2. HISTORY OF THE CREDIT REVOLVING FUND

The Allsop / Mann Formulation Report (1987) recommended that a fund be provided by BSF/UNDP and augmented by the Government of Kenya (GOK), for establishing a Revolving Fund for Small Scale Fish Farming which would provide a quick means of promoting small scale fish farming in the region. This recommendation was inscribed in the Project Document KEN/86/027, and it stated that :-
“A revolving fund shall be established to enable small holders interested in taking up or expanding their rural fish culture activities to obtain credit for supplies and materials necessary for the rehabilitation and stocking of their ponds.”

In response to this, the loan scheme was established in 1991 to assist fish farmers achieve the following objectives :-

• Increase credit-worthiness.

• Increase financial and economic self reliance.

• Provide reasonable priced and timely credit.

• Expand the development and income generating capacity of the rural groups.

• Increase the group-member access to credit and savings, thus promoting financial security.

• Create a pool of capital for local community investments and enhance credit-worthiness of rural individuals and groups.

The Credit Scheme has since its inception had three phases as follows:-

1. Phase I - August 1991 to May / June 1993

2. Phase II - May / June 1993 to September 1994

3. Phase III - October 1994 onwards

2.1 Phase I - August 1991 to May / June 1993.

The capital was supplied from project funds and administered through the Commercial Services Section of the Lake Basin Development Authority. The Administrators were responsible for the preparation of all accounting documents such as credit application forms, disbursement and recovery forms, and keeping proper books of accounts. They were also supposed to appoint a local farmers co-operative agency to supply farm inputs to the scheme beneficiaries. Other suppliers were to be appointed to supply items not available at the co-operative agency. The Project provided all the necessary technical information pertaining to fish farming required for management of the scheme, and they were also to assist in the grassroot identification of eligible farmers.

2.1.1 Eligibility and Selection Criteria

In extending credit, the scheme gave priority to persons who were already practising fish farming in the Lake Basin Region either as individual members, or as organized groups registered with the Ministry of Culture and Social Services. Non-practising fish farmers who were engaged in other farming activities and were genuinely interested in starting fish farming were considered provided they satisfied all the selection criteria which were applicable to all applicants. Special consideration was given to Women Groups. The following selection criteria were used:

• The fish farmer had to be genuinely committed and interested in carrying out commercial fish farming with a view of producing food and profit. He/She had to have a piece of land measuring approximately 1000 m² out of which at least 500 m² was to be set aside for fish ponds, leaving the balance of the land for expansion and working space.

• The land on which the fish pond was situated had to have the capacity for holding water, and a gentle slope so that the water could flow by gravity to enable the fish pond to be filled and drained without pumping. It also had to have adequate protection from flooding and erosion.

• There had to be adequate water supply of good quality from a source such as a stream, spring or river within the farm area throughout the year. The pH of the soil or water also had to be within the range good for fish farming.

2.1.2 Use of Credit

The credit received was used for the following purposes purchase of hardware, fingerlings, production inputs like fish feed, and for payment of labour costs during construction / rehabilitation.

2.1.3 Credit Approval Process

The scheme had a Loan Committee composed of 10 members. 4 members were from LBDA, 4 were from the Project, while two were from the West Kenya Rainfed Rice Development Project (WKRRDP) from whom the guidelines of operating the scheme were borrowed as they were already operating a credit scheme. The Managing Director (LBDA) was the Chairman of the Committee. The Committee carried out its functions in accordance with the procedures outlined in the Loan Document, and its specific role was the final scrutiny and approval of loan applications. This Committee met once a month to consider and approve loan applications.

The Scheme also had a Loan Sub-Committee composed of 6 members. 1 member was from LBDA, 1 was from WKRRDP, while 4 were from the Project. The Deputy Managing Director (LBDA) was the Chairman of this Sub-Committee. The Sub-Committee assessed the application forms before tabling them before the Loan Committee through the Commercial Services Manager (WKRRDP) for consideration.

