based on the work of
Ulf N. Wijkstrom (FAO Consultant Economist)
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
Rome, 1990
1 Introduction
So far, only fish farming has needed credit. As culture based fisheries has not yet started, there is naturally no experience in financing this activity. Thus, this section of the report concerns financing of fish farming.
In Ghana a number of banks provide credit for crop growing and livestock rearing. Alongside this formal credit system, informal, traditional systems exist. This Annex is concerned only with the formal banking system.
2 The Banks' Experience in the 1980's
In the early 1980's, the Government of Ghana encouraged the construction of ponds and the culture of fish. To facilitate this policy, banks were instructed to provide finance for pond construction. Several did so. Personnel with fisheries or fish farming backgrounds were recruited as project officers to both evaluate loans and advise the prospective fish farmers. Loans were not always given against hard collateral, guarantees were accepted ( as they were for other sectors of the economy). Loans were given on fluctuating interest rates. Several banks lent considerable amounts towards pond construction in the years 1983, 1984.
As a rule, experience has been bad. The repayments were not made as expected. Most bank officers interviewed during the mission reported that funds were still outstanding. It seems to have been a frequent occurrence that those who did repay did so with funds earned from activities other than fish farming.
After a few years the banks drastically decreased loans for the construction of fish ponds and, as far as the mission can ascertain, few loans have been made during the last few years. Bad management, or bad technology, were reported as the main reasons for the bad performance of the borrowers. Also, in several cases funds repaid had not originated from sales of cultured fish but from other sources.
3 The situation in April 1990
The banks are willing to lend for the construction of fish ponds but the conditions for the loans are strict and make them suitable mostly for those who are well established economically.
Guarantees are no longer accepted as collateral. Immovable property in the form of farms, buildings, deposits, bonds are accepted. Generally, the estimated value of the collateral has to be at least equivalent to the amount of the funds onlent.
Interest rates, in April 1990, can be set by the banks. For fish ponds, classified under agriculture, they were generally reported as about 26% per year. This, it was noted by one bank manager, is more favourable than the rate of 30% which is applied to the marine fisheries sector.
The Agriculture Development Bank has a few loan (project) officers with educational and practical experience from the fisheries sector. The practical experience of these officers of aquaculture is, however, weak. Most bank managers say that they will refer any loan request by a fish farmer to headquarters in Accra before deciding on a credit.
4 Conclusions
A number of conclusions can be drawn with respect to the usefulness of bank credit for the development and expansion of fish farming in Ghana.
Credit is and will continue to be available to fish farmers. However, the conditions are demanding. In particular, the demands for collateral are stringent. Thus, in effect, only those who already control considerable assets -which they can place as a guarantee for any bank loan - will have access to credit from the formal banking system. Thus, the formal credit system is not now functioning in a manner which will facilitate access of the small farmers - even if they are commercial in nature - to bank funds. The system is slow. The need for assessment by Accra-based staff will necessarily slow down the rate of allocation of credit.
5 Recommendations
It is the view of the author that it would be unrealistic to expect the banking system to provide credit on more favourable terms to fish farmers than to other farmers. The fish farmers are not a sufficiently strong group to obtain preferential treatment. The best that can be achieved is probably for the Fisheries Department and interested farmers to make concerned bank staff more familiar with good, successful fish farming activities. This could take the form of visits to successful fish farms or to government demonstration farms.
