Human Organization, Vol. 70, No.

3, 2011
Copyright 2011 by the Society for Applied Anthropology
0018-7259/11/030224-09$1.40/1

Informal Credit Systems in Fishing Communities:

Issues and Examples from Vietnam
Kenneth Ruddle
Exemplification of informal credit and local financial 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 fisheries stakeholders in five provinces of Vietnam demonstrates that, lacking collateral acceptable
to the formal sector, fisheries households depend on the informal financial system. Credit is pieced together generally from
several formal and informal sources to finance fishing boats and operations. Credit demand and supply in capture fisheries
communities still requires comprehensive examination, especially for countries like Vietnam, for which this is the first study.
The role of informal credit systems is examined, the associated patron-client relationship revisited, and additional research
needs suggested. Research on financial 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 fisheries, credit systems, financial institutions, fisheries credit, patron-client relationship

Introduction

he 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
fisheries has been ignored almost entirely. In a study of fish
marketing, for instance, Lem et al. (2004) comment merely
that demand in the marketing sector outstrips credit availability and that limited credit prevents wholesalers and retailers
supplying the domestic market from expanding and improving
their businesses. Because of that, the main objective of this
first detailed study of credit systems in the fisheries of Vietnam is to provide a baseline of recent information that raises
issues to provoke more specifically focused research. From
that, some directions for further research on credit systems
in small-scale or coastal fisheries 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 affiliated with the Research Center for Resources and
Rural Development, Hanoi, Vietnam. Research was supported financially
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 fisheries officers. 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 submitted version. The author is most grateful to them all.

224

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

regarded as pejorative, with its implications of unsophisticated, unregulated, or uncontrolled. These are patently not
the case in many financial 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 financial decisions
are influenced by a range of sociocultural, economic, and
ecological factors, both dualistic concepts ignore linkages and
change within any given location. It is important to keep these
shortcomings in mind when using such terms and concepts.
During the field 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 relationship. A third purpose of this article is, therefore, to briefly
revisit that relationship, particularly from the perspective of
small-scale fisheries, so that it is not overlooked in both future research designs and development practitioner thinking.
Based on an interviewed sample of 403 marine fisheries
stakeholders, the research showed that a social web performed
informal credit functions in the five provinces studied (Ba RiaVung Tau, Binh Thuan, Khanh Hoa, Quang Nam Danang, and
Quang Binh [Figure 1]), with small groups based solely on
shared mutual interest formed for financing fishing boats and
operations. They were based either on the extended family,
on a group of friends from the same fishing community, or
a combination of both. Sources of credit were banks, family
members, friends from within the community, and moneylenders. Family members and friends generally became permanent partners in the enterprise of the fisher to whom they
HUMAN ORGANIZATION

Figure 1. Location of Vietnam and the Provinces Studied

extended credit, whereas money lenders became investors

in an enterprise. Generally, credit was pieced together from
several sources to fulfill 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 rural development has been challenged (Osborne 2006), the
prevailing view is that it enables poor producers to purchase
VOL. 70, NO. 3, FALL 2011

inputs that raise productivity (Adams and von Pischke 1994;

Barham, Boucher, and Carter 1996; Feder et al. 1990). Paternalist 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 moneylenders characteristically demanding high interest rates under
onerous conditions that in fishing 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.
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Although several cases have described particularly onerous conditions within convoluted credit systems in South
Asian small-scale fisheries (Aghazadeh 1994; Khan, Ali, and
Tanveer 2005; Rahman et al. 2002), such situations are not the
norm throughout Asia. Evidence to the contrary from Southeast Asia was demonstrated in the 1940s by Raymond Firths
(1966) classic and exquisitely detailed study of the economy
of a Malay fishing community. Further contrary evidence was
provided by scholars examining client-patron relationships
(see below), as well as by another group (Merlijn 1989; Platteau and Abraham 1987; Stirrat 1974; Yap 1978) focusing on
the role of middlemen in fishing 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 economists. 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 focus); to time pressures that forced them to refer to distilled
reports rather than examine primary studies and original
field data; and to their focus on such issues as foreign trade
or public finance, 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 financial 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 informal
credit 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
fishers and which, therefore, drives them to the informal
financial sector, informal credit systems have some important advantages over the formal sector. These include ready
availability, quick and easy delivery, flexible conditions,
unintimidating application procedures, and the perception
of being less risky than loans contracted in the formal sector. Further, although interest rates on informal loans vary
depending on the source, there is often little or none on those
from 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 profits (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
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fishers find it either difficult or, more likely, impossible to