The project Fish Farming Extensionists (FFE's) identified and forwarded names of eligible farmers to the Assistant Aquaculturist through the District Fish Farming Extensionists (DFFE's) for initial assessment. They also assisted farmers to complete the credit application forms and ensured that the local administration signed the applicants forms before forwarding them to the DFFE's. The final assessment was done by the Aquaculturist / United Nations Volunteer, Assistant Aquaculturist and DFFE before forwarding the forms to the Loan Sub-Committee, who in turn forwarded them to the main Loan Committee for final approval.

2.1.4 Disbursement of Credit

Up to KSh 20,000 was disbursed to individuals and up to KSh 80,000 was disbursed to groups. These loan amounts were based on the experience of the Rainfed Rice Scheme of the Lake Basin Development Authority, and were not related to the production potential of the fish ponds. Money was paid directly to the farmers by cheque in 2 installments. The first 50% was given to construct or rehabilitate the ponds, while the second 50% was disbursed to cater for the pipes, fingerlings feeds, etc.

The farmers were given a grace period of 1 year. An interest of 12% per annum was charged on the amount of credit outstanding with effect from the date of disbursement, of which 9% was to be paid to the Revolving Credit Scheme and 4% was to be retained by the Scheme Administrators for their overhead expenses. The repayment period was 3 years. In case of default, the Scheme Administrators were to undertake to recover the loan through the Local administration.

In event of unforeseen natural calamity affecting the fish farmers operations such as drought, mass fish kills, etc., the Scheme Administrators would re-schedule the loan repayment and seek the advise and co-ooperation of the Project (DSSFFP) on how to assist the farmers to re-establish their operations as soon as possible.

2.1.5 Loans Disbursed and Recovered

67 Farmers benefitted from the scheme between August 1991 and May / June 1993.15 Groups received a total of KSh 609,676, while 52 Individuals received a total of KSh 837,170 in cash. The total amount disbursed totalled to KSh 1,446,846. The average loan size disbursed in cash in the Phase I was KSh 21,594,70. Table 2 indicates the overall status of loans to beneficiaries in Phase I. Figure 2 indicates the loans disbursed and repaid by individuals during Phase I, while Figure 3 indicates the loans disbursed and repaid by groups during Phase I.

PHASE I - OVERALL STATUS OF LOANS BY DISTRICT.

Note - Amounts in KSh (1 US $ = KSh 50)

PHASE I - LOANS TO INDIVIDUALS

Amounts Disbursed and Repaid

PHASE I - LOANS TO GROUPS

Amounts Disbursed and Repaid

2.1.6 Observations

Phase I of the scheme was unsuccessful. No farmers repaid their loans as scheduled, and there were a variety of reasons for this :-

• The initial plan to supply construction materials to the farmers through a local farmers co-operative agency was not possible. As a result, money given to some farmers for the purchase of certain important inputs was diverted to other uses. This diversion of funds meant lack funds to buy fingerlings to stock their ponds.

• At the various harvests held, it was obvious that serious problems were to be encountered in loan repayment. These included slow growth of fish due to lack of feeds, marketing problems due to lack of ready market to sell the fish, which caused some of the farmers to sell their fish at throw-away prices.

  In addition to this, other problems were:-

• The procedures used for granting loans to the farmers were cumbersome involving almost three separate committees. It took an unnecessarily long time to get a farmer's application approved.

• Loan amounts were based on the experience of the Rainfed Rice Scheme of the Lake Basin Development Authority and not related to the production potential of the fish ponds. As such, some farmers groups were given loans that could not be repaid from the production from fish.

• Groups experienced serious problems in the use of funds as certain groups had their members insisting that these loan disbursements be shared equally amongst all the members. This problem caused certain groups to disintegrate.

