2011 informal credit systems in fishing

7/26/2019 2011 Informal Credit Systems in Fishing

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224 HUMAN ORGANIZATION

Human Organization, Vol. 70, No. 3, 2011

Copyright 2011 by the Society for Applied Anthropology

0018-7259/11/030224-09$1.40/1

Introduction

The few studies of rural credit demand and supply in

Vietnam have focused on agriculture (e.g., Barslund

and Tarp 2003; Duong and Izumida 2002).Credit in

sheries has been ignored almost entirely. In a study of sh

marketing, for instance, Lem et al. (2004) comment merely

that demand in the marketing sector outstrips credit availabil-

ity and that limited credit prevents wholesalers and retailerssupplying the domestic market from expanding and improving

their businesses. Because of that, the main objective of this

rst detailed study of credit systems in the sheries of Viet-

nam is to provide a baseline of recent information that raises

issues to provoke more specically focused research. From

that, some directions for further research on credit systems

in small-scale or coastal sheries are suggested.

The second purpose is to clarify some basic aspects of the

relationship between the formal and informal components

of credit systems. Such a dualistic concept is constraining

and inappropriate, because a continuum of institutions and

Kenneth Ruddle is afliated with the Research Center for Resources and

Rural Development, Hanoi, Vietnam. Research was supported nancially

by IC-Net, as part of a JICA project. Local assistance was provided by

Dr. Nguyen Long, then of the Research Institute of Marine Products,

Haiphong, and provincial sheries ofcers. Professor Anthony Davis,

Department of Sociology-Anthropology, Mount Saint Vincent University,

Halifax, Nova Scotia, Canada, made valuable comments on an early

draft of the manuscript as did three anonymous reviewers of the submit-

ted version. The author is most grateful to them all.

Informal Credit Systems in Fishing Communities:

Issues and Examples from VietnamKenneth Ruddle

Exemplication of informal credit and local nancial systems since the 1940s has discredited the assumptions that these either

do not exist or, if they do, that they impose harsh conditions on borrowers. Nevertheless, those erroneous ideas remain tenacious.

A sample of 403 marine sheries stakeholders in ve provinces of Vietnam demonstrates that, lacking collateral acceptable

to the formal sector, sheries households depend on the informal nancial system. Credit is pieced together generally from

several formal and informal sources to nance shing boats and operations. Credit demand and supply in capture sheries

communities still requires comprehensive examination, especially for countries like Vietnam, for which this is the rst study.

The role of informal credit systems is examined, the associated patron-client relationship revisited, and additional research

needs suggested. Research on nancial systems should be broad and integrated, focusing on the varied interlocking contexts

of individuals and institutions and aimed at transcending misconceptions like the dichotomy between formal and informal.

Key words: coastal sheries, credit systems, nancial institutions, sheries credit, patron-client relationship

individuals is involved. Not the least is that informal can be

regarded as pejorative, with its implications of unsophisticat-

ed, unregulated, or uncontrolled. These are patently not

the case in many nancial transactions. Similarly, the dualism

between group and individual sets up a false exclusiveness

because a household is likely to have more than one credit

and savings strategy. And since household nancial decisions

are inuenced by a range of sociocultural, economic, and

ecological factors, both dualistic concepts ignore linkages andchange within any given location. It is important to keep these

shortcomings in mind when using such terms and concepts.

During the eld research on which this article is based, it

became apparent that aspects of the credit system under study

provided classic examples of the familiar patron-client rela-

tionship. A third purpose of this article is, therefore, to briey

revisit that relationship, particularly from the perspective of

small-scale sheries, so that it is not overlooked in both fu-

ture research designs and development practitioner thinking.

