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Table of Contents
ABBREVIATIONS AND ACRONYMS .............................................................................................. 3
PART ONE ............................................................................................................................................ 4
EXECUTIVE SUMMARY ................................................................................................................... 4
1.0 BACKGROUND ON THE NORTHEASTERN CORRIDOR .............................................. 8
1.1 COVERAGE OF THE AREA .............................................................................................. 8
1.2 AN AREA EMERGING FROM CONFLICT...................................................................... 9
1.3 FINANCIAL INSTITUTIONS IN THE AREA .................................................................... 9
2.0 THE CREDIT UNION MODEL IN GHANA ....................................................................... 11
2.1 OVERARCHING CREDIT UNION CONCEPT .............................................................. 11
2.2 MISSION, VISION, GOVERNANCE AND MANAGEMENT ....................................... 11
2.2.1 Mission Statement .................................................................................................... 11
2.2.2 Governance Structure ............................................................................................. 12
2.3 PERFORMANCE OF CU IN THE NORTHEASTERN CORRIDOR .......................... 13
2.3.1 Credit Union Penetration in the Northern Region ................................................ 13
2.3.2 Membership growth ..................................................................................................... 14
2.3.3 Growth in Deposits ...................................................................................................... 15
2.3.4 Growth in Portfolio ....................................................................................................... 16
3.0 THE SEND MICROFINANCE MODEL ............................................................................. 17
3.1 BASIC CONCEPT OF THE SEND MICROFINANCE MODEL ................................. 17
3.2 IMPLEMENTING THE SEND INTERVENTION MODEL ........................................... 18
3.3 GRADUATING MICROFINANCE CLIENTS TO MAINSTREAM CU ........................ 20
3.4 LESSONS LEARNED IN IMPLEMENTING THE MODEL ......................................... 20
4.0 IMPACT OF MICROFINANCE ON CREDIT UNIONS .................................................... 22
4.1 MEMBERSHIP GROWTH THROUGH MF CLIENTS ................................................. 22
4.2 GRADUATION AS A MEANS OF INCREASING CU MEMBERSHIP ...................... 22
4.3 IMPACT OF MICROFINANCE ON MEMBERS ........................................................... 24
4.3.1 Increasing savings and working capital .................................................................. 24
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4.3.2 Better business management skills ......................................................................... 24
4.3.3 Increasing access to education ................................................................................. 25
4.3.4 Reduction in morbidity ........................................................................................... 25
4.3.5 Increase in familial respect and harmony .......................................................... 25
4.4 SUSTAINABILITY OF OPERATIONS ............................................................................ 26
4.4.1 Interest Rate Policy .................................................................................................. 26
4.4.2 Income trends of the CUs ....................................................................................... 26
4.4.3 Generating Potential for Clients ............................................................................ 28
4.4.4 Portfolio Quality of Microfinance Operations ..................................................... 29
4.4.5 Trends in Portfolio Quality of CUs ........................................................................ 29
4.4.6 Operational Sustainability of the module ........................................................... 31
PART TWO ......................................................................................................................................... 33
5.0 REPLICATION PACKAGE FOR CU-MICROFINANCE GRADUATION MODEL ....... 33
5.1 COMMUNITY ENTRY DYNAMICS ................................................................................. 33
5.2 GROUP FORMATION STRATEGIES ............................................................................. 33
5.2.1 Criteria for Group Formation ................................................................................ 33
5.2.2 Solidarity Group Formation ........................................................................................ 35
5.2.3 Credit and Savings Association Formation ........................................................ 36
5.3 SAVINGS AND CREDIT ASSOCIATION MEMBER TRAINING ............................... 37
5.3.1 Preparation of Byelaws ............................................................................................ 37