• When the farmers completed constructing their ponds, it became apparent that there was insufficient stocking material at the Fry Production Centres, as the supply of fingerlings from these centres could not meet the demand of the credit beneficiaries, as well as the non-credit beneficiaries. In some cases, there were even delays of over one year in supplying fingerlings.

• In certain cases farmers' neighbours cut off the water supply on learning that the farmer had received some loan.

• Training of the beneficiaries immediately after receiving the loans was not done. As a result, some farmers still practised poor management techniques and also never kept records of their fish farming business.

• There was lack of regular visits by the field extension staff to these farmers. As a result, many farmers carried out partial harvests without the knowledge of the extension staff. Those being visited were visited by different cadres of staff and this brought confusion when it came to the farmer taking in all the different advices given.

• There was no initial allocation in the Credit Fund for running /overhead expenses.

As can be seen, this phase of the credit revolving fund was a failure. The above difficulties were also noticed by the Project Evaluation Mission of September - October 1991, and whose recommendations were as follows :-

• Re-consideration of the amounts given in loan to the farmer by actualizing the real production figures at the farmers level, and by the introduction of a parameter such as the amount of loan divided by the pond surface (KSh/square meter) to be used as a relative parameter to compare between farmers and groups. This could make the decisions of the loan committee more consistent.

• To reduce the burden of the heavy loans attributed during the loan committee meetings, the Loan Committee could consider prolonging the payback period from 3 to 5 years.

• The beneficiaries be closely followed by the senior staff who are to be present during harvest and sale of fish. During the production period, no partial harvests to be done by the farmer, and the farmers be visited once every fortnight by the DFFE and once every month by a senior staff member in order to verify book-keeping and inputs, and also to do sampling so as to give an estimation of growth and production.

• Repayment of the loan to be from the pond itself and not from other sources. The maximum attributed loan to be calculated in such a manner that the farmer still had a small benefit, even after the repayment of capital and interest.

The Project Management also changed in 1992, and the new management sought to change the credit scheme. A local Consultant was engaged in March-April 1993 to analyze Phase I of the scheme, identify problems and make recommendations so as to create a viable and sustainable credit facility. The Consultant presented their report in May 1993. The report was exhaustively reviewed by the senior project management, and the recommendations were discussed with all of the field staff involved in the future implementation of the scheme. After slight modifications, the recommendations of the Consultant were adapted, and this formed the basis of Phase II of the Scheme.

2.2 Phase II - May / June 1993 to September 1994.

The loan scheme was targeted at one specific project objective, i.e., to increase the levels of fish production in existing ponds from a rate of 1000kg/ha/yr to 2500kg/ha/yr. As a secondary objective, the loan was to demonstrate to the farmer that by providing limited inputs to fish farming activity, significant financial gains were possible. As a result, Phase II of the scheme had the following basic principles:-

• The loan scheme itself was considered as a financial business that was economically viable and sustainable on its own. It was therefore expected to continue after the withdrawal of donor support. The current economic conditions prevailing in the country had been taken into account and appropriate interest rates as well as some overhead costs, were charged for administering the scheme. Although the loan was designed to be easily reimbursed solely through fish farming, the loan beneficiary was expected in any event to reimburse the loan through other means.

• The scheme was to be able to assist in the development of commercially viable fish farming. It was to be able to reach as many farmers as possible and allow them to continue with improved fish production techniques after the loan has been repaid.

• The scheme was to be able to demonstrate to the farmer how to obtain maximum benefit from the pond, both in terms of fish production and financial returns. The scheme emphasized improved feeding and fertilization, with the introduction of partial harvesting during sale.

2.2.1 Eligibility

The new loan amounts were calculated on the basis of existing pond area and potential production. A minimum of 300 m² of total water surface area was necessary to qualify for the loan under the new scheme. This minimum size had been adapted as the smallest commercially viable size under the prevailing conditions in Western Kenya. Smaller ponds had been left to be exclusively used for subsistence. However, farmers with smaller ponds were still encouraged to expand using their own resources to qualify for the loan.

