» Revolving Community Loan Fund Ecotrust Canada
Social finance as a tool to support fishing communities

For many years we have seen a sharp decline in the real benefit communities and fishermen receive from their adjacent marine resources. Yet fisheries remain an integral part of the economic, environmental, and social fabric of fishing communities. Ecotrust Canada is working in partnership with First Nations communities and fishermen to design, test and implement financing solutions that can reverse this trend and help meet local objectives.

 

The Challenge

Communities are facing many challenges in their fisheries: no security of access; deteriorating infrastructure and boats; rapidly increasing purchase costs for new entrants; unstable fish populations; variable market prices; rising operating costs; competition for ocean space and resource use; limited to no succession; loss of fisherman knowledge; and limited or no access to capital.

Limited access to capital has been a serious barrier for fishermen struggling to stay on the water, and has hindered the ability of communities to seed their vision for a viable and dynamic local fisheries economy.

This limited capital access has traditionally been due to:

  • The high or variable risk nature of industry
  • A lack of credit history and/or low financial expertise on the part of fishermen
  • Minimal capacity to build and implement proposals for financing
  • A Low understanding of the fishing industry by financiers

 

The Opportunity

Despite these challenges, fisheries remain an integral part of coastal communities. If well managed by local leadership, fisheries can provide measurable improvements in community health and resilience. Furthermore, resident small boat fleets are essential to realizing this opportunity and the long-term sustainability of ocean resources. We know that creative and responsible approaches to financing driven by local objectives can lower the costs of going fishing, improve the viability of the small boat fleet and make it easier for younger generations to pursue careers in the industry. This is worth investing in for many reasons:

  • Commercial fishing is vital to the health, economies, and culture of coastal BC communities
  • Fishing is one of BC’s most environmentally sustainable and renewable resource-based industries
  • There is a high demand for seafood
  • Fishing supports regional food security

 

Solution in Action: A Revolving Loan Fund for Fishermen

We have designed a revolving loan fund with a partner First Nation that will give fishermen access to low-cost loans for in-season start-up costs.

These loans would support fishermen with no current access to financing and give greater agency to those who are traditionally reliant on a company for financing. For example, with this independent financing fishermen would have greater freedom to sell to who they want, increase their earnings, and pursue new or alternative value-added opportunities.

Many fishermen struggle with costs at the beginning of the season: licence fees, ice, vessel repairs, gear upgrades, or even fuel. They have little choice but to fish for large companies who provide upfront loans in exchange for guaranteed sales agreements that offer fishermen a very low price for their catch. This puts the fishermen in the position of being “price takers”. This lost revenue opportunity not only hurts the livelihood of fishermen, but also drains potential income and employment from local communities: for every $1 of revenue generated by a small boat fisherman, roughly $0.80 will remain in the region through wages and spending on gear, food, goods, and services.

For every dollar earned by small boat fishermen, 80 cents stays in the region as spending on wages, gear, food, goods, and services.

Although banks and other investors have historically avoided lending to fishermen due to the uncertainty of the industry and low repayment rates, we are optimistic that a community-based approach to lending can lead to better outcomes.

Each fund goes through a rigorous community design process so community leaders, fishermen, and community members all have a say in structuring the loan fund for success. This community-based approach improves the chance that the repayment scheme will actually work for fishermen and builds the foundation for a structure that enables the fund to grow over time.

 

Our Approach / Demonstrating Impact

We work in collaboration with our community and industry partners, taking our lead from the challenges they identify and the objectives they provide us. Our partners, like us, recognize and want the economic, social, and cultural benefits that healthy local fisheries can provide, and are committed to helping the viability of small boat fishermen.

For our first pilot fund, this meant getting creative about how loans could be disbursed and collected. We interviewed community members, fishermen, local businesses, fishing industry experts, and the local government to design a model that gives fishermen the access to capital they need, under conditions acceptable to them and the community, including:

  • Loan pricing and cycle time adapted to fishing seasons
  • Non-traditional criteria for borrowing and repayment
  • A straightforward collection process
  • A transparent and fair eligibility process

While the model will not be identical for every community, we believe a partnership-based approach to loan fund design and lending has a much higher likelihood of success and can give better social and financial returns than conventional lending from institutions.

The revolving loan fund cycle.

 

Expanding Our Reach

Ecotrust Canada can help your community implement a revolving loan fund by:

  • Host an information workshop to understand your priorities and objectives and assess whether or not a revolving loan fund would meet your needs
  • Facilitate a community-led design process to decide on a focus area and fund structure
  • Find funding for the loan design and loan fund, drawing on unrestricted funds from philanthropic sources as well other types of mission based funds
  • Work with assigned individuals and community champions (e.g. band staff) to establish loan administration, including application and assessment tools, risk management policies, and lending procedures – and then check back to make sure they meet the community priorities and objectives
  • Hire, train, and support a local fund manager to oversee the fund and provide financial literacy training for loan recipients
  • Model the direct and indirect economic impacts of the loan fund in your community – how is it actually making a difference?
  • Evaluate the fund on an ongoing basis and recommend changes to the structure as necessary

 

Ecotrust Canada ‘s background in social lending

Our objective is to design and build alternative economic models that provide greater benefits to people in place. As one part of our portfolio of work and tools, we owned and operated a $4 million revolving loan fund between 1999 and 2010. Our direct experience with the operation of a loan fund – together with our deep knowledge of the fishing industry, the region, the need as described by our community partners and the role of social finance to stimulate change – has inspired us to use this expertise to support small revolving loan funds in coastal communities.