5.3.2 Training of Members and Office Bearers ............................................................ 38
5.4 CREDIT UNION MICROFINANCE STAFF TRAINING ............................................... 39
5.4.1 Responsibilities of the Credit Officer ................................................................... 39
5.4.2 Investigation, Promotion and Organization of CSAs ........................................ 40
5.5 RECORDS KEEPING AT THE LEVEL OF THE CSA ................................................. 42
5.6 RECORDS KEEPING AT THE CREDIT UNION LEVEL ........................................... 46
5.7 SAVINGS AND CREDIT ASSOCIATION MONITORING ........................................... 47
5.8 KEY INDICATORS TO TRACK AND MONITOR.......................................................... 48
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ABBREVIATIONS AND ACRONYMS
AGM Annual General Meeting
AIDS Acquired Immune Deficiency Syndrome
CCA Canadian Cooperative Association
CCCU Community Cooperative Credit Union
COs Credit Officer(s)
CSA Credit and Savings Association
SCA Savings and Credit Association
CU(s) Credit Union
CUA Cooperative Credit Union
CwE Credit with Education
ECLSPP Eastern Corridor Livelihood Security Promotion Programme
FAs Field Agent(s)
FFHG Freedom from Hunger Ghana
HIV Human Immunodeficiency Virus
MDGs Millennium Development Goals
MFI Microfinance Institutions
NGO Nongovernmental Organization
PPNT Permanent Peace Negotiation Team
PRSP Poverty Reduction Strategy Paper
SG(s) Solidarity Group
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THE SEND MICROFINANCE STRATEGY: A MODEL
THAT WORKS FOR THE MAJORITY
PART ONE
EXECUTIVE SUMMARY
COVERAGE OF THE AREA
SEND’s Ghana programme started as part of SEND Foundation of West Africa which was
conceptualized to include Liberia and Sierra Leone. It was registered in 1998 by the Registrar of
Companies in Ghana as a company limited by guarantee. A consultative process covering seven
districts in the Northeastern corridor was conducted leading to the start of the programme. At
the time the programme catchment area was emerging from ethno-communal conflict.
FINANCIAL INSTITUTIONS IN THE AREA
Although the Northern Region is the largest region in Ghana and together with the two upper
regions constitute nearly half of the total land mass of Ghana the area accounts for less than 2%
of the number of financial institutions in the country. There are 6 commercial banks, two rural
banks and 20 Credit Unions operating in the region.
CREDIT UNION PENETRATION IN THE NROTHERN REGION
The Damango Community Credit Unions which was formed in 1968 is the oldest Credit Union
in the region. As of 2010 CUA reported that there were twenty Credit Unions operating in the
region with a total membership of 12,817 and savings deposits of GH¢4,020,719. Their
combined loan portfolio outstanding was GH¢4,445,250 during the same period.
BASIC CONCEPT OF THE SEND MICROFINANCE MODEL
The SEND Microfinance model is founded on the realization that the North-eastern corridor is
poor and inaccessible in terms of infrastructural development. Road network is poor making
commutation between communities risky and expensive. The area is largely underserved by
formal financial institutions. It was to address this gap that SEND introduced its intervention.
The basic operating modalities of the model involve four pillars namely:
a) Community mobilization to form a Credit Union to deliver affordable credit
b) Provision of basic infrastructure as well as human resources and technical assistance
c) Provision of external loanable funds to enable lending operations start early.
d) Mobilization of shares through membership development and more significantly through
cash deposits by members.
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By this model members of the microfinance window who initially could not afford to buy the
minimum share of GH¢20.00 would be able to accumulate savings thus making it possible for
them to become direct members of the credit union.
IMPLEMENTING THE SEND INTERVENTION MODEL
Access to affordable credit was a major constraint to realizing the objectives of the project. To
address this challenge, SEND identified cash as a recyclable resource and decided to implement
the revolving credit fund strategy using the Credit Unions as the launch pad. The concept
involved the creation of Credit Unions with a microfinance focus or the introduction of
microfinance windows into existing credit unions.
The SCA concept was adopted from Freedom from Hunger’s Credit with Education (CwE)
concept. Through the concept, programme participants in a credit-led strategy are offered small
credit to enable them invest in, or start income generating activities which they already have the
skill to do. The fundamental pillars of the CwE methodology are as follows: a) small loan sizes,
b) short loan duration, c) loan repayments by installments) option to take a repeat loan e) Loans
delivery through SG/SCA methodology f) no loan collateral required.
GRADUATING MICROFINANCE CLIENTS TO MAINSTREAM CU
The general guidelines and operating procedures developed by SEND to promote its graduation
strategy include the following: 1) Maximum loan cycles before graduation pegged at 12. 2) Pre-
determined minimum savings is mandatory 3) Opening of an account with the Credit Union is a
prerequisite 4) Establishment of a monitoring system to track operations.