2.2.2 Administration Procedures

Administration of the scheme changed. In the past, there were no clear lines of responsibility, and there was confusion within the project on just who was responsible for what. The present scheme was completely separate from other project activities, in the sense that all its accounting procedures were separately kept. This allowed better financial control over the scheme. The credit recipient (farmer or group) was supplied with a book for visit records and recommendations given by the field staff. There was also a file given to each recipient for keeping all documents pertaining to the loan. These documents were :-

• Loan Agreement - To signify the farmers' acceptance of the loan.

• Pond records of stocking, harvesting, feeding, etc.

• Feed Card - to show the amount of feed collected from the feed stockist, and also the balance due from the stockist.

• Debit Notes indicating the amount of money that the farmers' account had been debited with by way of supply of fingerlings.

• Receipts of repayments made, etc.

Only 1 staff member, a DFFE / Credit Officer (CO), was to deal with each farmer. He was accountable for both the success or failure of the farmers in the scheme. He was responsible for the following in his district :-

• Ensuring the farmer kept proper records.

• Recruiting new beneficiaries.

• Visiting the credit farmers at least once a month to ensure that correct fish farming techniques were being employed, and filling a Client Visit Report Form in the presence of the farmer during each visit. These forms were to be duly signed by both the DFFE / CO and the farmer, and then forwarded to the Credit Co-ordinator for analysis and action before being filed in the respective farmers files.

• Ensuring that inputs (feeds and fingerlings) were delivered in time.

• Keeping up-to-date records on each credit farmer.

The Technical Officers (TO's) were overall responsible for the smooth operation of the credit scheme in their areas of operation. Specifically they did the following:-

• Collection of repayments.

• Issuing receipts, debit notes, invoices and all relevant financial documentation of the loan scheme in their districts.

• Smooth operation of the feed distribution system, including arrangements for prompt payments to the suppliers.

• Ensuring the delivery of fish fingerlings when required.

• In conjunction with the DFFE / CO, submitting to the Credit Co-ordinator brief monthly reports on the credit scheme of the district he covers.

The Credit Co-ordinator was responsible for the day-to-day operations of the loan scheme. Her responsibilities were:-

• Ensuring that loan applications were discussed promptly and the outcome communicated quickly to the applicant, and that all records relating to the loan scheme were kept in order, including supervision of the loan scheme accounting procedures.

• Compilation of periodic reports on the status of the scheme.

• Record keeping and updating farmers' computerised files using the Lotus 1-2-3 programme.

The National Project Co-ordinator(NPC) and the Chief Technical Advisor (CTA) were responsible for the policy guidance and financial control of the scheme. In consultation with the Project staff, the NPC and CTA convened meetings to discuss modifications and improvements of the loan scheme when necessary.

2.2.3 Application and Approval Procedures

The FFE / DFFE initially contacted a farmer who appeared to have all the necessary qualifications. He then filled an Initial Client Recruitment Form in the farmer's presence, giving details of the farm. With the approval of the DFFE / CO and TO, the client was then sold an official serial-numbered Loan Application Form at the cost of Ksh 100, and a receipt was issued for this amount. This form was to be signed by two Guarantors, Area Chief, DFFE / CO and the TO before being forwarded to the credit Co-ordinator. A Loan Sub-Committee at the district level discussed the Loan Application Form. This Committee was comprised of the TO, DFFE / CO, Farm Supervisor, a representative from the Fisheries Department and the District Officer (DO) / Area Chief. This Committee recommended acceptance or rejection of the new loan applications. The applications were now brought by the TO to the Credit Co-ordinator, who then discussed the forms with the TO, NPC and CTA. Loan Applications and modifications made were then discussed in a final full Loan Committee Meeting comprised of the Managing Director, Deputy Managing Director, Financial Controller, NPC, CTA and Credit Co-ordinator.