obtain institutional credit for working capital. For that reason,
financial institutions have been essentially uninvolved in
financing the small-scale fisheries sector. There are several
reasons for that. As Aghazadeh (1994) commented for Bangladesh, inappropriate lending policies and procedures for
fisheries are an obstacle because target groups for lending
are often not well defined in terms of qualifications, experience, income, ownership/non-ownership of productive assets,
gender, and geographical location. Further, the formal sector
suffers from financial indiscipline and other institutional
shortcomings, like poor arrangements for rural credit, an
emphasis on commercial lending, a poor capacity to supervise
project lending to fishers owing to a lack of personnel trained
in fisheries, and reliance on overly complex bureaucratic
procedures. Aghazadehs observations are salient to a wide
variety of small boat fishing 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 finds it useful to have as an ally someone superior 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 justification of any hierarchy
of status and power implies the creation of morally-based
role obligations. Clients accept inequalities because patrons
provide social and material guarantees in return for the results
of labor and services (in the form of fish in this case), and
loyalty under conditions of labor scarcity and an absence of
competition from other patrons, such that mutual interest and
benefit 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 changing 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 fisheries communities in Vietnam and
particularly those where the traditional fisheries village
management institution known as the van chai has remained
strong (Nguyen and Ruddle 2010; Ruddle 1998, 2009; Ruddle
and Tuong 2009). Although elements of both the Popkin and
HUMAN ORGANIZATION

Scott hypotheses can be discerned in the empirical data presented here, in fisheries communities where a van chai retains
a strong influence, 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 fishing industry, Mez and
Ferse (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 fishing targets 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, fish 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:
Reflects the basic stake at the root of the debt relationship.
The middlemen are basically interested in the persistence
of this relationship and use the loans in order to maintain
access to the fishermens catches. To the extent that they
are satisfied with their fishermen, they are eager to prevent
them from repaying their loans. The fact that neither party
appears to wish to settle these running debts should be seen
in this light. The message being conveyed is that trust is
established between them, and as long as trust exists, there
is no reason to worry about financial transactions. As a
consequence, repayments are never fixed, neither in time
nor in installments. The rhythm of repayment depends on
the daily landings of the fishermen.

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

marketing service and will accept catches that include an
extremely high percentage of trash fish. From this, Merlijn
(1989:692) concludes:
The overall relationship between a middleman and a trawling fisherman is certainly not one of exploitation, but a sort
of social agreement with mutual benefits. Fishermen need
to sell their highly perishable commodity without delay, to
have immediate access to unsecured loans without cumbersome formalities, and to obtain inputs when these are
needed. For middlemen, a steady and substantial supply
of fish is of crucial importance. These concerns crystallize
into a situation where middlemen are ready to meet the
needs of fishermen to the best possible extent.

Structure of the Rural Credit System in

Vietnam
Average per capita annual incomes in the fisheries
households studied were higher than those both for Vietnam
and for their respective provinces (GOV 1994, 1995a).
VOL. 70, NO. 3, FALL 2011

Although budgets and savings rates of the households

sampled were positive, and for fisheries households above
the national and regional averages, nevertheless savings
alone would not have covered the purchase or maintenance
of a fishing boat, engine, gear, or other major items of
equipment. Thus, the role of credit was regarded by fishers as being critical to the fisheries sector of the provinces
studied. Average per capita annual incomes varied from
$232 in Quang Binh Province, which was 2.5 times higher
than the per capita average for the province, to $690 for
individual fisheries household members working the much
richer fisheries of Ba Ria-Vung Tau Province (3.7 times the
provincial average). Average fisheries 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 approximately 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 field research reported on here shows that credit
and other financial 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 fishing 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 fishing
communities.
Credit was used by boat owners mainly to build new
boats or purchase engines, gear, and other essential equipment. Overall, 44 percent (n=79) of respondents obtained
credit from family members. In addition to reflecting 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 reflect the relative affluence of the general population in
Quangnam Danang and the generally poor economic condition 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 reflected the general lack
of financial 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 reflected 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 fishing 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 profits.
For this reason also, only six percent of boat owners obtained
capital from investors or partners alone. This was the same
as the rate for bank loans.
Half of the eight market intermediaries (i.e., middlemen) interviewed borrowed less than the profit they made
during the previous year. In three cases, the level of credit
ranged from 100 to 300 percent of their latest annual profits.
These were market intermediaries specialized in supplying
local frozen fish 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 five 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 reflected the relative poverty of
Quang Binh fishers compared with the relative affluence of
those in Ba Ria-Vung Tau, and, therefore, the risk-taking
perceptions of bank loan officers. Loan periods were close
to 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 financial 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 fixed. 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
228

interest rate of 5 percent per year. In the other case, a purseseiner 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 fish market intermediaries who combine moneylending and other business
enterprises with their main marine resource business. In the
Northern and Central regions, moneylenders provide capital
for the purchase or construction of fishing boats, whereas in
the Southern Region they covered mostly the cost of fishing
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 fish
market intermediaries, as a condition of the loan, boat owners 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 repayment would accumulate.
There were usually several or more moneylenders in
all but the poorest fishing 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 fishing 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 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 fishing families had
maintained a business relationship with the moneylenders
family for several generations, with sons and daughters on
both side of the arrangement inheriting mutual obligations.