The model has proved to be efficacious as it has helped to shore up membership, improved
deposit mobilization and enhanced profitability. However notwithstanding the fact that the
principle of graduating microfinance members into mainstream credit union appears to be
working, there are some concerns which need to be addressed. These include coercing of
microfinance members to join the Credit Union rather than giving them the choice to decide;
treating Microfinance clients as none members of the credit when in deed they have group
membership; decapitating natural leaders from some groups; some graduants have problems with
meeting lending conditions after graduation etc.
LESSONS LEARNED IN IMPLEMENTING THE MODEL
A number of important lessons have emerged from the implementation of the model which are
worthy of noting.
a) Governance needs improvement. Currently all members retire en masse at the end of their
four year term of office.
b) Microfinance clients constitute the largest proportion of the CU clients but are not
represented on the board.
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c) Notwithstanding the fact the microfinance loans were more performing than the mainstream
CU loans they continued to invest most of their funds into mainstream CU loans.
IMPACT OF MICROFINANCE ON MEMBERS
The programme has shown that the poor can take and repay loans effectively. It has also shown
that the poor can save. Several members reported that the programme yielded appreciable
benefits to them some of which are: a) increase in both personal savings and capital employed in
income generating activities; b) better business management skills leading to higher profitability;
c) better access to education by children especially girls; d) reduction in morbidity among
children as a result to better food intake; e) better spousal relationship in the family etc.
Studies have revealed that:
• 49% of women reported that they expanded their business;
• Women cash saving increased from 24% to 40%;
• Women contributing to household expenditure increased from 12% to 45%;
• Women contributing to household decisions increased from 36% to 54%;
• Women with business skills increased from 42% to 56%; and
• Women involved in leadership matters increased from 20% to 46%
It was also established that microcredit can be used as a tool for improving the lives of
marginalized rural women. Studies further reveal that as the enterprise performance of
microfinance clients increases, the financial security of the members simultaneously increases as
well and they are more likely to have multiple economic activities.
PROFTIABILITY
Generally the programme has demonstrated a good potential for increasing the profitability of
the Credit Unions. This is because interest rates charged are market rates. The portfolio quality
of microfinance loans is far higher that mainstream CU loans. This is because a robust
monitoring system has been put in place to ensure that repayments are tracked properly and
corrective measures are put in place when performance appears to be going down.
REPLICATION PACKAGE FOR CU-MICROFINANCE GRADUATION MODEL
Replicating the SEND CU-graduation model requires a number of key steps to be taken for
successful implementation. These include a good community entry dynamics leading
establishing legitimacy in the community and better understanding of the programme by
community members. It is important to note that if the group formation process is not thorough,
groups created will be weak and as a result the performance of the groups will be seriously
compromise. Accordingly the group formation process must be thorough and solid solidarity
built among group members. Mutual guarantee mechanism is at the heart of the model and this
must be strengthened at the beginning and continuously emphasized throughout the programme.
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Training is equally important for all those involved in the programme i.e. programme
beneficiaries, programme staff, Credit Union management and as already mentioned general
orientation for the community at large.
It is important to implement a records keeping system which allows for easy and timely
generation of information. In doing this it must be noted that programme beneficiaries are largely
illiterate and their officers are not paid officials. In view of this the system should be kept basic,
short, simple and easy to understand and cost effective to deploy.
Continuous monitoring of the programme is absolutely essential. Timely action is required to
deal with issues of loan delinquency and any issues that might affect group solidarity. This
means monitoring should track qualitative as well as quantitative indicators. WOCCU has
offered several ratios that are helpful to effectively manage the programme under what it calls
PEARLS. For effective management of the programme it is important to track selected ratios in
the following categories: a) sustainability and profitability; b) assets and liability management; c)
efficiency and productivity and d) capital adequacy.
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1.0 BACKGROUND ON THE NORTHEASTERN CORRIDOR
1.1 COVERAGE OF THE AREA
SEND’s Ghana programme started as part of SEND Foundation of West Africa which was
conceptualized to include Liberia and Sierra Leone. It was registered in 1998 by the Registrar of
Companies in Ghana as a company limited by guarantee. This category of registration covers
Nongovernmental Organizations (NGOs). The commencement of the programme was based on
needs assessment conducted in what is now known as the Northeastern Corridor. The
consultative process in developing the needs assessment included a diverse group of stakeholders
including women, youth, farmers and persons with disabilities. These preliminary studies were
funded by Christian Aid. The coverage of these studies cut across several districts namely
Eastern Gonja, Nanumba, Yendi Saboba/Chereponi, Tatale, Kpandai and Ketekrachi in the
Northern Volta Region. The programme development process covered the period from 1998-
2000. The outcome of the stakeholder consultation during the period resulted in the institution of
the SEND’s first programme namely the Eastern Corridor Livelihood Security Promotion
Programme (ECLSPP) in 2001.
