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					             THE REPUBLIC OF THE GAMBIA




ACCESS TO FINANCE IN THE ARTISANAL FISHERIES SUB-SECTOR OF THE
                           GAMBIA




 PRESENTATION MADE AT THE WORKSHOP ON ARTISANAL FISHERIES
  AND THE WORLD MARKETS (11-12 APRIL 2002): ADMINISTRATION OF
  AGRICULTURAL CREDIT SCHEMES WITH REFERENCE TO THE AFDP
                    CREDIT PROGRAMME

                             BY:

        MOHAMMED E. JAMMEH, MICRO FINANCE OFFICER,
         THE GAMBIA SOCIAL DEVELOPMENT FUND (SDF)




                                                 APRIL 2002
1.0   INTRODUCTION
      "Poverty" and "Poverty Alleviation" are frequently heard buzzwords of today's world. Poverty is
      a multidimensional phenomenon with a definition, which depends on the context and perspective
      that one is looking at. A working definition from Professor Muhammad Yunus is: Poverty is that
      characteristic of being in a state of "joblessness, illiteracy, landlessness, homelessness, lack of
      adequate capital, facilities and food to earn a decent living and also powerlessness". Poverty
      Alleviation is therefore the act of reducing the scourges of the above conditions on an individual
      or community. According to recent statistics about 1.6 billion people on the globe are in absolute
      poverty and the number is rising. All these poor people need help.

      There are various ways of helping the poor and one key way is the use of micro finance services.
      There are many definitions of micro finance. Joanna Ledgerwood, a professional at the World
      Bank, defined micro finance as the provision of financial services to low-income clients (the
      poor), including the self-employed. She says the financial services generally include savings
      and credit provision.

      Micro finance institutions use various lending models throughout the world. Some of the major
      lending models/methodologies are: the Grameen model, cooperatives and credit union model,
      visaca/village bank model and Rotating Savings and Credit Association (ROSACA) or Osusu
      model.

      The Grameen model emerged from the poor- focussed grassroots institution, the Grameen Bank
      that was started by Professor Muhammad Yunus in Bangladesh.

      It is essentially a group of five prospective borrowers saving and borrowing from a grassroots
      bank unit set up with a Field Manager and a number of bank workers covering an area of about 15
      to 22 villages. The savings are in the form of "musti chaul" (a handful of rice) and the group
      fund.

      The cooperative and credit union lending model depends on joint-ownership, democratic
      control, shared values or common bonds and member-driven motives while the Visaca or
      village/community banking model essentially treats the whole village or community as one unit
      and establishes a semi- formal financial institution through which micro finance is accessed.

      The Rotating Savings and Credit Association (ROSACA) or Osusu model has a group of
      individuals who came together and make regular cyclical contributions to a common fund, which
      is then given as a lumpsum to one member in each cycle. Each micro finance lending model
      relies on a set of best practices for its success in poverty alleviation.

      The World Microcredit Summit Campaign, in its website for Countdown 2005, has outlined nine
      (9) best practices for micro finance, which are as follows:

      (a)   Ensuring loan repayment.
      (b)   Moving towards institutional sustainability.
      (c)   Targeting the poorest and covering costs.
      (d)   Sustainability in industrialized countries.
      (e)   Empowering women.
      (f)   Establishment and use of poverty measurement tools.

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       (g)    Measuring impact on the lives of clients.
       (h)    Mobilizing savings and ensuring their safe use.
       (i)    Recruiting, training and retaining excellent staff.

       The combination of these best practices in the appropriate proportions is useful in poverty
       alleviation and other development plans. However, since micro finance deals with both business
       and human relationship, which involve a lot of risk-taking. The risks taken need to be managed
       properly.

       One risk management issue deals with the assessment and appraisal of creditworthiness.
       Focussing on the five C’s of credit as follows easily assesses the creditworthiness of a micro
       finance loan:

        (a)   Character (i.e. credit history, personal history, honesty, reliability and repayment ability)
        (b)   Capacity (i.e. amount conformably handled/managed, incomes/expenses and legal issues).
      (c)     Capital (i.e. currently held tangible assets, savings, investments and properties).
       (d)    Collateral (i.e. things offered as security/guarantee for loans).
       (e)    Conditions (i.e. other terms of accessing the loan)

       In essence, risk management helps to achieve sustainability in micro finance.