Loans from Family Members Combined with

Another 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
HUMAN ORGANIZATION

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 insufficient. Thus, in only
five 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 from
a 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 (fishers within the same community) was repaid by
making the provider(s) permanent partners or joint-owners in
the fishing enterprise. Such an arrangement lasted as long as
a fishing 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 profit sharing system among boat owners, captain, and
crew (see Ruddle 1998.) In most cases, regardless of location and gear type, this was a simple percentage division of
the annual profits, 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-fishing owner,
the share was often equal to that of the owner.
Of the 86 boat owners, 37 (43 percent) had partners in
their fishing 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
fishers 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 fishing technology with high startup 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 accounted for 49 percent of those with investment partners.
However, despite Ba Ria-Vung Tau being the province with
the most rapidly adopted investment-intensive fishing technologies, only 11 percent of respondents there had investment
partners. The highest rates of partnership occurred in Danang
(35 percent) and Nhatrang (27 percent). This reflected the
relative poverty among fishers and the desire to expand their
fishing enterprise. Of boat owners Quang Binh, 57 percent
had an investment partner.
VOL. 70, NO. 3, FALL 2011

Further Research
Several aspects of informal finance were not covered in
the field 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 social roles of middlemen, and the distribution of power within
small groups involved in informal financial arrangements.
The research reported on here is intended as a first baseline study of the credit situation in a sample of Vietnamese
fishing 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 Vietnam has grown and diversified enormously since the mid1990s, and, concomitantly, the structure and productivity of
the already varied national fishery has changed significantly.
For example, in the fishery sector there has been considerable 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 fisheries laborers and boat crew
members would not. The former may or may not have preexisting 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 ownership 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 fisheries have also changed in important but as
yet undocumented ways since the mid-1990s.
Transcending stereotypical misconceptions that have
stunted research on rural financial systems requires a broad
and integrated approach to achieve a comprehensive understanding of the roles and performance of all households,
individuals, and institutions involved within their varied
economic, social, and stakeholder contexts. As a first step,
that requires an understanding of household economies since
the status of a households finances 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 insufficient formal loans, so
they were also mainly used for the same purposes. However,
30 percent of informal sector loans were used for evening out
229

consumption and paying large medical expenditures, demonstrating 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 fishing, as demonstrated in this
article, depend largely on the informal sector.
Barslund and Tarp (2003) noted the large regional economic differences in Vietnam. In the research reported here,
it was found that fishers in Ba Ria-Vung Tau were relatively
well-off economically and so could fund their operations
either from their own fishing efforts or obtain loans without
taking on partners. Similarly, the income of fisheries households sampled generally exceeded the national average for
all households (because the latter was depressed by the great
preponderance of farm households). However, the field study
found a significant north to south increase in both income and
savings rates of fishery 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 fishing 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 profit 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 financial systems.
Because suppliers of formal credit would likely not be flexible
enough to meet new and potentially unconventional demand,
the role of informal sources could, therefore, expand proportionately. For fisheries, 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 reflect changes
in fish species composition and behavior, as well as changes
in all upstream and downstream activities tied to any fishing
system, and related economic and social activities. Therefore,
credit will be required so that fishers can obtain the new gear
and other equipment required to deal with changes in species
composition and fish 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 field research should be conducted on the
financial systems used by small-scale fishers worldwide. This
requires attention to both overturn persistent misconceptions
about the need for and role of informal credit in small-scale
fisheries 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.
230

Conclusion
Field study in five 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 borrowers. Although this is the first such report for fisheries
communities in Vietnam, it verifies and contributes to the
evidence of the regionally diverse literature that has accumulated over the last two decades.
The fisheries households sampled obtained credit and
other financial services from various sources. Banks are the
predominant formal institution, and family members were
the main informal sector supplier. Most fishing boat owners combine credit obtained from a bank with that from one
or more informal sources, mainly family. Informal sources
remain preeminent in marine capture fishing communities.
Obtaining loans from a combination of family members and
investors (generally friends from within the same fishing
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 owners 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 arrangements could be onerous.
This field research further demonstrated that for Vietnam
the negative stereotypical image of the informal credit role
of moneylenders is not always justified, particularly when
seen within a patron-client framework. For example, since
money lenders might have to compete among themselves
within a community to invest in a fishing 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 fisherman. This
is a classic example of the long-familiar patron-client relationship. In contrast, boat owners had a relationship with only
one money lender, although they could change to another if a
relationship soured. Some fishing families had maintained a
business relationship with a moneylenders family for several
generations, with sons and daughters on both sides inheriting
mutual 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 fisheries on the
behavior of middlemen. However, such a kneejerk response
often demonstrates nothing more than an ignorance of the
flexible and multiplex economic and social services that
they perform in fishing communities. Rather, poor use rates
of such introductions as marketing systems and cooperatives
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may indicate a fishers rational choice, rather than either his

resistance to change or control by middlemen.
The field research reported here raises several issues
regarding financial systems in small-scale and coastal fishing 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 fisheries and that
they formed a major component of the financial system, such
systems 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
significantly 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 institutions, 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 rectified
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 pressures 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 probable that informal and formal sectors will continue to coexist,
regardless of how well developed, efficient, or convenient a
sector might become eventually.
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