The sketch below which is not drawn to scale is an indicative map of were the Credit Unions in
the Northeastern corridor are located
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1.2 AN AREA EMERGING FROM CONFLICT
In 1994 the Northeastern Corridor was engulfed in an ethnic conflict which resulted in the loss of
thousands of lives and the displacement of tens of thousands of people. As is typical with all
conflicts around the world, the fighting ended but the peace was to take some time to return to
the area. General insecurity and mutual mistrust persisted among the various ethnic groups and
communities fundamentally affecting societal and communal cohesiveness. This general
insecurity seriously affected the business environment, disrupted the performance of livelihood
activities and affected the quality of lives of the people in the area. Sometime was required for
people to rebuild their lives and return to normalcy.
This was the situation on the ground in area when the SEND intervention based on Freedom
from Hunger’s Credit with Education (CwE) model was launched. This strategy was specially
designed to assist in the effort to provide people with credit to rebuild their lives and provide the
opportunity to save some money. The programme also aimed to provide education in areas such
as peace building, gender relations etc. to assist this conflict community in rebuilding lives and
restoring some ethnic harmony.
It is significant to note that after the ethnic conflict there were several interventions by NGOs
and other stakeholders before the SEND intervention to try to rebuild peace and harmony among
the communities. One of these was the Permanent Peace Negotiation Team (PPNT). Some of the
initiatives of the PPNT aimed at restoring peace included the following:
• Formation of peace committees to educate the people in the region about tolerance and
coexistence
• Encouragement of free movement of people in the region
• Creation of mechanisms for control of inflow of weapons into the region
• Involvement in the resettlement and reconstruction of the war ravaged areas by
mobilizing resources from NGOs as well as government.
• Galvanizing interest and assistance from inside and outside the country for the overall
economic development of the Northern Region.
1.3 FINANCIAL INSTITUTIONS IN THE AREA
The Ghanaian financial market comprises the following types1 of institutions: a) Commercial
banks b) Savings and Loans Companies c) Rural and Community Banks, d) Credit Unions f)
Financial NGOs g) Microfinance Companies.
The Northern Region is the largest region in Ghana and together with the two upper regions
constitute nearly half of the total land mass of Ghana. However, northern Ghana accounts for
1 For purpose of this presentation some institution types such as hire purchase, leasing, micro-insurance etc. have
been excluded.
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less than 2% of the number of commercial banks. The northeastern corridor is underserved in
terms of formal financial institutions. The distribution of formal sector banks in the area is as
follows:
Table 1: Financial Institutions in Northeastern Corridor
Town Name of bank Type of bank 1 Salaga Ghana Commercial Bank Commercial Bank
2 Bimbila Ghana Commercial Bank Commercial Bank
3 Yendi Ghana Commercial Bank Commercial Bank
4 Ketekrachi Ghana Commercial Bank Commercial Bank
5 Yendi Agric Development Bank Commercial Bank
6 Wulensi First National Bank2 Commercial Bank
Gushegu Tizza Rural Bank Rural Bank
7 Zabzugu Zabzugu Rural Bank Ltd Rural Bank
8 Banda Banda Credit Union Community Credit Union
9 Bimbilla Bimbilla CCCU Community Credit Union
10 Chamba Chamab CCCU Community Credit Union
11 Ketekrachi Ketekrachi CCCU Community Credit Union
12 Saboba Saboba CCCU Community Credit Union
13 Salaga Salaga CCCU Community Credit Union
14 Kpandai Kpandai CCCU Community Credit Union
15 Yendi Yendi CCCU Community Credit Union
16 Tatale Tatale CCCU Community Credit Union
17 Tamale Tamale CCCU Community Credit Union
18 Chereponi Chereponi CCCU Community Credit Union
The absence of financial institutions in the area may in part be attributable to ethnic conflicts
exacerbated by the harsh environmental conditions such as poor road network etc. The number
of commercial banks in the Accra metropolis far exceeds those in the entire northern Ghana. In
addition given the operating conditions it is difficult for people within the area to walk into these
few commercial bank branches to open an account. This is because the minimum requirement for
opening an account at these banks is about one hundred Ghana cedis on the average. It is even
more difficult to obtain a loan from these commercial banks because of conditions which include
landed property, personal guarantors usually by a salaried worker. Borrowers are more attractive
for lending purposes if they are in formal sector employment particularly government
departments or agencies.