Based on an interviewed sample of 403 marine sheries

stakeholders, the research showed that a social web performed

informal credit functions in the ve provinces studied (Ba Ria-

Vung Tau, Binh Thuan, Khanh Hoa, Quang Nam Danang, and

Quang Binh [Figure 1]), with small groups based solely on

shared mutual interest formed for nancing shing boats and

operations. They were based either on the extended family,

on a group of friends from the same shing community, or

a combination of both. Sources of credit were banks, family

members, friends from within the community, and money-

lenders. Family members and friends generally became per-

manent partners in the enterprise of the sher to whom they


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extended credit, whereas money lenders became investors

in an enterprise. Generally, credit was pieced together from

several sources to fulll a single purpose. Although varying

in importance by location, as between the relatively poor

Quang Binh Province and richer Ba Ria-Vung Tau Province,

for example, the general preference was to obtain a loan from:

(1) family, (2) family and a bank, and (3) family and friends

(partners or moneylenders [investors]).

Informal Rural Credit Systems

Although the role of credit in promoting sustained ru-

ral development has been challenged (Osborne 2006), the

prevailing view is that it enables poor producers to purchase

inputs that raise productivity (Adams and von Pischke 1994;

Barham, Boucher, and Carter 1996; Feder et al. 1990). Pa-

ternalist policies based on that perspective commonly but

erroneously assumed that there were no preexisting credit

systems in economically poor countries. Where such systems

could not be overlooked, understanding was confounded by

stereotypical ideas that invariably condemned informal credit

as lacking transparency and accountability, with moneylend-

ers characteristically demanding high interest rates under

onerous conditions that in shing communities might include

catch-sale bondage, obligatory boat rental, or requirements

to purchase supplies from lenders. As a result, it is thought

conventionally that government, either directly or through

intermediaries like NGOs, must provide formal credit.

Figure 1. Location of Vietnam and the Provinces Studied


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Although several cases have described particularly oner-

ous conditions within convoluted credit systems in South

Asian small-scale sheries (Aghazadeh 1994; Khan, Ali, and

Tanveer 2005; Rahman et al. 2002), such situations are not the

norm throughout Asia. Evidence to the contrary from South-

east Asia was demonstrated in the 1940s by Raymond Firths

(1966) classic and exquisitely detailed study of the economy

of a Malay shing community. Further contrary evidence was

provided by scholars examining client-patron relationships(see below), as well as by another group (Merlijn 1989; Plat-

teau and Abraham 1987; Stirrat 1974; Yap 1978) focusing on

the role of middlemen in shing communities. These scholars

have challenged the established view by emphasizing the

range of social and economic functions they perform.

However, such work has been largely overlooked by

development practitioners, who were predominantly econo-

mists. Yamey (1964), for example, attributed the neglect of

anthropological studies to the economists concern with such

large-scale factors as entire sectors of a national economy

(compared with the general small-scale anthropological fo-

cus); to time pressures that forced them to refer to distilled

reports rather than examine primary studies and original

eld data; and to their focus on such issues as foreign trade

or public nance, to which anthropologists seemingly had

nothing to contribute.

The latest body of evidence began to emerge in the early

1990s, when Adams (1992), Adams and Fitchett (1992),

Bouman (1990), and Bouman and Hospes (1994) showed

the widespread importance of informal nancial systems

in poorer nations and, contrary to stereotypical thinking,

that well-functioning preexisting credit schemes are neither

uncommon nor necessarily exploitative. Subsequently, rural

credit arrangements have been revealed as both heterogeneous

and segmented, with the coexistence of formal and informalcredit markets being widely reported for Asia (Bardhan and

Udry 1999; Barslund and Tarp 2003; Duong and Izumida

2002; Yadav, Otsuka, and David 1992), Latin America

(Guirkinger 2008; Trivelli 2003), and Africa (Mosley 1999).

In addition to a lack of collateral, as is common among

shers and which, therefore, drives them to the informal

nancial sector, informal credit systems have some impor-

tant advantages over the formal sector. These include ready

availability, quick and easy delivery, exible conditions,

unintimidating application procedures, and the perception

of being less risky than loans contracted in the formal sec -

tor. Further, although interest rates on informal loans vary

depending on the source, there is often little or none on thosefrom friends or relatives. However, loans from informal credit

institutions can have higher interest rates than those in the

formal sector. Nevertheless, as in Bangladesh, for example,

people still prefer to use the informal sector, believing that

formal institutions are too corrupt, too bureaucratic, and too

focused on prots (Holmgren 2005).

