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Micro Credit
 
Government Credit Programs
The history of Government sector led credit programs for fishermen in Indonesia is not a happy one. While the government recognizes the need for credit, the implementation of programs has been marked by corruption and mismanagement. Recent programs in West Sumatra resulted in approximately one third of fishermen being granted small loans of Rp4,000,000 to purchase engines. Repayments were not made because most fishermen were convinced that other groups were giving kickbacks to the authorities given the job of administering the loans to be released from any need to pay. Once one group refused to pay, all the others refused on the grounds that it was not fair. Credit to the remaining fishermen was then suspended leaving them angry and dis-enfranchised.
In the past, credit programs were almost always focused on marine engine purchases. Competition among artisanal fishermen and competition with larger foreign vessels resulted in over taxing near coastal fish resources. These pressures led to a situation where the fishermen were under pressure to build bigger boats and to use larger engines and to go into debt to survive. The recent shutting down of illegal logging throughout the country combined with dramatic fuel price increases has hit fishermen especially hard. Most fisher credit loans will now default because the boats cant make enough profit to pay for maintenance and repairs let alone service debt.
Credit/Financial Services
Credit,  fish marketing and savings, are the three central themes of a new credit model to be tested by Island Aid at Air Manis. The program will be called Island Aid Credit (IAC). Credit is an essential input for small-scale fisheries for a variety of important needs, and is effectively the lubricant that keeps the sector going.
Island Aid is under pressure from the members of the existing Fisher Organization to start a credit programme, because of the failure of past schemes and the lack of alternative. Banks, on the other hand, do not meet fishermen needs and insist on collateral.

Island Aid will initiate a new Micro-Credit programme to achieve the following objectives.
 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 introduce an additional channel rather than to eliminate existing channels of institutional credit to members. 

 To introduce professionalism 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 existing fishermen's associations membership. 

 To encourage the use of credit as an instrument for fisheries management to the extent possible through supporting financing of appropriate technologies. 

 To support fisherwomen organizations to gain access to credit for their fish vending activities

In India micro-credit programs for fishermen have been very successful , and micro-credit accounts for more than 50 % of the loans given to member fishermen. The dominant organization is the South India Federation of Fishermen's Societies (SIFFS).

The SIFFS model will be introduced to Sumatra target areas where other credit schemes are not available or where existing programs have failed. The programs will cover:
  1. Purchase and renewal of fishing boats, motors and equipment
  2. Repair and maintenance of fishing equipment 
  3. Fisher family investment in sanitation and sustainable lighting 
  4. Employment diversification 
  5. Post harvest activities (fish vending, fish processing) 
  6. Selected community projects focused on health and education
  7. Uninsured Medical Expenses
  8. Insurance
The proposed credit program is closely linked to fish marketing and savings. Loan repayment is generally based on a percentage (10-15% depending on the quantum of loan) of fish catches, and not on a fixed instalment.
Local banks will be approached to support the Micro-Credit programs.
 
Proposed Loans
Category
Target group
Purpose
Amount (Rp)
Term
Rate*
Production
Owners of artisanal fishing units, motorised and non motorised
Purchase of fishing equipment like, boat, motor, net, ice boxes, other equipment, Debt redemption
Rp5-10 million
36 months
16%
Labour
Crew of artisanal
 fishing craft
Consumption needs like childrens education, medical expenses, and other consumption needs
Rp1- 2 million
12 months
16%
Fisher  
women
Fisherwomen
Working capital for fish vending as well as other petty trade and income generating activities
Rp1-2 million
12-24 months
18%**
Women -
Seasonal
Fisherwomen with
proved credit discipline
Relatively bigger loans for working capital for seasonal fish vending
Rp2-5 million
Bullet
payment
when
season
 ends
18%**
Lightboat
fishermen
loan
Fishermen involved in deep sea fishing, especially for shark
Upgrading craft with solar panels, batteries and LED lamps, new smaller  equipment, storage facilities, etc.
Rp10-15 million
24 months
16%
 * Diminishing Balance
** The extra 2% will be used to fund the establishment of women's organizations