Recently a number of Financial NGOs such as Maatan Tudu and other microfinance companies
have emerged on the scene. Some of the MFIs that operate in the area were Care-vision,
Mawunyo Financial Services and Atebubumae Financial Services etc. Most of these entered the
area from the Volta and Brong Ahafo Regions to take advantage of the absence of financial
institutions in the area. According to community members the activities of some of these
2 First National Bank was built in Wulensi during the bi-election in that constituency but has not yet been licensed
for business by the Bank of Ghana. It is therefore not on the ground although the bank building is available.
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microfinance companies had led to loss of their savings as the institution go under and officials
disappeared after collecting registration fees and savings deposits from them.
2.0 THE CREDIT UNION MODEL IN GHANA
2.1 OVERARCHING CREDIT UNION CONCEPT
The concept of Credit Unions in Ghana is not different from credit unions around the world. Like
all Credit Unions they are member-owned financial cooperatives managed by the members
themselves for the purpose of promoting thrift and providing credit to its members at competitive
interest rates. The basis of the union is the common bond among members; for example working
for the same organization (workplace), living in the same area (community based), worshiping in
the same church (faith or church based), or members engaged in the same activity (farmers).
The operating principle is simple. Members pool their resources together by purchasing shares in
the credit unions and making savings deposits. This allows them to build up a reservoir of
loanable funds from which they make loans to members who wish to borrow. This means as a
general principle the standard credit model is a savings-led one. The lead activity is to garner
member savings to enable the union to build up the necessary resources and subsequently to
make loans. A credit union largely relies on its own deposit mobilization from among members.
The driving motive of the credit union is not the profit element. Credit union operation is driven
by the serve its members cost effectively, pay adequate recompense on members’ deposits, and
use profits generated to provide competitive interest rates on its loan products to members. In
other words profit made by the credit union is allowed to backflow into the system to provide
better member services including lower cost of borrowing. Although dividend is paid when
declared, this is not the most important motive for credit union members.
For all these to happen, the management of the credit union needs to remain in the hands of the
members through their elected representatives. For this reason the voting process for decision
making is not based on the number of shares a member holds but rather per head. The
governance system in the CU system is discussed in section 2.2.2 below.
2.2 MISSION, VISION, GOVERNANCE AND MANAGEMENT
2.2.1 Mission Statement
All the Community Cooperative Credit Unions in the Eastern Corridor have carefully defined
their mission statement to reflect the fact that their catchment area covers a population which is
vulnerable, marginalized and hard to reach through conventional financial intervention models.
They state their mission as to “improve the socio-economic well-being of especially women and
children in the target communities by offering affordable and client-friendly loan products and
savings opportunities”. This mission statement does not only look at who their clients are, how
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they will be serviced and where they will be served. It goes further to look at issues of bringing
about the well-being of women and children who are often the hardest hit in terms of
vulnerability. It is clear that without using innovative strategies it would be difficult to reach this
segment of society with the kind of self-help they need to make a difference in their lives.
The Credit Union model appears to be the best financial model which can easily resonate very
well with the poor and under-privileged. With very little money invested in shares ordinary poor
people can become part owners of the Credit Union along with other people they know.
Knowing the other co-owners of the credit union demystifies the process and makes ordinary
people feel confident in the system that serves them.
2.2.2 Governance Structure
Like all credit unions the CCCUs in the Northeastern Corridor are owned and managed by their
members. Through their Annual General Meetings (AGMs) they exercise control over the
functioning of their CCCUs. Each Member of the CCCU has one single vote regardless of the
number of shares that the person may hold. In other words voting in the credit union system is
not by shares but each member has one vote.
To effectively manage the Credit Union the members delegate the management of the CCCU to
a Board of Directors. The Board of Directors is elected by the members and therefore is
accountable to the general membership. Every year at the annual general meeting Board
members are called to account for their stewardship.
