Formal versus informal: Insights into the credit transactions of small-scale fishers along the south west coast of India

Abstract

This paper closely scrutinizes the diverse credit transactions undertaken by small-scale fishers along the South West coast of India, based on a field-level survey carried out in the maritime State of Kerala. The study describes alternative modes of fishery credit delivery in the State and explores the tangled inter-linkages in the formal and informal credit contracts. Further, empirical assessment of borrowing pattern of small-scale fishers is conducted by taking the case of ring seiners who constitute an important segment in the local fishery. The main determinants of their borrowing behavior from institutional credit sources are identified using a fractional logit regression approach. The findings point to continuing dominance of the informal financial sector over the institutional credit sector. In the light of the findings, measures such as reforming the fish auction system, linking insurance with formal credit, further strengthening of fishery co-operative societies and exercising stringent state control to curb exploitative lending practices are suggested.