The Credit Co-ordinator then informed the applicants of the outcome. The successful applicants were given three copies of the Loan Approval Forms detailing the materials expected in the loan package. These forms once signed by the applicant to signify his/her acceptance, were then taken to the Chief / Asst. Chief for signature. Thereafter, the farmer retained one copy, the TO / DFFE retained another copy while the Credit Co-ordinator was sent the third copy to be kept in the farmer's file at Headquarters.

The TO on receipt of his copy of the Loan Approval Form arranged to stock the farmers ponds, and immediately notified the Credit Co-ordinator of the stocking date as this was the day when the loan interest calculation began. Fingerlings were supplied by the project Fry Production Centres and the farmer was given a Debit Note indicating the number and cost of the fingerlings supplied. The Credit Scheme was then invoiced by the TO for payment into the Farm Revenue Account.

Along with the Loan Approval Forms, the farmer was also given two copies of Feed Cards (Goods Collection Cards), which he signed and also fixed a recent passport photograph on each card. The DFFE / CO then took one card to the stockist, while the other card was retained by the farmer.

One or more private feed suppliers had been identified in each district. They were paid in advance at three month intervals for supply of feed at the market price to the credit farmers. Both the stockist and credit farmers' Goods Collection Cards indicated the total amount of feed authorized, the number of bags already taken by the farmer and the balance.

2.2.4 Disbursement of Credit

All new loans were now given in kind; farmers were no longer given cash. The loan amount was restricted to the necessary inputs for one production cycle based on an 8-month rearing period, i.e., high quality fingerlings from the Project Fry Production Centres (Tilapia nilotica and Clarias) and feeds (Rice or wheat Bran). Integrated farming was being strongly encouraged. Where a farmer constructed or had existing facilities for integrated fish farming, the purchase of poultry or pigs together with stock feeds considered for use in integrated farming. The fund was not to be used in the construction of ponds although pond construction represented a major investment in fish farming. This was because the payback period for such an investment was too long for the interests of the loan scheme. Secondly, the farmer was required to contribute a significant amount to the enterprise.

The loan scheme charged the farmer a flat commission of 10% as overhead costs on the total amount of the loan to contribute to the sustainability of the fund when the donor assistance was withdrawn. In view of the then prevailing economic conditions in the country, the interest rate was increased to 18% p.a. Though there was no lower limit on the loan, an upper limit was fixed at Ksh 15,000, subject to review. The objective of this was to reach more farmers and reduce the burden of repayment.

The scheme also made available rental nets for the harvest of credit ponds at a daily rental fee of Ksh 10, as rental of the nets would give the DFFE / CO more control over the timing of the harvest of the credit farmers' ponds. This rental fee also ensured that the nets were returned promptly, and it was also to meet the cost of repair and maintenance of the net.

There was to be a Grace Period of 8 months before loan repayment begun, although interest accumulated beginning the day of stocking. There were 5 repayment installments, the first one being at the 8th month, and the subsequent four repayments being made at four equal intervals. This made the total payback period 24 months or 2 years from the day of stocking. This repayment period had been adopted for the following reasons :-

• Sufficient funds could be raised from the first harvest cycle to re-stock and feed fish for a second cycle.

• In view of paying the harvest proceeds to the loan scheme, smaller payments over a period of time were more likely to be honoured.

Sale of fish and repayment of the loan was the farmer's responsibility. The DFFE / CO was however encouraged to assist / advice the farmer on marketing. The TO / DFFE were also expected to witness harvests for the purpose of collecting data, giving advice, etc.

2.2.5 Loans Disbursed and Recovered

225 Farmers benefitted from the scheme between May / June 1993 and September 1994. 59 Groups received a total of Ksh 502,292, while 166 Individuals received a total of Ksh 1,083,604 in kind. The amount disbursed totalled to KSh 1,585,896. The average loan size in kind in Phase II was KSh 7048.40. Table 3 indicates the overall status of loans to beneficiaries in Phase II. Figure 4 indicates the loans disbursed and repaid by individuals during Phase II, while Figure 5 indicates the loans disbursed and repaid by groups during Phase II.