The Board of Directors comprises of Chairperson and Vice, Secretary and an Assistant
Secretary, and a Treasurer. The convention which the Credit Unions are following is that the
AGM appoints the board members. The Board subsequently meets and elects the office bearers
including the Chairperson and Vice.
To assist the CU in its functions including fiduciary, oversight and policy setting functions, the
Credit Unions have also put in place a number of committees. These committees have clearly
defined mandates and functions. The committees that have been put in place to assist in good
governance are the following:
• The Loans Committee: The Loans Committee is charged with the responsibility of
reviewing all loans requests and ensuring that all applications meet the criteria set by the
Credit Union. They have the authority to recommend for approval any loan application which
meets its lending criteria or otherwise to decline all applications that do not meet the lending
criteria. The Loans Committee may also assist a loan applicant to repackage a loan
application to meet its lending criteria and conditions.
• Supervisory Committee: The Supervisory Committee is a very important organ of the
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Board to ensure its good performance and indeed the proper function of the Credit Union as a
whole. The mandate of the Supervisory Committee is to evaluate, verify and assess the
performance of all officers of the Credit Union whether they are hired officers or elected
representatives of the members. It is their function to ensure that all officers including the CU
manager perform their duties in accordance with the rules and regulations governing their
office. Particularly with respect to lending, the supervisory committee has the onerous duty
of ensuring that all loans granted are in accordance with the lending policies and guidelines
and that the portfolio outstanding is performing. In deed the Supervisory Committee
performs the function of the Internal Audit.
• Education Committee: The Loans and Supervisory Committee members are elected by the
members in AGM. However the Education Committee is set up by the Board of Directors.
The function of the Education Committee is as follows:
o To educate members on the Credit Union policies and programmes
o To educate potential members on the benefits of being a member so as to attract more
membership
o To market the products offered by the credit union to its members and depositors so as
to improve the visibility of the credit union within the community.
o To uplift the image of the credit union within its catchment area.
The tenure of office of the Board is four years. It was noted that all Board members are
required to retire en masse at the end of their tenure of office. This does not augur well for
continuity and the maintenance of a good institutional memory. Good practice requires that
board members retire from their positions after their tenure of office by rotation. This enables
continuity and the retention of a good institutional memory.
An elected member of the Board cannot hold office for more than two consecutive terms. Any
member desirous to be re-elected after serving the maximum of two terms must stay out for at
least four years before submitting him/herself for election.
2.3 PERFORMANCE OF CU IN THE NORTHEASTERN CORRIDOR
2.3.1 Credit Union Penetration in the Northern Region
The Damango Community Credit Unions which was formed in 1968 is the oldest Credit Union
in the region. A study of the CUs shows that it was the intervention of SEND that provided the
impetus for the formation of CUs especially in the Eastern Corridor. As of 2010 CUA reported
that there are twenty Credit Unions operating in the region. This list excludes those that SEND is
incubating which have not attained full Credit Union status. Thirteen of the credit unions are
community credit unions while three and four are workplace and faith based credit unions
respectively. Total membership of these twenty credit unions as of 2010 was 12,817 with total
savings of GH¢4,020,719. The CUs in the region advanced a total of GH¢4,445,250 to their
members in the year.
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Table 2: Penetration of CUs in the Northern Region
Name Amount
1 Membership 12,817
2 Value of Shares in Ghana Cedis 424,520
3 Savings 4,020,719
4 Borrowers 3,547
5 Total Portfolio 4,445,250
Source: CUA Report 2010
2.3.2 Membership growth
Before the introduction of the SEND supported process to develop CCCU across the catchment
area there were a few Credit Unions operating in the area. These included the Tamale Teachers
Credit Union (1994), Salaga Farmer Credit Union (1972), and the Chamba Parish Credit Union.
