loan amounts have always been less than the demand, a “rationing” process takes place with the SIFFS executives working out a formula to share the available loan amount between federations. The formula takes into account the needs of each federation as well as the loan repayment performance till then. • The District federations in turn get their member societies to propose suitable candidates for the SIDBI loan. The managing committees of the local societies then look at the pending request for loans and send a list of members needing loans to the District Federation. The list from the societies is then scrutinised using certain eligibility conditions set by SIFFS. After taking into account the urgency of the member’s loan requirement and the overall “quota” fixed by SIFFS, the District Federation then finalises its loan list and forwards it to SIFFS. • SIFFS also scrutinises the list sent by member federations and checks whether it is in conformity with the SIFFS criteria for eligibility. At times, the SIFFS Credit Manager does a field visit before the list is approved. If needed, further negotiations are done with the federation, and the loans are disbursed. • Even though the loan is routed through the district federations and the societies, SIFFS ensures that it has a direct connection with the beneficiary. This is through a legal agreement between SIFFS and the fisherman with the societies and federation as guarantors. A briefing session is held for fishermen before loan disbursement so that they are aware of the terms and conditions of the loans as well as the agencies involved. • Around 90% of the production loans are meant for boats or motors, and SIFFS and the member federations supply both these items. While SIFFS is an importer of Out Board Motors (OBMs) as well as manufacturer of boats, some of the District federations also manufacture boats. Hence, in many instances, the fisherman does not get the loan as cash. He is provided with the item on the payment of his margin money. Eligibility criteria (fishermen) The loans for fishing equipment purchase are relatively large, even though the loan per head is not large. Moreover, fishing itself is a risky operation with high level of variations in income among fishermen undertaking similar operations with similar equipment. Hence SIFFS has an elaborate criteria for selection of beneficiaries. SIFFS criteria is at two levels. One level is that of the fishermen and the other level is that of the society. As far as the fisherman is concerned, the following criteria are used : • Is he in immediate need of equipment' Does he have the repayment capacity' • Is his past repayment record good' To answer the repayment capacity question, the sales figures for member for the previous one year is taken from society records. Certain minimum annual sales have been fixed for different loan amounts to be eligible for a SIFFS loan. For example, an annual fish sales of R.1.5 lakhs has been fixed for a fishermen in Trivandrum to be eligible for a Rs.35,000 loan. As far as the society is concerned, the general viability of the society and its past performance in collecting dues from members is analysed. The criteria are not rigidly applied but used as guidelines for selection as past performance is not always a good indicator of future success in fishing. Loan disbursement (women’s loans) It is important to understand that the women’s groups are not directly members of SIFFS but have historical links with SIFFS or its member federations. Hence the loans to women are routed through the district federations. The women’s loans are handled in a simpler manner as the loan amounts are smaller and there are more beneficiaries. The beneficiary selection is left entirely to the women’s groups and the District federation forwards the list they provide, to SIFFS. Initially, a few loans are given on trial basis, and if found successful, further loans are given. SIFFS goes by the general performance of the women’s group and does not have an elaborate process for loan approval. Loan recovery procedure Loan recovery is normally from the fish catches marketed by the local societies and is generally10% of the fish sales value. However, the system is flexible in that other methods of repayment are also encouraged. In cases were fishermen tend to migrate and part of their fish sales is not through the society, monthly lump sum repayment during the migration period is insisted upon. The repayments collected from the members is accumulated by the societies for a month and then remitted to the District federation which immediately remits the money to SIFFS. In the case of loans to fisherwomen, the women’s groups have both daily collections as well as weekly/monthly collection systems. The amount collected each month is remitted to the concerned