       The different players in micro finance may be divided into three broad categories as follows:
       practitioners, promoters (or facilitators/replicators) and projects and programs of micro finance.

       The micro finance promoters are agencies that have their own networks and facilitate the
       activities and resource mobilization of these networks [e.g. VISACA Promotion Center (VPC),
       FORUT, Association of Farmers Educators and Traders (AFET) and FFHC].

       The second category of micro finance players is the practitione rs, which actually carryout on a
       daily basis the services of savings mobilization and credit delivery [e.g. Gambia Women's
       Finance Association (GAWFA) and Gambia Rural Development Agency (GARDA) ]. These
       different players in micro finance use different lending methodologies in their operations.

       Micro finance projects and programs assist both the micro finance promoters and practitioners
       in their developmental endeavor by providing funds that could be accessed through wholesale.
       An example of such micro finance projects and programs is the SDF.


2.0   ACCESSING SDF CREDIT BY THE FISHER-FOLK FROM THE
      CREDIT PROGRAM OF THE ARTISANAL FISHERIES DEVELOPMENT
      PROJECT (AFDP)
       The Gambia Social Development Fund (SDF) was institutionalized in February 1998 by The
       Government of The Gambia (GOTG) as an autonomous charitable umbrella funding agency for
       poverty alleviation activities in the country. It works directly with groups in the form of Micro
       Finance Institutions (MFIs), Community Based Organizations (CBOs), Non-Governmental
       Organizations (NGOs) and Public Service Institutions (PSIs).



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      SDF uses a participatory demand-driven approach as its main intervention strategy in
      channeling resources to the poor in the most effective, efficient and timely manner. The main
      target beneficiaries are women, youths and the handicaps. These target beneficiaries fully
      participate in the identification, planning, implementation, monitoring and evaluation of sub-
      projects geared towards addressing the community/individuals’ needs and concerns.

      In order to carry out its functions, the SDF relies on a three-pronged attack to help fight poverty in
      The Gambia and these are: extensive Outreach and Monitoring activities, access to social and
      economic ventures and capacity building, and an offer of wholesale Micro Finance credits to
      legally recognized MFIs, NGOs and CBOs through its Micro Finance Unit (MFU). The main
      objectives of the MFU are:

       (a)       To provide credit facilities to the grassroots poor to help them undertake income-
                 generating ventures thus assisting in employment creation;

       (b)       To offer to the supported group's technical assistance, training and institutiona l
                 development interventions so as to strengthen the capacities of the MFIs/CBOs/NGOs
                 for savings mobilization and proper credit management.

      The SDF is a wholesale funding agency in terms of credit, delivery. It currently operates two
      loan schemes: the Individual and the Small Enterprise Development (SED) Credit.

      The individual loan scheme of the SDF is designed in such a way that only the Central Bank of
      The Gambia (CBG) registered/licensed institutions can directly access the micro credit funds
      from the SDF. The other institutions/groups that are not recognized as CBG registered/licensed
      Non-bank Financial Institutions (NBFIs) have to channel their loans through CBG
      registered/licensed NBFIs in order to get the individual credit. On the other hand, CBG
      recognized institutions as well as reputable NGOs and umbre lla CBOs running micro finance can
      directly access the group activity SED credit.

      SDF will facilitate the access of the fisher-folk to micro finance under the Credit Program of
      Artisanal Fisheries Development Project (AFDP) with more than D20million credit funds.
      These funds for the fisher – folk will cover the whole country over a six year period beginning
      2002.