While some of them are still operating a few of them have collapsed. These include the Chamba
Parish and Salaga Farmers CUs which went under. The growth trend in the region in terms of
numbers has been high. Among the eleven credit unions monitored by SEND between 2010 and
2011, only three of them namely Kpandai, Chamba and Banda recorded negative growth. Their
growth was -2%, -10% and -4% over the previous year figures. The other CUs showed very
strong growth. For example in 2011 the Tamale CCCU recorded a growth rate of 20% over the
2010 position. For the first half year of 2012, it slowed down to only 4%. The Salaga CCCU
grew its membership from 496 as at the end of 2010 to 598 at the end of 2011 representing a
growth of 21% over the 2010 position. By the end of the first half of 2012, its membership had
further increased to 670 representing a growth rate of 12% within the period. The newer credit
unions appeared to be growing at a much faster rate. The fastest membership growth between
2010 and 2011 was the Tatale CCCU which recorded a growth rate of 459%. For the first half
year of 2012, it recorded another phenomenal rate of 68%. Rapid growth by new MFIs is
predictable but will slow down over the years. On the average the eleven credit unions showed a
good potential for growth. Between 2010 and 2011 the average growth rate was 14%. At the end
of the first half of 2012, the average growth rate was 8%. Given the poverty profile of the area
and the level of education required to penetrate the area the rate of growth is significant.
Fig Growth of members
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Source: Generated with data from SENDFiNGO monitoring Reports
2.3.3 Growth in Deposits
Savings development has generally mirrored membership growth. This is mainly because the
process is savings-led. This means membership to the credit union must be preceded by a
commitment to make agreed periodic savings. Data available showed that the three credit unions,
Kpandai, Chamba and Banda which recorded negative membership growth also recorded
stagnated deposit growth during the period.
In absolute terms the deposit growth has been rapid in aggregate. Total deposits of all the CCCU
in the ECLSPP was GH¢1,908,487, GH¢2,199,238 for 2010 and 2011 respectively. The
performance for the period January to June 2012 was GH¢2,613,906. In terms of the growth
trends among the CUs this varied depending on location and age of the CU.
Between 2010 and 2011, the Tamale CCCU recorded a deposit growth rate of about 35%. From
January 2012 to June of the same year, it recorded a growth rate of about 15%. If this trend
continues it would repeat the same performance record of more than 30%. Overall the CCCUs
have achieved an average growth rate of 15% for the period between 2010 and 2011 while for
the year up to 2012 they have grown their deposits by 19%.
Fig Deposit growth of CUs
-
2,000
4,000
6,000
8,000
10,000
12,000
Am
ou
nt
in g
ha
na
ce
dis
Location of CUs
CU Membership
2010 CU MBRS
2011 CU MBRS
2012 CU MBRS
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16
Source: Generated with data from SENDFiNGO monitoring Reports
2.3.4 Growth in Portfolio
An important mandate of the CUs in the area is the delivery of credit to their members. Available
data suggests that they were doing this quite effectively. In 2010, the Kete Krachi CCCU which
is by far the biggest of all the CUs in the area disbursed a total of seven hundred and sixteen
thousand, four hundred and eighty five (716,485) Ghana cedis. This amount represented over
50% of the gross total portfolio outstanding among all the CUs in the areas. It was able to
achieve this within a relatively short period of four years. By June of 2012, the Kete Krachi CU
had disbursed seven hundred and seventy one thousand one hundred and eleven (771,111) Ghana
cedis. This growth represented a rate of about 8% on the 2010 position.
The Chamba CCCU also demonstrated that it could mobilize shares and deposits from its
members and on lend to deserving members. Its portfolio outstanding for 2010 amounted to
GH¢254,375 in 2010. This dipped to GH¢233,009 to 2011 and further declined to GH¢191,976
by the end of June 2012. All the eleven CUs maintained a combined portfolio outstanding of
GH¢1,430,535 in 2010, this increased to GH¢1,463,836 in 2011 and by the end of June 2012, the
aggregate portfolio outstanding was GH¢1,463,030.
It is significant to mention that, some of the CUs showed a reduction in portfolio outstanding.
These CUs were the same CUs that also experienced membership attrition. However the major
cause of the portfolio reduction with those CUs is loan delinquency. The figure below shows the
portfolio outstanding of the CUs between 2010 and June 2012.
Fig
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Am
ou
nt
in G
ha
na
Ce
dis
Location of Credit Unions
Deposit Growth of CUs
2010
2011
2012
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
17
Source: Generated with data from SENDFiNGO monitoring reports
3.0 THE SEND MICROFINANCE MODEL
3.1 BASIC CONCEPT OF THE SEND MICROFINANCE MODEL
The SEND Microfinance model is founded on the realization that the North-eastern Corridor is
poor and inaccessible in terms of infrastructural development. The road network is poor making
commutation between communities expensive and risky. As a result of this the area is largely
underserved by formal financial institutions. It is in view of this that the SEND model was
conceptualized.