Lacking collateral that includes land deeds/titles, other

immovable property, and third party guarantees, as required

by banks, almost everywhere in poor countries small-scale

shers nd it either difcult or, more likely, impossible to

obtain institutional credit for working capital. For that reason,

nancial institutions have been essentially uninvolved in

nancing the small-scale sheries sector. There are several

reasons for that. As Aghazadeh (1994) commented for Ban-

gladesh, inappropriate lending policies and procedures for

sheries are an obstacle because target groups for lending

are often not well dened in terms of qualications, experi-

ence, income, ownership/non-ownership of productive assets,gender, and geographical location. Further, the formal sector

suffers from nancial indiscipline and other institutional

shortcomings, like poor arrangements for rural credit, an

emphasis on commercial lending, a poor capacity to supervise

project lending to shers owing to a lack of personnel trained

in sheries, and reliance on overly complex bureaucratic

procedures. Aghazadehs observations are salient to a wide

variety of small boat shing settings.

Revisiting the Patron-Client Relationship

As emerges in the following examples from Vietnam,

the informal credit relationships illustrated here could be

described and analyzed within a patron-client framework,

described as ...a vertical dyadic alliance; that is, an alliance

between two people of unequal status, power, or resources

each of whom nds it useful to have as an ally someone su-

perior or inferior to himself (Land 1977:xx). This is a long

familiar model (Lemarchand and Legg 1972; Popkin 1979;

Scott 1976; Swartz 1968). Although such a relationship is

based on superior-inferior status, it rests also on reciprocity

and face-to-face contact between the parties (Powell 1970).

Scott (1976) argued that the justication of any hierarchy

of status and power implies the creation of morally-based

role obligations. Clients accept inequalities because patronsprovide social and material guarantees in return for the results

of labor and services (in the form of sh in this case), and

loyalty under conditions of labor scarcity and an absence of

competition from other patrons, such that mutual interest and

benet unites the patron-client pair until the actions of one

rupture the moral framework. This approach does not hold

up in the cases from Vietnam described here, because there

is a surplus of labor and more than one potential patron in

a community. In contrast, in a competing rational political

economy thesis based on his study of precolonial farming

villages in Vietnam, Popkin (1979) argued that individual

choice and decision making were the key concepts. He argues

that norms are renegotiated and shifted considering chang-ing power and strategic relationships, such that a farmer is

self-interested and rational because he is concerned above all

with his households welfare and security.

It would be risky to apply either one of these competing

theories directly to sheries communities in Vietnam and

particularly those where the traditional sheries village

management institution known as the van chaihas remained

strong (Nguyen and Ruddle 2010; Ruddle 1998, 2009; Ruddle

and Tuong 2009). Although elements of both the Popkin and


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227VOL. 70, NO. 3, FALL 2011

Scott hypotheses can be discerned in the empirical data pre-

sented here, in sheries communities where a van chai retains

a strong inuence, as will be seen below, the moral imperative

that it introduces is likely to be predominant.

Patron-client relationships have long played a major

role in marine resource use in Southeast Asia (Firth 1966;

Mangahas 2004; Merlijn 1989; Pelras 2000) where they are

especially common in Chinese-managed business. Far from

being conservative actors in the shing industry, Mez andFerse (2010) observe that by reacting to market indicators,

particularly entrepreneurial patrons function as business

innovators by announcing their willingness to buy a new

commodity and equipping their clients to switch shing tar-

gets and harvest it. In general, loans and related matters are

handled informally, except for the clients moral obligation to

sell all his catches to the middleman to whom he is indebted.

