Innovative Finance | Rare

Oceans contribute nearly US$1.5 trillion to the global economy and employ 60 million people, most of them small-scale fishers in the developing world. But small-scale fishers and coastal communities don’t capture or retain much of the wealth from the resources that lie just offshore. An estimated $10.6 billion in fish catch from small-scale fisheries goes unrecorded each year¹. But because they exist outside of legal frameworks and away from the formal economy, that wealth slips through their nets.

What is the formal economy?

The formal economy refers to access to formal financial services offered by banks such as savings accounts, insurance, and affordable financial loans. Most coastal fishing communities are rural and remote, far from the nearest bank. In these communities, many micro-businesses are in extra-legal status, meaning they exist outside legal frameworks. This means they cannot open a savings account or legally register for insurance. Without access to formal financial services, fishers often have to take out informal and often predatory loans that are much harder to repay.

What is financial inclusion?

Financial inclusion is the easy and affordable access to formal financial services, products, and financial literacy.

How does financial inclusion protect the ocean and the people who depend on it?

In this Rare Quotes video Q&A, Kate Schweigart, Rare’s Senior Director of Innovative Finance, explains how financial inclusion and access to the formal economy can help fishers build wealth and reduce pressure on critical ocean ecosystems. Rare’s Innovative Finance initiative does this in two ways:  Enabling access to formal financial products and services, and demonstrating the benefits of microbusiness formalization and providing actionable support to complete the formalization process.

Elements of Innovative Finance

	Partnerships In bringing public, private and social sector actors together, Rare helps transform the productive economy of small-scale fisheries and strengthens the relationship between community-based fisheries and local government. Partnerships make it possible. Example: We partner with government entities at the local, regional, and national level to help them understand the value of their small-scale fisheries and support them with allocating and attracting more funding to this sector.
	Access to Formal Financial Services Rare trains local communities and their microbusinesses on using and accessing formal financial services. We also use technology to empower both communities and formal institutions to track and share financial information more easily. Example: In addition to enabling access to bank accounts, formal loans, and insurances, we also design, test, and implement technology-based solutions, such as a financial statements portal to support microbusiness financial management and access to credit.
	Financial Literacy and Savings Clubs Financial literacy trainings and savings clubs provide communities and microbusinesses a space to improve financial management and support the adoption of sustainable financial behaviors and competencies. Building these capacities prepares their transition to formal financial services and bolsters local resilience to crises (natural disasters, climate impacts, pandemics). Example: We design and pilot a digital ledger app to capture and digitize every single transaction in each of the around 500 savings clubs we support.

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Resources

CITATIONS

1. Calculated from catch reconstruction data on http://www.seaaroundus.org/