Since early 2016, Rare has introduced community-run savings clubs in coastal fishing communities throughout the Philippines. In these remote areas, the idea of saving and investing in one’s own future is as novel as it is necessary. Learning to save requires fishers to pivot from quick spending to long-term financial planning, and that change in behavior can create powerful impact for the long-game strategy behind coastal fisheries conservation and the goal to end overfishing. To learn more about this connection, we turn to Rare’s own Carlos Arango, Senior Manager, Economic Resilience, who shows us how life can change when people, households and whole communities learn to save.
With a focus on coastal fishing, Rare works with some very remote fishing communities around the world. How would you describe the economy in which these fishers work?
One of the terms to describe it is the “grey economy.” It’s very informal, transactions are carried out in cash or in-kind and most likely, the cash never makes it into the financial system where financial mechanisms to retain wealth and build assets exist. For remote fishing communities, it is not easy to access brick and mortar banks. However, with increasing digital banking and agent systems, it is nowadays possible to connect them to financial services. The nature of the grey economy makes it difficult to invest in it and almost impossible to make it sustainable. In some ways, it is like a leaking bucket — it doesn’t really matter how much water is poured in, it will always leak and won’t retain it.
What kinds of problems or obstacles does the economy present for fishers and the rest of the community?
Not having access to financial mechanisms presents a full set of problems for fishers and the community. One is not having access to savings mechanisms and all the benefits that comes with it. For example, it is easier to save when funds are not easily accessible or kept in separate accounts, even not losing purchasing power because of inflation. Savings are the foundation for financial stability and provide a safety net when emergencies come. Normally, the savings of the fishers and community members are wiped out after shocks, like medical emergencies, natural disasters, a boat in need of repairs, etc. They don’t have access to loans, long or short term, to bridge the cash flow when an emergency occurs.
Funds are also needed for investments and for developing profitable enterprises. In remote communities, the lender is normally the local fish buyer, and to repay their debt, fishers most likely feel the need to overfish, generating additional pressure on already scarce resources. And let’s not forget the exorbitant interest rates that they end up paying for using the funds. There is also a lack of access to insurance to protect assets. This is a critical problem, because it leaves individuals and communities vulnerable to shocks, and makes recovery more difficult.
Communities become invisible to governments as well, because they don’t contribute to GDP. Public spending tends to be larger in places that generate revenue via taxes. Communities will have more leverage if they belong to formal economies.
More important than helping fishing households save, is changing their financial behavior, then cross-walking that behavior change into conservation and sustainability.Carlos Arango, Senior Manager for Economic Resilience, Rare
Many of the people in these coastal communities seem stuck in a cycle of poverty, not only because the natural resource they depend on is dwindling, but because they may not have the tools or know-how to save. What knowledge or behaviors can people in these communities adopt to become more financially resilient?
Low-income individuals, in this case fishers in remote communities, tend to have a shorter planning horizon. Extending the planning horizon is key to increase the financial resiliency of the community and its members. Planning and budgeting ensures that individuals and communities rally around common goals and will be better prepared for when shocks occur. To break the cycle of poverty, it’s critical to provide individuals and communities with the tools to maximize the benefit of belonging to formal economies.
Why are local savings clubs, like the ones Rare introduced last year in the Philippines, particularly helpful for boosting financial literacy?
They expose members to financial terms that are necessary to participate in the clubs, and teach valuable financial concepts. For Rare, one of the most important things to achieve with the clubs is to change behavior, from short-term planning to a longer planning horizon.
Some may ask why a conservation organization is helping establish savings clubs. What is the connection between savings clubs and marine ecosystems?
Conservation is a long-term game; fish stocks don’t recover overnight. It requires planning for years to come; the time frame for fishers and community members is shorter, they plan for days or weeks. Because conservation is a human problem and the solution is working with people, aligning those two timeframes is very important to achieve conservation and sustainable livelihoods goals.
Trust is also an issue addressed in the savings clubs. For a fisher to trust a group of people with guardianship of his or her cash is a signal that trust in his or her peers has increased. Moving the trust from individuals to the community has great impact on building social capital for the benefit of the community. Once trust and social capital have been built, they can be used to mobilize the community and to achieve conservation and financial inclusion goals.
Will helping fishing households save change fishing behaviors?
In many ways, saving is similar to adopting sustainable fishing behaviors. Fishers must give up fishing temporarily in certain zones in the short term to ensure the sustainability of the fishery in the long term. More important than helping fishing households save, is changing their financial behavior, then cross-walking that behavior change into conservation and sustainability.