A picture I took in a small village outside Winneba. This is a young girl who lives with her family on the side of the road. On her right leg she has a fairly large infection where it looks like worms took their toll. You see it all the time here, but you don't get used to it...
...And hopefully places like this can help.Today was quite the successful day as far as the networking and microfinance aspects of my stay are concerned. Since my first meeting last friday with my main contact here, Mr. Abbey, I have met with three microfinance institutions and will meet with another tomorrow and the more I go along, the more time I feel I need to meet with all the names I have been getting. Which of course is a good thing, but it can be overwhelming too. Today I met with the microfinancial manager of the Women’s World Banking Savings and Loan Company and it went as well as any meeting could have gone. Working under the auspices of Mr. Abbey and throwing around Mr. Abbey’s name, which I do liberally upon his recommendation, has truly brought me into contact with some legitimate institutions willing to give me some of their time. The one interesting thing I have noticed about the location of the institutions is that they are always outside the cities in poorer areas in order to, I suppose, more easily reach those in need. Which means I walk by blocks of impecunious city dwellers into an office of tailored suits and bosses scolding their employees for too much facial hair (yes, a man grabbed a worker’s tuft on his chin and told him to get rid of it). Anyhow, the man who met with me today was as prepared as he could be with his laptop at the ready to regurgitate statistics upon my request and he was happy to help. Just to give an idea of what these meetings are like I’ll give some of the details so apologies if this gets a bit dull.
My research focuses on the five major avenues of microfinance, them being financial NGOs, Rural and Community banks, Savings and Loans Companies, Credit Unions, and Susu Collectors (A more rural practice where people can save their money without having to travel miles to a bank). My first goal is to acquire information about one institution of each category. Information I’m hoping to collect includes but is definitely not limited to interest rates, ratio of women to men borrowers, average loan size, depth of outreach, ratio of active savers to borrowers, % required savings, % of staff composed of credit officers, and repayment rate. A little profile on Women’s World Banking shows that, ironically, only 60% of members are women, the average loan is $1,500, 8:1 savers to borrowers, interest rates run from 21%-36%, repayment rates are up to 99% (although they’ve upped the ante on collateral more on that later), and two out of seven staff members is a credit officer.
The institituion previously relied strictly on donor funding, but as of January, when many things changed, they have become an independent commercial institution relying on no outside funding. As is customary among MFIs , they require that their members be trained on the terms of their institution and how to handle their money appropriately. Unlike the RCB and FNGO of last week, WWB ensures that they finance working capital, meaning they are shaping what their money is being used for. When they loan out money, they make sure they know exactly where it’s going and how they are going to be repaid. They require in some programs that 25% of the loan be saved in order to promote good financial strategy for the borrower. The collateral is an important issue, because the crux of Dr. Yunus’s Grameen Bank (and what eventually one him and the bank the Nobel Peace Prize) is that you can dole out uncollateralized loans to the poor, and through efficient strategies, they will pay back…97% of the time! WWB is adding the social pressure to collateralized loans by threatening to seize assets (vehicles, closing shops) so that the community will see that a certain individual is not running a trustworthy business. In January they addressed their loan portfolio which had 80% of borrowers at risk of finding themselves in arrears. It seems that their strategy is working for them, but it doesn't work out so well for the poor. This methodology means that those who have the least stability (the illiterate, poor) are charged the most usurious rates, which doesn't aid in the alleviation of poverty…which we hope microfinance can do. Anyway, the guy was quite knowledgeable and helpful and at the end when I asked if he could refer me to other institutions he gave me names addresses phone number and directions to three of them, one of which, ProCredit, is high on my list of institutions.
A note on MF…As I am studying the varying techniques of MFIs in rural and urban settings, the five categories previously described exist under the umbrella of microfinance. Although, as the rural bank manager described to me last Friday, they cannot make loans over 10 million cedis ($1,000) because it lies outside the domain of “microfinance.” Sure enough, after my meeting I was directed to ProCredit (an institution often mentioned under microfinancial terms) where there brochure reads “Loan amount rage from GHC 10,000,001 – GHC 99,000,000.” This means that to be recognized as an official RCB, your loans must not exceed GHC 10,000,000 and those involved in S&L must loan out at rates greater than GHC 10,000,000.
My research focuses on the five major avenues of microfinance, them being financial NGOs, Rural and Community banks, Savings and Loans Companies, Credit Unions, and Susu Collectors (A more rural practice where people can save their money without having to travel miles to a bank). My first goal is to acquire information about one institution of each category. Information I’m hoping to collect includes but is definitely not limited to interest rates, ratio of women to men borrowers, average loan size, depth of outreach, ratio of active savers to borrowers, % required savings, % of staff composed of credit officers, and repayment rate. A little profile on Women’s World Banking shows that, ironically, only 60% of members are women, the average loan is $1,500, 8:1 savers to borrowers, interest rates run from 21%-36%, repayment rates are up to 99% (although they’ve upped the ante on collateral more on that later), and two out of seven staff members is a credit officer.
The institituion previously relied strictly on donor funding, but as of January, when many things changed, they have become an independent commercial institution relying on no outside funding. As is customary among MFIs , they require that their members be trained on the terms of their institution and how to handle their money appropriately. Unlike the RCB and FNGO of last week, WWB ensures that they finance working capital, meaning they are shaping what their money is being used for. When they loan out money, they make sure they know exactly where it’s going and how they are going to be repaid. They require in some programs that 25% of the loan be saved in order to promote good financial strategy for the borrower. The collateral is an important issue, because the crux of Dr. Yunus’s Grameen Bank (and what eventually one him and the bank the Nobel Peace Prize) is that you can dole out uncollateralized loans to the poor, and through efficient strategies, they will pay back…97% of the time! WWB is adding the social pressure to collateralized loans by threatening to seize assets (vehicles, closing shops) so that the community will see that a certain individual is not running a trustworthy business. In January they addressed their loan portfolio which had 80% of borrowers at risk of finding themselves in arrears. It seems that their strategy is working for them, but it doesn't work out so well for the poor. This methodology means that those who have the least stability (the illiterate, poor) are charged the most usurious rates, which doesn't aid in the alleviation of poverty…which we hope microfinance can do. Anyway, the guy was quite knowledgeable and helpful and at the end when I asked if he could refer me to other institutions he gave me names addresses phone number and directions to three of them, one of which, ProCredit, is high on my list of institutions.
A note on MF…As I am studying the varying techniques of MFIs in rural and urban settings, the five categories previously described exist under the umbrella of microfinance. Although, as the rural bank manager described to me last Friday, they cannot make loans over 10 million cedis ($1,000) because it lies outside the domain of “microfinance.” Sure enough, after my meeting I was directed to ProCredit (an institution often mentioned under microfinancial terms) where there brochure reads “Loan amount rage from GHC 10,000,001 – GHC 99,000,000.” This means that to be recognized as an official RCB, your loans must not exceed GHC 10,000,000 and those involved in S&L must loan out at rates greater than GHC 10,000,000.
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