Small fish farmers pay high interest for loans: study

Small fish farmers have to pay a higher interest rate on credit than their larger peers as they have to borrow from NGOs and microfinance institutions (MFIs) owing to bankers' reluctance to provide finance without collateral, according to a study on aquaculture unveiled yesterday.

Carried out by the Bangladesh Shrimp and Fish Foundation (BSFF), the study finds that more than 70 percent of small farmers borrow from relatives, NGOs and MFIs.

Only 24 percent of them could get loans from state-owned and private banks.

On the other hand, banks were sources of finance for a total of 65 percent of large and 48 percent of midsize aquaculture farmers, according to the study on “supports received by the aquaculture sector in Bangladesh: existing reality and scope for improvements”.

“Small farmers remain in a disadvantageous position in terms of credit,” said Bazlul Haque Khondker, a professor at the department of economics at the University of Dhaka, while presenting the findings of the study at a workshop at the Pan Pacific Sonargaon hotel in Dhaka. 

The BSFF organised the event to disseminate the findings of the study on 450 aquaculture farms from 19 upazilas, covering all divisions.

Discussants demanded ensuring low-cost loans for farmers, aquaculture insurance, increased public investment and supply of quality fish fries and post larva to increase production of cultured fishes, which accounted for 56 percent of the total fish supply in fiscal 2015-16.

Participants said high cost and substandard feed are major problems for aquaculture farmers. Some 90 percent of farmers identified high price of fish as one of the most important problems, according to the study.

Md Akter Hassan Panna, managing director of Pranti Aquaculture Ltd, said most of the shrimp farmers run short of working capital.

“As a result, they have to buy on credit and at higher prices. As they have to buy on credit, they have little option to choose quality,” said Panna, who grows shrimp following an intensive or advanced cultivation method.

He said availability of low-interest loans would be beneficial for farmers. “But we are deprived of that,” he said, adding that high interest ate into the margins.

He said farmers also incur losses due to natural calamities and disease attacks. “We have long been demanding insurance coverage.”

The survey finds that owners of 5 percent of small, 11 percent of medium and 26 percent of large farms received loans from private banks. “Private bank loans for small farmers were insignificant,” said Khondker.

Banks are reluctant to extend credit to small farmers as they cannot offer collateral. The administrative and supervisory cost for loan processing and monitoring was high, the study said, adding that aquaculture is also seen as a risky sector because of production uncertainties.

As a result, small farmers turn to NGOs, MFIs and relatives for credit. The cost of finance was found to be significantly higher for credit from NGOs and MFIs, according to the study.

“The respondents complained about hardship caused by obligation to make weekly payment even when production cycle was not complete and that no grace period was allowed,” said the study.

BSFF Chairman Syed Mahmudul Haque stressed the need for increasing fish yield, citing that the national average for shrimp yield is 400 kilogrammes per hectare.

As feed cost accounts for 61 percent of the total production cost of aquaculture farmers, prices should be reduced through policy measures so that farmers can keep production cost low to become competitive in the world market, he said.

“Ensuring quality seed and feed for growers is vital,” said AHM Kohinoor, principal scientific officer of Bangladesh Fisheries Research Institute.

He said there are 120 feed companies producing fish feed and 40 percent of them produce quality feed.

Negative impacts of climate change and water pollution are growing threats to the fisheries sector and are fast becoming a serious public health issue, he added.