In Sarawak, for example, middlemen supply trawlers with

cool boxes, sh baskets, prawn tanks, and ice paid for by a

deduction from the catch price (Merlijn 1989). Merlijn notes

that this provides both credit and insurance since the price

is lowered when the catch is of low value. Small loans are

extended informally and on a verbal basis and seem to be

only vaguely kept in mind, which, Merlijn (1989:691) says:

Reects the basic stake at the root of the debt relationship.The middlemen are basically interested in the persistenceof this relationship and use the loans in order to maintainaccess to the shermens catches. To the extent that theyare satised with their shermen, they are eager to preventthem from repaying their loans. The fact that neither partyappears to wish to settle these running debts should be seenin this light. The message being conveyed is that trust isestablished between them, and as long as trust exists, thereis no reason to worry about nancial transactions. As aconsequence, repayments are never xed, neither in time

nor in installments. The rhythm of repayment depends onthe daily landings of the shermen.

In addition, middlemen provide a exible, round-the-clock

marketing service and will accept catches that include an

extremely high percentage of trash sh. From this, Merlijn

(1989:692) concludes:

The overall relationship between a middleman and a trawl-ing sherman is certainly not one of exploitation, but a sortof social agreement with mutual benets. Fishermen needto sell their highly perishable commodity without delay, tohave immediate access to unsecured loans without cum-

bersome formalities, and to obtain inputs when these areneeded. For middlemen, a steady and substantial supplyof sh is of crucial importance. These concerns crystallizeinto a situation where middlemen are ready to meet theneeds of shermen to the best possible extent.

Structure of the Rural Credit System inVietnam

Average per capita annual incomes in the sheries

households studied were higher than those both for Vietnam

and for their respective provinces (GOV 1994, 1995a).

Although budgets and savings rates of the households

sampled were positive, and for sheries households above

the national and regional averages, nevertheless savings

alone would not have covered the purchase or maintenance

of a shing boat, engine, gear, or other major items of

equipment. Thus, the role of credit was regarded by sh-

ers as being critical to the sheries sector of the provinces

studied. Average per capita annual incomes varied from

$232 in Quang Binh Province, which was 2.5 times higherthan the per capita average for the province, to $690 for

individual sheries household members working the much

richer sheries of Ba Ria-Vung Tau Province (3.7 times the

provincial average). Average sheries household savings

rates (i.e., the percentage of total annual income saved)

were 48.1 percent and ranged from 31.0 percent in Khanh

Hoa to 74.2 percent in Ba Ria-Vung Tau.

The Vietnam Living Standards Survey 1992-1993, which

sampled 4,800 households nationwide, showed that approxi-

mately 60 percent of them had taken loans and that about 70

percent had borrowed from informal sources (GOV 1994). A

later survey of rural households found that 25 percent of all

loans had been obtained from family and friends, 36 percent

was derived from market intermediaries and money lenders,

and 34 percent from formal institutions (GOV 1995b).

The eld research reported on here shows that credit

and other nancial services were obtained from a variety of

sources. Banks played the predominant role in the formal

sector, whereas in the informal sector family members were

the main suppliers. However, most shing boat owners raised

credit by combining funds obtained from a bank with those

raised from one or more informal sources. Informal sources

of borrowing were preeminent in marine capture shing

communities.

Credit was used by boat owners mainly to build newboats or purchase engines, gear, and other essential equip-

ment. Overall, 44 percent (n=79) of respondents obtained

credit from family members. In addition to reecting the

general scarcity of acceptable levels of collateral among boat

owners, especially those who were not already relatively

well-off, borrowing from family also avoided the high interest

charge of bank loans and the short period for which bank loans

were made available. Rates of obtaining credit from family

members ranged from 55 percent of respondents in Danang to

a low of 20 percent in Quang Binh. These differences capture

and reect the relative afuence of the general population in

Quangnam Danang and the generally poor economic condi-

tion of the population in Quang Binh.Twenty-eight percent of boat owners raised capital from

a combination of family sources and bank loans. The rate in

Quang Binh was 72 percent, which despite the drawbacks

associated with bank loans, again reected the general lack

of nancial resources within families in that province. In Ba

Ria-Vung Tau, 40 percent of boat owners obtained credit

from the bank. In contrast to Quang Binh, this reected the

ability of the relatively rich Ba Ria-Vung Tau boat owners

to provide the requisite collateral.


