Evaluating and managing risk in small‐scale fish farming in a developing economy: An application to Rwanda

Abstract

Policy makers in developing economies continue to promote small‐scale fish culture as a means of generating stable income and alleviating malnutrition and famine problems. In some places like Rwanda, land previously established with traditional crops has been re‐allocated to small‐scale fish culture. While the income derived from fish farming is a powerful incentive to produce an alternative crop, the lack of information on the risk associated with returns from small‐scale fish farming in Rwanda is striking. This study used the @Risk risk analysis and simulation add‐in for Lotus 1–2–3 to determine the range and the probability of economic success or failure, to identify sources of risk, and to evaluate ways of minimizing risks in small‐scale fish production in Rwanda. The study compared fish farming by cooperatives and by individual farmers. Small‐scale fish farming showed economic potential in Rwanda when evaluated as positive income above variable costs. The event ‘income above variable costs is at least zero’ occurred with a 100% probability for both cooperatives’ and individual farms. When evaluation was based on net returns to land and management, economic failure became a virtual certain event, occurring with 99.8% and 95.5% probabilities for cooperatives and individual farms, respectively. Although, the level of success was sensitive to higher stocking rates, and higher fish producer prices, the amount of labour used in the production‐marketing process was the major determinant of economic success. The upper limit of the efficient level of labour was estimated at 20 person‐days per 100 m2 per growing cycle, Ceteris paribus.