PHASE II - OVERALL STATUS OF LOANS BY DISTRICT.

Note - Amounts in KSh. (1 US $ = KSh 50)

PHASE II - LOANS TO INDIVIDUALS

Amounts Disbursed and Repaid

PHASE II - LOANS TO GROUPS

Amounts Disbursed and Repaid

2.2.6 Observations

The main influences that affected Phases II of the Scheme were:-

• Due to the prevailing economy, the average cost of a 70kg bag of feed soared from KSh 200 in 1992 to KSh 600 in 1994, and yet the price of fish did not change. (See Economic Models in Tables 4 and 5). This did not really benefit the farmer as the profits obtained from fish farming only further reduced.

• With the war in Rwanda in the earlier part of 1994, the price of fish drastically dropped as many consumers refused to buy fish due to the fact that some human corpses had been found in some parts of Lake Victoria.

• The repayment rate was found to be extremely low. Even after harvest, ⅓ of the beneficiaries had not started repaying at all. Some beneficiaries harvested their ponds, sold their fish and used the income generated for other things like school fees, etc. It therefore became apparent that regular loan repayment was only guaranteed when the field staff were present during the harvesting of the ponds. At times there seemed to be lack of pressure from the officer in charge of recovering the loan as he / she was the same officer giving the farmer extension service. The extension service was not capable and competent of running a loan scheme.

• Production data collection was difficult because farmers did not want the field staff to know what they were producing. However, from a few of the ones data could be collected from, production was estimated at 7–8 tonnes/hectare/year.

• Some feed stockists selected used sub-standard ingredients, e.g., rice husks instead of rice bran; and some also delayed in supplying the beneficiaries with feed for even 3 months. Many beneficiaries complained of long distances and transport incurred to collect the fish feed, and therefore never collected their feed regularly. All these greatly affected the production of fish.

• There was a major drought from May 1993 to February 1994. A majority of the beneficiaries'' ponds dried up causing their loans to be re-scheduled. The Fry Production Centres were neither spared. Out of the Project's 7 Fry Production Centres, only Kibos Fish Farm survived the drought because of the presence of a borehole.

Other additional problems were:-

• Groups still had a tendency to have problems once they had acquired loan. Some of these problems were problems related to land ownership, what type of fish feeds to use, etc. To-date 74 Groups had benefitted from the credit scheme, and this represented 28.3 % of the total loan disbursed. Though women groups were easier to work with, introducing a fish farming credit scheme in such groups could not work as most of the fish in the ponds went towards loan repayment, leaving the women with hardly anything to divide amongst themselves.

• 5 individuals had been given poultry, while 1 individual was given pigs to integrate with fish farming. However, this integrated farming using poultry did not seem to work as it was difficult to get point-of-lay chicks at reasonable costs and the project could not also do the same, as such chicks cost Ksh. 250 at the time they were being given to the farmer. Therefore, it can be seen that integrated farming required a high cash flow to maintain and was not remunerative as the farmer still got negative profit even after the first year, making the payback period for such an investment longer.

• The average selling price of mature Tilapia varied from KSh 35 in the lake shore regions to Ksh 60 per kilogram in areas remote from the lake. The average selling price per kilogram of Catfish varied from Ksh 40 to Ksh 90. It is also interesting to note that while the price of feed has almost tripled, the price of fish has remained almost the same.

• Most of the beneficiaries practised polyculture of Clarias and Tilapia, though there was poor sale of Clarias in districts like Siaya, Nyamira and Kisii where it was newly introduced. Many farmers reported that they marketed their fish best by announcing the date of harvest at the Chief's Baraza.

• There was some improvement in record keeping by the farmers, particularly harvest and stocking records. It was evident from the beneficiary's visit report book that some field officers were visiting the beneficiaries more frequently. This also encouraged regular monthly sampling of the fish.