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Loans obtained from a combination of family members

and investors (generally friends from within the same sh-

ing community) were the third most common way of raising

capital and reported by 15 percent of boat owners. Like bank

loans, raising capital from investors was expensive. However,

whereas bank loans were expensive in the short term, those

from investors had a long-term cost since investors usually

took a permanent share of the boat owners annual prots.

For this reason also, only six percent of boat owners obtainedcapital from investors or partners alone. This was the same

as the rate for bank loans.

Half of the eight market intermediaries (i.e., middle-

men) interviewed borrowed less than the prot they made

during the previous year. In three cases, the level of credit

ranged from 100 to 300 percent of their latest annual prots.

These were market intermediaries specialized in supplying

local frozen sh factories, a stable local relationship that

enhanced their creditworthiness.

Bank Loans

Overall interest rates on bank loans obtained by boat

owners averaged 2.24 percent per month in all ve provinces.

Rates ranged from a below average of 1.85 percent per month

in Nhatrang and Danang to about average in Quang Binh

(2.19% per month) and Binh Thuan (2.26% per month), to

a high of 2.96 percent per month in Ba Ria-Vung Tau. Loan

periods also varied, with a range of from four months to four

years and an average of 1.7 years. Average loan periods were

shortest in Quang Binh (1.3 years) and longest in Ba Ria-Vung

Tau (3.0 years). This again reected the relative poverty of

Quang Binh shers compared with the relative afuence of

those in Ba Ria-Vung Tau, and, therefore, the risk-taking

perceptions of bank loan ofcers. Loan periods were closeto the overall average in Danang (1.65 years), Nhatrang (1.6

years), and Binh Thuan (1.8 years).

Market intermediaries relied little on banks. Indeed, only

one had obtained credit exclusively from a bank (borrowing

$1,800 for 12 months at an interest rate of 2.6% per month).

Another combined a bank loan of $18,100 (for a three month

period at a rate of 2.2% per month) with money borrowed

from family members. However, only 17 percent of the total

credit borrowed was obtained from the bank. No examples

were found of market intermediaries obtaining credit either

from friends or nancial institutions other than banks.

Loans from Family Members

Of 69 boat owners interviewed, 44 percent had obtained

their capital by borrowing from family members; either alone

or combined with some other source of credit. Of these, only

two were required to pay annual interest (compared with

monthly interest at the banks) on the outstanding balance. In

neither case had a precise repayment schedule been xed. In

the case of a bottom gill-netter from Long Hai, Ba Ria-Vung

Tau, the $9,000 borrowed for an unlimited period carried an

interest rate of 5 percent per year. In the other case, a purse-

seiner from Danang, a $27,000 loan carried an annual interest

rate of 10 percent.

Moneylenders (Investors)

Only 6 percent of boat owners raised capital entirely

from moneylenders. Such people were mainly sh market in-

termediaries who combine moneylending and other businessenterprises with their main marine resource business. In the

Northern and Central regions, moneylenders provide capital

for the purchase or construction of shing boats, whereas in

the Southern Region they covered mostly the cost of shing

supplies (ice, drinking water, food, fuel, and lubricants).

Moneylenders were not a popular source of funds among

boat owners because interest rates were relatively high and

lending periods limited, the maximum period in the sample

being two years. However, less collateral was required than

for bank loans. Interest rates were usually 3.0 percent per

month. In addition, since most moneylenders were also sh

market intermediaries, as a condition of the loan, boat own-

ers were required to sell their catch to the moneylender who

extended credit to them. Although in some cases this was done

at the prevailing market price, mostly the catch was sold at

a discount of 10-15 percent.

The business arrangements between moneylenders and

boat owners varied considerably. In some cases, no interest

was charged on the loan, but catch sales arrangements could

be onerous. Some required the sale of the entire catch to

the moneylender, whereas, in other cases, only part of the

catch was sold at a discounted price to that person. In some

instances, no repayments were claimed from the boat owner

when catches were bad, but under those conditions, the repay-

ment would accumulate.There were usually several or more moneylenders in

all but the poorest shing communities. They competed for

clients, and richer moneylenders had business relationships

with several or more boat owners. Since money lenders might

have to compete among themselves within a community to

invest in a shing boat owner, they were obliged to be gener-

ous with their clients. In addition to making gifts on the

special occasions of festivals and family ceremonies, they had

to assist them during time of need. On the other hand, boat

owners have such a relationship with only one moneylender,

and they could change moneylenders if a relationship soured.

