Aquaculture Development:
Financing and Institutional Support¹

Financing and investment principles

Increasingly, international assistance is geared to poverty alleviation. This requires development programmes to adhere to the principles of sustainability, social acceptability and environmental soundness over and above the traditional principles of technical feasibility and financial and economic viability.

To achieve rapid and sustainable aquaculture development would require more intensive, co-ordinated institutional support and direct community involvement. Continued rapid development will require close attention to potential environmental and social impacts and their prevention or mitigation. Defining the roles of government and the private sector including civil society, and the identification of responsibilities that enable each one to complement the others’ efforts is crucial to mustering support or commitment to development projects. Donors would like to see national policies that clearly express the roles and responsibilities of various stakeholders preferably made through consultations among them. More important, it would assure investors and farmers that their projects are supported and their investments protected.

Priority and agenda setting

• Grass roots/rural community needs should be reflected in national priorities;
• Understanding of development bottlenecks should be improved.
• The aquaculture sector should be a key advocate for research and development needs;
• Development outcomes should be defined – such as production for domestic consumption, increase in rural incomes and employment, and increase foreign exchange earnings while concurrently assuring product quality for exports.

There is a growing trend towards better governance, accountability, and more stakeholder participation. An important question is how can the importance of aquaculture gain appropriate consideration in national policies and planning.

A mechanism is needed to set national social and economic development priorities for aquaculture that includes and reflects the needs of the rural poor.

Allocation and use of resources

• Private Sector - Major player; includes national companies, trans-national corporations, and entrepreneurs;
• Public Sector - National, regional, bilateral and multilateral institutions;
• NGOs;
• Cooperatives.

Significantly, the investments on aquaculture development are increasingly originating from a mix of sources. The trend is that financing from private sector is on the rise and becoming dominant, even as donor and external funds are decreasing relative to the overall amount of investment. National sources that include development and commercial banks, private investors, farmer cooperatives, and governments themselves are becoming a more significant player in aquaculture development funding. NGOs are also moving from a solely advocacy role to providing support services. Nonetheless, smallholder access to credit remains limited, due in part to the interest on so-called bankable projects, which are invariably commercial-scale or -oriented activities. There is therefore a need to focus or direct more development assistance to address poverty. And this suggests greater scrutiny of aquaculture from the environmental, social and good governance perspectives.

Some issues on the allocation and use of resources would include effectiveness of the financial delivery mechanisms, how can these be strengthened; the future role of NGO’s in the delivery of services including credit; and, along with globalization, how nations could benefit from increasing mobility of international venture capital.

An important consideration in the use of resources is stakeholders’ involvement in the process. Primary stakeholders should be enlisted as partners with government in decision-making processes. This requires well-organized and informed stakeholders that are willing to share responsibility for planning and management of the aquaculture sector or of a development project.

Institutional support and co-ordination

• Capacity building and access to credit by the rural poor are essential;
• Local research and strengthened training are mobilized;
• Competence of extension services for sustainable development strengthened and maintained;
• Appropriate technologies, knowledge, and skills made available to businesses, farmers and communities.

There are two ways of looking at the issue of institutional capacity. One is that the probability of success of an investment project becomes better with well-developed institutional mechanisms. The other is that it is usually in areas that have poorly developed policy, institutional support and regulatory systems that are in greater need of development support. One key area that has increasingly been overlooked is the provision of credit and training in its management for the rural poor under fair market terms that improves profitability, broader access to markets, and, thereby, sustainability. Often, traditional credit institutions do not have the experience or capacity to evaluate aquaculture proposals and need to develop linkages to fisheries/aquaculture departments, agencies, or institutions to hire technical specialists to be able to assist in the assessments. Mechanisms to meet collateral needs often required for micro-credit/loans also need to be explored and researched, particularly for the rural poor who are often precluded from formal sources of funding due to collateral requirements. Examples along the lines of the practices of the Grameen Bank in Bangladesh may be a good starting point for many countries. Accordingly, for the provision of credit, the range of options need to be explored among the institutions (banks, government finance systems, credit unions, cooperatives, NGOs, etc.) need to be considered as to whether they are the more appropriate agencies.

Support to improving research and extension capacities on technical aspects have, in the past, been substantial in many countries so that there is now, in most developing countries the critical mass of skilled R & D personnel, and fairly well developed management systems and infrastructures for research and extension.

What is required to achieve the needed capacity?

• Increasing donor cooperation and co-ordination;
• Strengthening institutions and access to funding to meeting demand;
• Increasing information exchange and communication capacity.