3.   TARGETED FISHERIES BUSINESS SUB-SECTORS

     The following are the business areas for the fisheries sub-sector that could have
     access to SDF credit funds:
      (a)    Retailing and Wholesaling of fish and fish products ( Locally and overseas)

      (b)    Production of fish (i.e. aqua-culture and artisanal fishing)

                Acquisition of fishing boats
                Acquisition of fishing gears and other instruments
                Fish pond construction and management

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      (c)    Processing of fish and fish products
                 Fish Smoking
                 Fish Packaging
                 Fish Drying


4.0   METHODOLOGY OF SERVICE DELIVERY
      SDF microfinance only deals with wholesale lending. The wholesale loans for micro, small and
      medium enterprises are directly to intermediary agencies which inturn forward- lend to groups or
      individuals. The forward- lender or intermediary agency must be CBG recognised for individual
      final beneficiary loans. On the other hand, the group-activity credit under the SED must have
      intermediaries, which are either CBG recognized, or are reputable NGOs/umbrella CBOs with
      track records in savings and credit delivery. The SDF’s methods of microfinance services delivery
      may be better understood using the illustrations below:


      (a) Individual    Credit                      (b) SED Credit

                         SDF                                         SDF

       Disbursement            Repayment


             Intermediary Agency                            Intermediary Agency
            (CBG Recognized MFI)                         (CBG Recognized MFI, or
                                                         Reputable NGO/ Umbrella
                                                         CBO doing Micro finance)


                     Group
                    (NGO or CBO)                        Group (for group Activity
                                                                  only)


                Individual Members


      5.0 QUALIFICATION FOR AN SDF LOAN FOR GRASSROOTS GROUPS

             (a) Group must submit to its Intermediary Agency or Partner Organization (PO) a loan
                 application
             (b) Group must have a proven track record of running savings and credit for at least 2 years
             (c) Group must have a good and written credit policy in place
             (d) Group must be capable to manage the loans being applied for i.e. with good
                 management structure, credit committees and peer pressure in place
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      (e) Group must be ready to receive and give feed back as required

6.0   ELIGIBILITY CRITERIA FOR INTERMEDIARY
      AGENCIES/PARTNER ORGANISATIONS

      (a) Partner Organization (PO) must be a CBG registered MFI (for individual credit) or a
           reputable NGO/umbrella CBO (for access to SED credit meant for group activities)
      (b) PO must be engaged in savings and credit delivery with at least 2 years track record
      (c) PO should have a lending plan responsive to SDF targeted groups and business sectors
      (d) PO having a loan recovery rate of at least 95%
      (e) PO must be ready to borrow SDF funds for On- lending at the prevailing CBG discount
           rate.
      (f) PO must accept and sign the terms and conditions in the On- lending Agreement of the
           SDF
      (g) For SED credit, PO must submit on behalf of the applicant groups for the wholesale
           loan copies of a simplified business and marketing plan the contents of which should
           be:
           General information about the group
           Details of proposed sub-project to be funded
           Simple market analysis (i.e. Product, Price(s), Distribution (Place) and Promotion)
           Budget and possible sources of funding
           Estimated profitability

7.0   LOAN DURATIONS TYPE; SIZES, GRACE PERIOD AND INTEREST
      CHARGES

7.1   DURATION AND TYPES

      (a) Individual credit scheme:- short to medium term loans over 12 months duration
      (b) SED credit scheme:- short or medium term loans over periods up to 24 months
          maximum

7.2   LOAN SIZES AND GRACE PERIODS

      (a) Individual credit scheme:- Maximum of D5,000 per individual loan applicant with 1-3
          months maximum grace period depending upon activity type
      (b) SED Credit Scheme:- Maximum of D60,000 per group loan application with 1-4 month
          grace period depending on the type of activity

7.3   INTEREST CHARGES

      SDF lends all wholesale loans to its intermediary agencies or POs at the prevailing CBG
      discount rate the country. All POs are urged to forward- lend to the final beneficiaries using
      the market- lending rate for micro finance in the Gambia. Studies have shown that, the
      current market micro finance lending rate ranges between 15-35% per annum.

      SDF

                                             5
                      CBG Discount Rate



       PO

                      Market Interest Rate



       GROUP


                      Market Interest Rate


       INDIVIDUAL

 For the SED credit, there is a matching fund (counterpart contribution) of 10% of the applied
 loan. This may be contributed as an up front cash contribution (in which case it will not be part of
 the interest calculation) or contributed by the SDF as part of total loan (for which interest would
 be calculated on everything).