In some instances, it was reported that shing families had

maintained a business relationship with the moneylendersfamily for several generations, with sons and daughters on

both side of the arrangement inheriting mutual obligations.

Loans from Family Members Combined withAnother Source

Forty-four percent of boat owners formed their capital by

combining loans from family members with those obtained

from another source, either a bank or a moneylender. This


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combination had the advantage of reducing the total cost of a

loan, since only rarely was interest paid to a family member.

Invariably, bank loans or those from moneylenders were used

to complete the full capital requirement, when loans obtained

from family members alone were insufcient. Thus, in only

ve cases did the proportion of a combined loan obtained

from a bank come to 40 percent or more of the total amount.

The highest amount recorded from a bank was 83 percent.

In most cases, the portion of a combined loan obtained froma bank amounted to less than 30 percent of the total loan.

As with boat owners, market intermediaries relied

mostly on family members to supply credit, 75 percent having

obtained it exclusively in that way. In no case was interest

charged, and no repayment schedule was set.

Sharing With Partners or Joint-Owners

In many cases, credit obtained from family members or

friends (shers within the same community) was repaid by

making the provider(s) permanent partners or joint-owners in

the shing enterprise. Such an arrangement lasted as long as

a shing boat remained in operation. Partners or joint-owners

received a return on their investment over a number of years,

based on a share system. This is quite separate from the annual

catch prot sharing system among boat owners, captain, and

crew (see Ruddle 1998.) In most cases, regardless of loca-

tion and gear type, this was a simple percentage division of

the annual prots, based on the proportion of the investment

contributed by each partner, including the boat owner. Not

uncommonly, where one of the partners was not concurrently

the boat captain, each partner, including the owner, usually

received equal shares. Where the owner was also the boat

captain, his share was larger than those of the other partners.

But where the captain was the son of the non-shing owner,the share was often equal to that of the owner.

Of the 86 boat owners, 37 (43 percent) had partners in

their shing enterprise. Only a very narrow range of people

become partners. The three main categories were son(s),

other nuclear family members (but only rarely a nephew or

son-in-law), and friends. In all cases, friends comprised

shers from the same community as the boat owner. When

more than three investors were involved, the investing group

usually comprised family and friends.

Boat owners using a shing technology with high start-

up costs tended to seek investment partners more than those

employing other technologies. Thus, owners of boats used

for purse-seining, pair trawling, and drifting gill-netting ac-counted for 49 percent of those with investment partners.

However, despite Ba Ria-Vung Tau being the province with

the most rapidly adopted investment-intensive shing tech-

nologies, only 11 percent of respondents there had investment

partners. The highest rates of partnership occurred in Danang

(35 percent) and Nhatrang (27 percent). This reected the

relative poverty among shers and the desire to expand their

shing enterprise. Of boat owners Quang Binh, 57 percent

had an investment partner.

Further Research

Several aspects of informal nance were not covered in

the eld study on which this article is based. These include

diversity and change within the sector, the perspectives of

rural users in terms of the patron-client relationship, the so-

cial roles of middlemen, and the distribution of power within

small groups involved in informal nancial arrangements.

The research reported on here is intended as a rst base-line study of the credit situation in a sample of Vietnamese

shing communities. It urgently needs revising both via a

restudy of the same localities and an expanded geographical

coverage. Restudy is required because the economy of Viet-

nam has grown and diversied enormously since the mid-

1990s, and, concomitantly, the structure and productivity of

the already varied national shery has changed signicantly.