The management of a development project is a complex undertaking requiring the co-ordination of various efforts and even harmonizing often-differing views or interests from all legitimate stakeholders. Clearly, the sum of the capacities of various stakeholders would not make any impact on development if these were not co-ordinated or they did not cooperate. Cooperative involvement occurs when primary stakeholders act as partners with government in the decision-making processes. Much depends on the commitment of government for stakeholder involvement in policy, planning and management processes, the tasks to be undertaken, political and social norms in the country and the capabilities and aspirations of the stakeholders themselves. Increasing stakeholder involvement requires overcoming any constraints associated with these critical issues.

Although much of the expansion can be attributed to private sector investment, there was also direct participation by local communities; national, private, and multilateral banks; governments; multilateral and bilateral agencies; non-governmental organizations; aquaculture associations and cooperatives; aquaculture research institutes; universities, and technical schools and colleges. Often, more than one and, in many instances, several of the above institutions have collaborated on the implementation of aquaculture development programs using the relative strengths of each to its best advantage. Based on this trend and the comparative advantages of current activities that involve multiple agency collaboration with the receiving communities/households, it is expected that this trend will continue in the future.

The key to obtaining the maximum development impact and desired results from investments (be they grants, loans, or direct investments) is effective co-ordination and cooperation among donors to address all needs at the local level. Governments know that external support should mainly provide the catalyst to development or to a development process, not to serve as substitute to national resources and efforts. On the other hand, donors and other assistance agencies have been working on several approaches aimed at co-ordinating diverse assistance. One of these approaches was exemplified by the NACA project, and now the NACA organization, by which a regional programme provided coherence and direction to various sources of assistance. A recent example, designed to focus various externa as well as local assistance to address poverty, is the Sustainable Aquaculture for Poverty Alleviation (SAPA) strategy of Vietnam. A third, example, at the regional level, is the regional initiative called STREAM (for Support to Regional Aquatic Resources Management), which provides a platform for cooperation among various organizations, agencies and institutions to address livelihoods development among poor rural dwellers dependent on aquatic systems for livelihood. (Editors’ note: The keynote paper, “Regional and Inter-regional Cooperation for Sustainable Aquaculture Development,” by Lennox Hinds and G.B. Bacon (in this volume) provides an interesting and detailed rationale and strategies for effective cooperation among donors and recipients).

A key element to improving capacity to manage development activities is information and communications support. Firstly, an information system is integral to the monitoring and evaluation system, secondly, it enables a quick response mechanism to urgent needs by the participants, thirdly it facilitates exchange of experiences and lessons learned, and fourthly, a strong development support communications facilitates the search for or design of solutions to problems, and improves the effectiveness of training and other capacity building efforts. An effective blend of traditional media and the new information technology would be desirable.

As a final word, the attribute of these and, no doubt of successful cases or other promising approaches, is that institutional and financial assistance to aquaculture development drawing their coherence and relevance from viewpoint of local needs.

Summary of the session

Private sector funding makes a major contribution to aquaculture development, while public sector finance is important and can fill niches of capacity building and institutional development. Applied research and farmer access to knowledge are identified as areas needing particular attention. International development assistance is becoming increasingly directed towards poverty alleviation and needs to adhere to basic principles of social equity, including gender, environmental sustainability, technical feasibility, economic viability and good governance. The level of risk is important when supporting initiatives to address poverty elimination.

Recommendations of the session

The session panel comprised Cornelia Nauen, Ron Zweig, Richard Fuchs, Barney Smith, Kirsten Bjoru, Simon Bland, Jeanenike Dahl-Kristensen, Lennox Hinds, A.M. Jayasekara, Jia Jiansan, Hassanai Kongkeo, Alessandro Piccioli and Malcolm Sarmiento. The recommendations are as follows:

• Private sector funding makes a major contribution to aquaculture development, while public sector finance is important and can fill niches of capacity building and institutional development.
• Applied research and farmers’ access to knowledge and credit are identified as areas needing particular attention.
• International development assistance is becoming increasingly directed towards poverty alleviation and needs to adhere to basic principles of social equity, including gender, environmental sustainability, technical feasibility, economic viability and good governance.
• The level of risk is important when supporting initiatives to address poverty elimination.
• Multiple projects increase the costs of development assistance and place a significant burden on national resources. A program approach makes it necessary for donors to more effectively cooperate and collaborate with each other. Ultimately this needs to occur within comprehensive frameworks. There is thus a need for donors to adopt more cohesive approaches and procedures.