Financial Services for SME Aquaculture and Fisheries Producers: Ghana Case Study
The fisheries sector in Ghana is a key contributor to gross domestic product, export income, people’s diet and food security. Most of the catch comes from marine fisheries (400,000 tonnes annually) followed by inland waters (40,000 tonnes) and aquaculture (5,000 tonnes). However, a growing population and declining national catch has meant that imports, currently running at approximately 430,000 tonnes (mostly of low quality fish), account for nearly 50% of national consumption. The quality and size of the Ghanaian capture sector has been declining over the last decade and therefore the only opportunity for import substitution would appear to be the aquaculture sector, although significant technical and financial challenges have to be addressed if this sector is to grow from its current low level. Artisanal marine fisheries (landing 70% of total catch) has a relatively high set-up cost of approximately 28,000 US $ for canoes, outboard motor and nets in Tema and 47,000 US $ in Cape Coast. Running costs are required for fuel, food and crew wages. Inland fisheries require lower capital costs of approximately 9,500 US $ for canoe, motor and nets. Records are rarely kept and it was difficult to obtain authoritative macro-level data for the total catch (particularly inland fisheries) and more micro-level level information on the returns to capital achieved by the fishermen, although they reported that it produced a good living and was more than enough to cover their basic needs. Aquaculture capital costs are more variable than for marine fisheries, due to nature (e.g. ponds versus cages) and size of the venture. One small- to medium-sized venture reported costs of construction of 20,000 US $ for six ponds of each 0.2 ha. Also, running costs can be higher and include the purchase of fingerlings (0.6 US cents each), annual water charges (typically 500 US $) and good quality imported feed (27 US$ per 25 kg bag) to maximize yields. Excluding the annual cost of capital, one farmer estimated that producing 10,000 kg of fresh fish would cost 27,000 US $ to yield a revenue of 33,000 US $. However, as with the capture sector, lack of accurate record keeping is an issue. It can be seen that all types of fishing activities require a considerable amount of capital and variable expenditure. In capture fisheries, accessing funds is mostly undertaken through informal arrangements in which women traders are the key financiers for both capital and running costs. Women traders will use their own savings or secure loans from banks such as the Agricultural Development Bank (ADB) or the private sector institutions such as the Prudential Bank, who see women traders as a lower risk and more capable of managing finances than the fishermen. The informal loan arrangements provided by women traders mean that fisherman are obliged to sell their catch to the women until the loan has been repaid. No information was available to gauge the repayment terms and conditions, and how this translates to a monetary value in order to judge its competitiveness with the formal credit sector. Credit organisations such as the ADB have provided loans directly to fisherman when they have been able to provide collateral (such as titled land deeds), references, third-party guarantor and clear evidence of a viable business (records of catch and sales). Form the fishermen’s perspective, the procedures were said to take a long time which has discouraged them from taking the formal route. In the aquaculture sector, the interviewed SMEs had used their own funds generated from other business ventures although they sometimes used a bank overdraft facility to purchase feed in bulk. Women traders were important to them in terms of marketing their fish but even here there were moves to process their own catch and sell directly to retail and other outlets. In assessing the provision of financing, the following opportunities and challenges were identified: (a) More in-depth studies are required to understand the full costs to fishermen of using informal loans, notwithstanding the key role that women traders play in providing financial services and managing the risk in this sector; (b) Capacity strengthening to improve the ability of fishermen to keep records and to make them aware of the advantages of using formal banking systems would increase their opportunities to make use of more formal credit systems; (c) Aquaculture appears to offer more opportunities for growth compared to the capture fisheries sector which is suffering from declining stocks and relatively large number of players; (d)Lack of technical capacity appears problematic at all levels in the aquaculture sector, particularly in managing fingerling stocks and optimising feed rates and stock density – the later is crucial in maximising returns on capital and variable expenditure; (e) Increase resources are required to support the advisory services in providing advice to all fisheries sectors – this does not necessarily have to be solely through Government funding since a profitable fishing sector should be able to play a bigger role in resourcing and managing this support.