For example, in the shery sector there has been consider-

able internal and southwards migration, largely in search of

economic opportunities. The composition of such migrants

needs to be ascertained, since boat owners and entrepreneurs

might need to seek sources of informal credit in their areas

of in-migration, whereas sheries laborers and boat crew

members would not. The former may or may not have pre-

existing social relations in their new working locality and so

may or may not have access to local lines of informal credit.

Alternatively, they might have retained access to informal

credit in their areas of origin. Or perhaps new boat owner-

ship patterns have emerged, like local person and in-migrant

joint ownership that might be based on kin or some other

kind of social relationship. Or it may be a straightforward

business arrangement. Regardless of the details, it is almost

certain that both the formal and informal credit systems in

Vietnamese sheries have also changed in important but as

yet undocumented ways since the mid-1990s.Transcending stereotypical misconceptions that have

stunted research on rural nancial systems requires a broad

and integrated approach to achieve a comprehensive under-

standing of the roles and performance of all households,

individuals, and institutions involved within their varied

economic, social, and stakeholder contexts. As a rst step,

that requires an understanding of household economies since

the status of a households nances determines whether or

not it can invest in an enterprise from its own resources alone

or whether it must seek credit to do so. Similarly, categories

of individual or small groups both seeking and providing

credit must be ascertained, as must be the local informal and

the formal regional and national institutions that provide it.Rural credit in any locality is a complex system for which

all components, linkages, relationships, and context must be

established. For example, Duong and Izumida (2002) showed

that farm households made concurrent formal and informal loans,

with the former accounting for 80 percent of the total, of which

about 91 percent was used for production and asset accumulation.

Informal loans were also to top-up insufcient formal loans, so

they were also mainly used for the same purposes. However,

30 percent of informal sector loans were used for evening out


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consumption and paying large medical expenditures, demonstrat-

ing the importance to poorer households of informal networks

and relatives (Barslund and Tarp 2003). However, whereas farm

households have acceptable collateral to satisfy formal sector

requirements, those engaged in shing, as demonstrated in this

article, depend largely on the informal sector.

Barslund and Tarp (2003) noted the large regional eco-

nomic differences in Vietnam. In the research reported here,

it was found that shers in Ba Ria-Vung Tau were relativelywell-off economically and so could fund their operations

either from their own shing efforts or obtain loans without

taking on partners. Similarly, the income of sheries house-

holds sampled generally exceeded the national average for

all households (because the latter was depressed by the great

preponderance of farm households). However, the eld study

found a signicant north to south increase in both income and

savings rates of shery households. The reasons for this need

to be understood, given the importance of tailoring formal

credit supply to potential local needs and demand.

In the case of Vietnam, and likely elsewhere, there is

a need to understand the relationship between the informal

credit system and preexisting (also termed traditional)

management institutions in shing villages. One example in

the Vietnamese case is the van chai, the main functions of

which include mutual assistance among the membership and

regulating the disposal of the catch and prot sharing (Ruddle

1998; Ruddle and Tuong 2009). Although locally varied,

everywhere the veneration of deities and ancestors, plus the

sacred obligations of mutual assistance, provide the van chai

with its moral authority (Ruddle and Tuong 2009:10).

The implications of climatic change and associated

adaptation should be examined for rural nancial systems.

Because suppliers of formal credit would likely not be exible

enough to meet new and potentially unconventional demand,the role of informal sources could, therefore, expand propor-

tionately. For sheries, climate change will have an as yet

unknown impact on day-to-day and longer-term operations

that will likely include alterations in location, timing, and

the technology (ies) used, all of which will reect changes

in sh species composition and behavior, as well as changes

in all upstream and downstream activities tied to any shing

system, and related economic and social activities. Therefore,

credit will be required so that shers can obtain the new gear

and other equipment required to deal with changes in species

composition and sh behavior, among other things. Managing

such a complex set of uncertain changes would probably be

beyond the capacity of central and local governments, thus,the need for informal credit directly attuned to local situations

would likely become paramount.

Finally, more eld research should be conducted on the

nancial systems used by small-scale shers worldwide. This

requires attention to both overturn persistent misconceptions

about the need for and role of informal credit in small-scale

sheries in non-Western contexts worldwide and also to

provide comprehensive and unbiased information to set the

context for introducing new credit systems, regardless of type.