district federation and then to SIFFS. Loan re-cycling Every month based on the amounts recovered and the amount to be remitted to SIDBI, SIFFS has some amount available for fresh loans to members. These loans are disbursed based on pending requests from district federations with the eligibility criteria being the same. Record keeping and information flow Records are kept at all three levels of the structure. The societies routinely enter loan repayment and loan outstanding figures in their books of accounts as well as in the member pass books. However, interest is not calculated at society level. The District federations maintain complete documentation and accounts for the loans. The same is done at SIFFS level. Interest is calculated at both SIFFS and federation levels. A computerised MIS has been developed in-house at SIFFS for monitoring the credit programme and SIFFS is in the process of setting up similar systems at the district federations also, installing both hardware and software. Information is available every month on all the necessary parameters. Credit programme staffing As the SIFFS credit programme is built on the foundations of the existing credit programme of the societies and district federations, SIFFS does not need an elaborate structure to manage the programme. All SIFFS has at present are one part-time Credit Manager and one full time Credit Officer. Recently a credit officer has been appointed for the Malabar region as it is too far away for the Head Office to manage. The accounting and other administrative tasks are done by the SIFFS office along with the accounting and administration for other activities and programmes. As most of the routine tasks are done by the societies and district federations, the credit department staff spend time for other development work like capacity building programmes for the district federations in the area of credit. Some addition to the staff will be needed when the programme grows bigger. 1. Evolution of the credit programme Marianad Model: Linking marketing and loan repayment 1970s : Society-Bank direct dealings Early & mid 1980s : Federation as facilitator Late 80s and early 90s : Federation as guarantor Revolving funds at district level Entry of SIFFS : new bulk loan concept 2. Existing channels of credit for members |Source |Description |Quantum |Purpose |Terms | |Village Society|From accumulated |Rs.1,000-3,000 |Mainly for emergencies like |Normally interest free; to be | | |funds of society and|normally; exceptional |loss of net, engine repair, |recovered from fish sales with | | |member savings |societies give |illness, etc; for new |considerable variation in periodicity| | | |10,000-35,000 |equipment in some societies | | |Bank loans |Given to members by |5,000-10,000 for non |Purchase of fishing equipment|4% for small loans under DIR; 12-14% | | |banks on the basis |motorised units; |(mostly for replacement) |for other loans; three year repayment| | |of guarantee of |25,000-40,000 for | |period; society deducts 10% from | | |society/federation |motorised units | |daily sales for repayment | |Federa-tion |From federation’s |Same as a bank loan |Purchase of fishing equipment|Interest varies from Federation to | |loans |revolving funds for | |(mostly for replacement) |federation: some give soft loans at | | |credit | | |6%, others at14-15%; other repayment | | | | | |terms similar to bank | |SIFFS loan |From SIDBI bulk loan|Same as bank loans |Fishing equipment |14% to fishermen, from which 2% given| | |and some own funds | |Ice boxes. |to federations as service charges for| | | | |capital for fish vending |their work; 3 year period; loan | | | | |women |recovery through society at 10% of | | | | |Small businesses for |catch value plus lump sums whenever | | | | |fisherwomen |repayment through fish sales is poor.| 3. Objectives of SIFFS Micro Finance programme: The overall objectives of the credit programme through the societies can be summed up as releasing the fishermen from the clutches of the moneylenders and merchants, and in turn to improve fishermen incomes. However, the intervention of SIFFS at present has some other specific objectives. The following are the main objectives of the SIFFS credit programme. • To close the credit gap that exists due to the inability of other channels of institutional credit to cater to the needs of the members. • To remain an additional channel rather than to eliminate existing channels of institutional credit to members. • To use the SIFFS credit programme to introduce professionalism in the credit programmes of the district federations and societies, by example and through training and other forms of support. • To improve the credit worthiness and absorption capacity of the societies and members by introduction of new concepts and methods in selection, monitoring, etc. • To give a boost to the expansion of the SIFFS co-operatives and their membership which is stagnating due to difficulties in accessing credit for members. • To use credit as an instrument for fisheries management to the extent possible, supporting appropriate technologies and discouraging the finance of inappropriate technologies. • To support fisherwomen groups, who have historical links to SIFFS, to have access to credit for their fish vending activities and also to promote alternate employment among fisherfolk, especially women and youth. 