• There seemed still a general lack of understanding between the DOF Officers, the project staff dealing with the credit scheme, and the beneficiaries of the credit scheme. Some cases had been recorded of the Fisheries Officers harvesting the beneficiary's ponds without the knowledge of the project staff.

• The acceptance of the project and the general enthusiasm of fish farming by farmers in non-traditional fish eating areas of the region suggested that the project had made a significant impact in such areas, e.g., Nandi.

• Many beneficiaries who could produce fingerlings found that the easiest method for repaying their loans was for the project to credit to their accounts the value of fingerlings sold to other beneficiaries.

• With a view to introducing the group / association approach during the next phase of the scheme, several special credit field days were held during November 1994, and to date 3 Fish farming Associations have been established within the project area.

Table 4 - Economic Model 1

The following is an economic model when the cost of feed was Ksh 200 per bag in 1992. The feed being used at that time was Rice / Wheat Bran which has a Food Conversion Ratio (FCR) of 7. No Interest / Overhead Charges have been included.

STOCKING :
Number of Tilapia Stocked - 600
Survival Rate - 50 %
Number of Clarias Stocked - 300
Survival Rate - 70 %

HARVESTING :
Number of Tilapia Harvested - 300
Mean Weight of Tilapia at harvest - 250g
Total Weight of Tilapia Harvested - 75 Kg
Market Price of Tilapia - KSh 40 per Kg
Total Amount obtained from sale of Tilapia - KSh 3,000

Number of Clarias Harvested - 210
Mean Weight of Clarias at harvest - 250g
Total weight of Clarias Harvested - 52.5 Kg
Market Price of Clarias - KSh 70 per Kg
Total Amount obtained from sale of Clarias - KSh 3,675

Total Weight of Clarias and Tilapia harvested - 127.5 Kg
Total Amount obtained from sale of Tilapia and Clarias - KSh 6,675

EXPENDITURE :
Cost of Tilapia Fingerlings (per piece) - KSh 2.00
Total Cost of Tilapia Fingerlings - KSh 1,200
Cost of Clarias Fingerlings (per piece) - KSh 3.00
Total Cost of Clarias Fingerlings - KSh 900

Cost of Rice / Wheat Bran per 70 Kg Bag - KSh 200
Cost of Rice / Wheat Bran per Kg - KSh 2.86
FCR - 7
Cost per Kg of Fish - 7 × 2.86 = KSh 20.02
Total Feed Cost - 20.02 × 127.5 = KSh 2,552.55
Total Cost of Tilapia and Clarias Fingerlings = KSh 2,100
TOTAL - 2552.55 + 2100 = KSh 4,652.55
NET - 6675 - 4652.55 = KSh 2,022.45

Table 5 - Economic Model 2

The following is an economic model when the cost of feed soared to KSh 600 per bag in 1994, and it is the situation that still prevails to-date. The feed being used at that time, and which is still being used is Composed Feed which has an FCR of 2.5. No Interest / Overhead Charges have been included.

STOCKING :
Number of Tilapia Stocked - 600
Survival Rate - 50 %
Number of Clarias Stocked - 300
Survival Rate - 70 %

HARVESTING :
Number of Tilapia Harvested - 300
Mean Weight of Tilapia at harvest - 250g
Total Weight of Tilapia Harvested - 75 Kg
Market Price of Tilapia - KSh 40 per Kg
Total Amount obtained from sale of Tilapia - KSh 3,000

Number of Clarias Harvested - 210
Mean Weight of Clarias at harvest - 250g
Total weight of Clarias Harvested - 52.5 Kg
Market Price of Clarias - KSh 70 per Kg
Total Amount obtained from sale of Clarias - KSh 3,675

Total Weight of Clarias and Tilapia harvested - 127.5 Kg
Total Amount obtained from sale of Tilapia and Clarias - KSh 6,675

