Fish marketing societies in coastal India

Summary

In the coastal areas of Tamil Nadu in Southern India, fisher communities historically had almost no access to credit or savings to purchase fishing equipment. Their only option was to borrow money at exploitative interest rates from local money-lenders, who were also the local traders to whom they had to sell their catch. These lender-traders would set the price of fish far below the market value even as fishers were compelled to sell to them in lieu of the debt. Due to these obstacles, fishers could never repay their debts.

The Post-Tsunami Sustainable Livelihoods Programme (PTSLP) created fish marketing societies, which opened the credit market to fisher communities and allowed them to repay their debt and take out small loans. The initiative includes financial instruments, such as insurance, which have freed the fisherfolks from centuries of slavery to the money-lenders.

Challenge

For generations, most of the fishers living in coastal villages in the South of India have described their condition as being akin to slavery. With no access to the credit or savings markets, they have had no option but to borrow money, creating long-term debts which in some cases were inherited by their children. Money lenders charged interest at very high rates, typically around 120 per cent. Making the situation even worse, the lender-traders set the fish price far below market value. Since fishers were not allowed to trade with anyone else they could never pay off their debts. After the 2004 Tsunami, the situation got worse when many fishermen lost their nets and boats, meaning none of them could work for the following five months.

Solution

In 2005, IFAD and the Government of India launched PTSLP, a project which is implemented by the State Government of Tamil Nadu. It was put into action in coastal panchayats of six districts; Thiruvallur, Kancheepuram, Villupuram, Cuddalore, Nagapattinam and Kanyakumari. The project objective was to build self-reliant and self-sustainable coastal communities that can minimize the impacts of environment shocks. Among its several components, the programme established some 50 fish marketing societies (FMS) in partnership with the South Indian Federation of Fishermen Societies (SIFFS) – limiting membership to smallholder fisher folks, the owners of small crafts.

• Debt redemption fund. As a mechanism to increase bargaining power, the programme supported the groups by awarding small grants through debt redemption funds. The mechanism cleared the debts of the members of the FMS and empowered the fishermen to sell their catch.
• Financial instruments. In cooperation with local credit institutions, fishers have been able to access small loans. After selling their catch at the local auctions, they collect their money at the society offices, where a percentage is deducted to pay back their debt to the local bank. A share of their earnings is set aside for insurance, which is collectively negotiated by the society members and includes coverage for crew members and against accidental death. Another share is deducted for compulsory saving, which can be used as collateral for subsequent loans. Even after these deductions, the incomes of local fishers have increased by an average of 30 per cent, allowing them to repay their debts in just one year and ask for more loans to expand their businesses.
• Organization. Through the FMS, fishermen formed small village-based groups that gave them more bargaining power to set the price of their catch during cooperative auctioning at the public markets. Acting as a group, they made local traders walk out of the market.

Results

Through the establishment of FMS:

• Terms of trade and access to credit and savings services have dramatically improved for coastal communities.
• Community-based financial services linked to marketing have developed.
• The compulsory saving scheme enabled fishers to access financial resources for their family needs and subsequent loans.
• There has been an extensive training programme for members of fishing societies to make use of the insurance services, with a view to encouraging groups to link up with insurance companies for endowment and pension schemes.
• Fishers can now control the first point of sale of fish, which has been demonstrated to help them get a better price.

Lessons learned and potential for replication

Gradual group development. The best approach to group development is a gradual and flexible one, which allows different groups to adopt their own required development rhythm and to build group cohesiveness and discipline.

Transparent group management and operations. The savings and lending activities, in particular, need to be transparent in order to contribute to group cohesiveness and sustainability. As in any situation where money is involved, suspicion of corruption could easily threaten to break up the societies.

Sustainability. By decentralizing the portfolio of each federation to be managed by the federation, including the debt redemption fund (DRF), SIFFS has contributed to the programme’s sustainability.

Next steps

As the societies gain experience, more financial products will be developed, such as remittances services, savings-linked insurance and pension plans.