4. Products A. Loan products |Loan Type |Purposes |Amount |Term |Int rate |Remarks | |Production |Purchase of fishing equipments | | | | | | |Installation of |5000 |24 months | | | | |icebox/navigational/safety equipments |to |to |16% | | | | |50000 |36 months | | | |Labour |Consumption |1000 to |12-18 |16% | | | | |3000 |months | | | |Women’s loan |Working capital for fish vending , |1500 |12-24 |18% | | | |curing / small businesses other than |to |months | | | | |fish vending |10000 | | | | B.Savings Product ➢ Old Age Security Saving (OASS) ➢ Objectives: Inculcate the savings habit, Social security ➢ Features: ➢ Rs 50 or Multiples of 50 /month ➢ Penalty for defaulters ➢ Interest will be announced at the beginning of the financial year ➢ At the year end interest will be add back to savings amount ➢ It is only for members C.Insurance The objective of the scheme is to provide life insurance protection to the rural and urban poor persons below poverty line and marginally above the poverty line. A person aged between 18 & 60 years, who is a member of specific group/ society/ Panchayat / NGO/ Self Help Group, which is the Nodal Agency, is eligible to join the scheme. Minimum membership of the group is 25. The Nodal Agency will act on behalf of the insured members. In the event of death of the member an amount of Rs.20,000/- is payable. In the event of death/ total permanent disability due to accident an amount of Rs.50,000/- is payable. In case of permanent partial disability due to accident, an amount of Rs.25,000/- is payable. 50% of the premium of Rs. 200/- is borne by the Social Security Fund and 50% is contributed by the member and / or Nodal Agency / State Govt. 5. Procedures A.Savings Joining by • Filling up the Nomination form (yellow card) • Deposit of OASS amount (No. of Units x Rs.50 ) Monthly Remittance • First week of every month • Remittance through demand/collection sheet send by SIFFS • The Savings Demand/collection sheet will be sent to Societies by SIFFS on or before 20th of each month • At society level, all OASS collection is to be entered in OASS register and Pass book • At the Year end declares the interest rate (Commercial Bank RD rate + half percent) • interest for each member will be communicated to societies • Confirmation of balance of each member will be sent to societies by SIFFS For account closing • As per the Norms of the OASS programme society has to request SIFFS on behalf of a member. • The passbook must be returned with duly filled & signed OASS closing form. • The amount due will be released only after receiving the said documents B. Loan Issue ➢ Application from member to the society ➢ Clerk has to fill the Loan request form for those who applied for loans ➢ Committee scrutinizes and finalise the application from loan members individually & based on society rating. ➢ Forward the list to Feds ➢ Fed.s finalises the list. ➢ Scrutiny by SIFFS ➢ Sanctioning if eligible & information to concerned federation ➢ Filling up of Application, Guarantee, Agreement, Asset Information and promissory note ➢ Federations forwarding all documents to SIFFS ➢ If documentation completed, disbursement will be made through Federation C. Loan Repaymets ➢ At the beginning of each month Society clerks has to fill up the SIFFS loan pay in slip for the previous month loan collection ➢ Remit it to Feds ➢ Feds remit it to SIFFS ➢ SIFFS will sent details about the principal and interest of loan amount repaid by members along with interest balance, if any ➢ Clerks / Feds have to make entries in the loan register / loan card D. Insurance : ➢ Rs 100 as annual premium ➢ Deatls : name, Fathe name, Address, Age, Nominee, Age, Relation ➢ How to claim' o Fill the claim form ( Bank account no and signature of the Nominee) o Death certificate in the case of Normal death o Police inquest report in the case of Accidental death 6. Formats ➢ Savings Nomination form ➢ Savings Pass Book ➢ Savings Register ➢ Savings demand / Collection slip ➢ Loan Request form ➢ Loan application /Guarantee form ➢ Loan Agreement ➢ Promisary note ➢ Loan Card ➢ Pay-in-slip ➢ Request letter for Rescheduling ➢ Insurance claim form ➢ Insurance List * All loan amounts in this proposal are in Rupees unless specifically mentioned as lakhs of rupees, etc.