 All SDF interest charges are calculated using the straight-line method. In addition, penalty
 charges of 1% per month on outstanding balance is levied on loan repayments past due dates and
 after a reminder.

8.0    COLLATERAL/SECURITY/GUARANTEE

           Reliance on the On- lending Agreements
           Reliance on the group peer-pressure

9.0    LOAN APPLICATION, APPRAISAL AND APPROVAL PROCESSES
9.1        APPLICATION PROCESS

           All loan applications for funding should be made through a forward- lending agency (i.e.
           an MFI, an umbrella CBO or a reputable NGO), which should then send the applications
           to FMT through the Divisional Fund Officers (DFOs) stating the:
           (i) Loan amount requested on behalf of each group and group location;
           (ii) List and number of groups intended to benefit from the funds;
           (iii) Number of intended beneficiaries for each group;
            (iv) Profile of these beneficiaries: men and women for each group; and
            (v) Business activity or enterprise to be undertaken by each group.




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         This information should be filled in the letter of loan application by the forward- lender,
         which should be accompanied by the completed standard loan application Form SDF
         W2.1, and a simple business and marketing plan (in the case of SED).

9.2      APPRAISAL AND SCREENING

         DFOs, staff of the forward-lenders and FMT members are involved in the appraisal of
         the loans. The initial appraisal, verifications and screening would be done at the
         divisional level while final appraisal and screening are done by the technical staff at the
         levels of the forward- lending agencies and the FMT.

9.3     APPROVAL OF LOANS

       The SDF Board and FMT do the approval of all loans for income generating activities.
       Loans of D30,000 and below are approved by FMT, while the Board approves loans of
       more than D30,000.

10.0     LOAN DISBURSEMENT PROCESS
       Loan disbursements for the wholesale loans are done by cheque. All loans are disbursed
       either in a lumpsum or in installments. However, loan amounts relating to capital items may
       be delivered in-kind as deemed necessary so as to avoid loan fund diversions. All loan
       disbursements are in accordance with what is agreed in the flexible Loan Disbursement
       Schedule of the On- lending Agreement.

11.0    LOAN MONITORING AND SUPERVISION

       The monitoring and supervision of the SED loans are done jointly by the MFO and OMO in
       collaboration with the DFOs, other extension workers and staff of Partner Organizations
       within the seven administrative areas. The quarterly and annual reports of these key staff
       capture the progress of the loan scheme.

12.0      LOAN RECOVERY/COLLECTION

       The staff of the SDF and the forward- lending agencies are charged with the responsibility
       of collecting all loan repayments for the credit scheme from borrower groups relying on
       their peer pressure.

       Loan repayments to the SDF are done by the forward-lenders in cheque only directly to
       SDF Accounts, and every loan repayment is receipted. All loan repayments from forward-
       lenders are in accordance with the agreements spelt out in the Loan Repayment Schedule
       of the On- lending Agreement.
13.0 ISSUES GOVERNING LOAN ADMINISTRATION
        The potential for loan default from the SDF scheme is reduced to the minimum. All loan
        repayments that are one month past due date attracts a penalty charge o f 1% per month o n
        the overdue outstanding balance plus accrued interest over the period.

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 All disputes/default cases pertaining to the SDF loan scheme are settled in an amicable
 manner and where that fails, the SDF recommends and takes legal action aga inst the
 concerned group(s). In the event of a legal settlement of any loan, the SDF’s claims are
 limited to the principal and accrued interest, legal costs and penalties over the period.


In conclusion, access to finance by the fisher- folk one important possibility to help alleviate
poverty, but a quotation from A. Rahman et al of IFAD would better demonstrate the way
poverty reduction should be done and I quote: “ Poverty reduction is not something that
Governments, development institutions or NGOs can do for the poor. The poor
themselves have to seize responsibility, as gents of change, for their own development “.


The Gambia Social Development Fund (SDF)
17 Garba Jahumpa Road, Bakau New Town, KMC, The Gambia
Tel: 494-329/ -330/ -332/ -310
Fax: 494-331
Email: sdf@qanet.gm




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