EXPENDITURE :
Cost of Tilapia Fingerlings (per piece) - KSh 2.00
Total Cost of Tilapia Fingerlings - KSh 1,200
Cost of Clarias Fingerlings (per piece) - KSh 3.00
Total Cost of Clarias Fingerlings - KSh 900

Cost of Composed Feed per 70 Kg Bag - KSh 610
Cost of Composed Feed per Kg - KSh 8.57
FCR - 2.5
Cost per Kg of Fish - 2.5 × 8.57 = KSh 21.425
Total Feed Cost - 21.425 × 127.5 = KSh 2731.69
Total Cost of Tilapia and Clarias Fingerlings = KSh 2,100
TOTAL - 2731.69 + 2100 = KSh 4831.69
NET - 6675 - 4831.69 = KSh 1843.31

2.3 Phase III - October 1994 to-date.

A local Consultant was again engaged in September-October 1994 to analyze Phase II of the scheme, identify problems and make recommendations so as to create a viable and sustainable credit facility. The Consultant presented their report in November 1994. The report was exhaustively reviewed by the senior project management, and the recommendations discussed with all the field staff involved in the future implementation of the scheme. After slight modifications, some of the recommendations of the Consultant were adopted although the basic principles underlying Phase III of the scheme were the same as those of Phase II.

For simplicity, the repayment of loans were now required on a monthly basis. To calculate the minimum expected repayment, the total loan amount was multiplied by 1.24 (24% over 2 years), and then this amount was divided by 24 (monthly installments).

Again, farmers were encouraged to repay earlier to avoid paying interest charges. All payments were to be recorded and signed in duplicate on new Loan Repayment Schedule Forms. A copy of the schedule was to stay with the farmer, while the other copy was to be filed in the farmer's file at the project office at the Fry Production Centre serving the district the farmer came from.

All the interest rates were reduced to 12% per annum or 1% per month with effect from 1st November 1994.

Due to the extremely poor repayment record of the loan scheme to-date, an definite moratorium was introduced on loans to both individuals and groups with effect from 1st January 1995. No new loans would be given in any location or district until the repayment reached a satisfactory level, equal or exceeding the planned monthly rate of reimbursement.

Loans to individual farmers were found to be uneconomical due to the small amounts of loans involved and also due to the frequent visits one had to pay these individual farmers. As a result, all future loans would also be restricted to Farmers Associations. A Fish Farmers Association was a group of individual farmers who formed and registered an association, with each individual in the association owning their own ponds. The loan would be given to the association and collected from the Chairman or a similar designated individual. Payments would still be made on a monthly basis. Separate guidelines for this would soon be drawn.

2.3.1 Loans Disbursed and Recovered

94 Farmers benefitted from the scheme between October 1994 to-date. 24 Groups received a total of Ksh 194,016, while 70 Individuals received a total of KSh 696,497 in kind. The amount disbursed totalled to KSh 890,513. The average loan size in kind in Phase III has been KSh 9473.50. Table 6 indicates the overall status of loans to beneficiaries in Phase III. Figure 6 indicates the loans disbursed and repaid by individuals during Phase III, while Figure 7 indicates the loans disbursed and repaid by groups during Phase III.

PHASE III - OVERALL STATUS OF LOANS BY DISTRICT.

Note - Amounts in KSh. (1 US $ = KSh 50)

PHASE III - LOANS TO INDIVIDUALS

Amounts Disbursed and Repaid

PHASE THREE - LOANS TO GROUPS

Amounts Disbursed and Repaid

2.3.2 Observations

At the time of this report (May 1995) which is 6 months after the beginning of Phase III, it is clear that there are still significant problems in the loan scheme despite the credit field days. Those problems are :-

• There was a surge in loan repayment immediately following these credit field days, but this has since declined.

• The extension staff are still not filling out the Loan Repayment Schedules. A variety of excuses are given. However, it is apparent that the staff are unwilling to combine extension work with the credit fund activities.