Conclusion

Field study in ve provinces of Vietnam demonstrated

that a well-functioning, heterogeneous, and segmented credit

system existed, which included both formal and informal

components intermingled in complementary ways by bor-

rowers. Although this is the rst such report for sheries

communities in Vietnam, it veries and contributes to the

evidence of the regionally diverse literature that has accu-mulated over the last two decades.

The sheries households sampled obtained credit and

other nancial services from various sources. Banks are the

predominant formal institution, and family members were

the main informal sector supplier. Most shing boat own-

ers combine credit obtained from a bank with that from one

or more informal sources, mainly family. Informal sources

remain preeminent in marine capture shing communities.

Obtaining loans from a combination of family members and

investors (generally friends from within the same shing

community) was the third most popular way of raising capital.

Credit was used by boat owners mainly to build new boats or

purchase engines, gear, and other essential equipment. Money

lenders were not a popular source of funds among boat own-

ers because interest rates were relatively high and lending

periods limited. However, less collateral was required than

for bank loans. The business arrangements between money

lenders and boat owners varied considerably. In some cases,

no interest was charged on the loan, but catch sales arrange-

ments could be onerous.

This eld research further demonstrated that for Vietnam

the negative stereotypical image of the informal credit role

of moneylenders is not always justied, particularly when

seen within a patron-client framework. For example, since

money lenders might have to compete among themselveswithin a community to invest in a shing boat owner, they

were obliged to be generous with their clients. In addition to

making gifts on the special occasions of festivals and family

ceremonies, they had to assist them during times of need, as

when it became necessary to repair or replace damaged boats

or gear, or to pay for a funeral and help the family with other

expenses resulting from the death of an active sherman. This

is a classic example of the long-familiar patron-client relation-

ship. In contrast, boat owners had a relationship with only

one money lender, although they could change to another if a

relationship soured. Some shing families had maintained a

business relationship with a moneylenders family for several

generations, with sons and daughters on both sides inheritingmutual obligations (cf. Merlijn 1989 for similar arrangements

in Sarawak). As in Malaysia (Merlijn 1989), it is common to

blame the poor performance of capital-intensive development

and/or institutional services in small-scale sheries on the

behavior of middlemen. However, such a kneejerk response

often demonstrates nothing more than an ignorance of the

exible and multiplex economic and social services that

they perform in shing communities. Rather, poor use rates

of such introductions as marketing systems and cooperatives


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231VOL. 70, NO. 3, FALL 2011

may indicate a shers rational choice, rather than either his

resistance to change or control by middlemen.

The eld research reported here raises several issues

regarding nancial systems in small-scale and coastal sh-

ing societies during times of change. Vietnam has undergone

major economic and related changes since the mid-1990s.

Although it has been demonstrated in this article that informal

credit systems were of critical importance in sheries and that

they formed a major component of the nancial system, suchsystems alter as the social and economic contexts in which

they are embedded change. In particular, it now needs to be

ascertained whether patron-client relationships have changed

signicantly in response to economic change and alternative

sources of credit that may have developed in the interim, such

as an expanded formal banking sector or state-sponsored

formal credit and cooperative institutions. How the informal

credit sector articulates, if at all, with other preexisting insti-

tutions, and particularly with the mutual assistance functions

of a van chai, also remains to be studied.

Although the questions posed by those issues remain

to be answered, some likely directions can be considered. For

example, it is unlikely that all the imperfections in the formal

sector, discussed in the literature review, would be rectied

soon. Were they to be, it is most probable that agile money

lenders would adjust their terms and rates in order to remain

competitive and continue in business. In addition, social pres-

sures might make it impossible to deny offers of loans from

family and friends, as for example, when prestige is accrued

through the generosity demonstrated in lending money or

insurance is thereby ensured against potential future needs

by the lender. For those reasons and many others, it is prob-

able that informal and formal sectors will continue to coexist,

regardless of how well developed, efcient, or convenient a

sector might become eventually.

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