SEND believes that working with people in their own communities, it would be possible to build
a reservoir of resources for on lending among themselves if the opportunity to do so is created by
encouraging thrift and creating the deposit capture infrastructure for them to save. Alternative
models such the rural banking concept was considered but the best model that emerged was the
credit union. This model was more attractive because the communities could own and manage
the institution which would provide them with the opportunity to save as well as take loans for
their income generating activities or for consumption. The basic operating modalities of the
model involve the following:
e) Mobilise the people in the community to establish a community based credit union. In most
cases the CCCU becomes the only recourse for accessing affordable credit.
f) Since the facility is often established from scratch, SEND provides the basic infrastructure as
well as human resources and technical assistance to the community in the early days to build
their capacity to manage the new CCCU.
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Location of CUs
Growth in Portfolio of CUs
2010
2011
2012
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
18
g) SEND invests external loanable funds to enable the credit union start lending operations. The
external loan for microfinance operations enables the credit union to start operating a credit-
led intervention which allows members to first take a loan after initial training which is
invested into income generation and then make mandatory savings. This helps them to both
build up reserves and then position themselves financially to purchase shares of the CCCU to
become part owners. Most people within the programme area are simply too poor to raise the
minimum share capital required to join the CCCU directly.
h) As the CCCU begins to develop, it accumulates shares through membership development but
even more significantly through cash deposits by members. This internally generated source
of funds provides a more sustainable means of meeting the demand for credit by members.
The theory is that over time internally generated funds accumulated from share capital and
savings deposits will progressively reduce the need for external funds and ultimately make
external funding unnecessary.
At the centre of this model is that members of the microfinance window who initially could not
afford to buy the minimum share of GH¢20.00 would be able to accumulate savings thus making
it possible for them to become direct members of the credit union instead of through their
collective membership by virtue of being members of the microfinance programme.
3.2 IMPLEMENTING THE SEND INTERVENTION MODEL
In 2001, following participatory research, SEND Ghana established the Eastern Corridor
Livelihood Food Security Promotion Programme (ECLSPP). The focus of the programme was
agricultural marketing, youth self-employment, and support to rural commercial women to
assure food security. It also addressed education and information dissemination covering
reproductive health, HIV/AIDS, peace, rights and gender.
In particular the food security component of the programme was designed to support the
promotion of Community Based Farmers’ Cooperatives and through them encourage and
promote the production and consumption of soybeans. The production of soybeans as a cash
crop would improve family incomes while its consumption would also improve intake of protein
dense food especially by children.
It was noted that access to affordable credit was a major constraint to realizing the objectives of
the project. To address this challenge, SEND identified cash as a recyclable resource and decided
to implement the revolving credit fund strategy. By this strategy a fund was established so that
artisans and women traders could borrow from it for their activities. At the end of each loan
cycle they were expected to pay back so the money would be recycled as new loans to others.
Sadly enough the programme was fraught with repayment problems thereby seriously
compromising the effectiveness of the programme. In the search for an alternative financing
mechanism that would deal with lack of access to credit while at the same time address the
repayment challenge SEND settled on the SCA model. This involved working in collaboration
with the Ghana Credit Union Association to launch a credit programme using the Credit Union
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
19
as the launch pad. The concept involved the creation of Credit Unions with a microfinance focus
or the introduction of microfinance windows into existing credit unions.
Initially an attempt was made to keep the operations of the microfinance window separate from
that of the mainstream credit operations. In pursuance of this SEND provided funds, staff and
operational guidelines.
The SCA concept was adopted from Freedom from Hunger Credit with Education (CwE)
concept. Through the CwE concept, programme participants in a credit-led strategy are offered
small credit to enable them invest in, or start an income generating activity which they already
have the skill to do. This means there is no skills acquisition to start the business thereby making
the start of the programme less expensive than would otherwise be the case if there was the need
to provide training. The fundamental pillars of the CwE methodology are as follows:
• Loans granted should be small for working capital not fixed assets finance.
• Loans should be granted for only short term income generating activities that do not have
a gestation period but not for consumption.
• Repayment plan should be by installments rather than balloon.
• Borrowers should have the option to take a new loan immediately after repaying.
• Loans should be delivered only through the two-tier SG/SCA methodology.
• Loans granted should not be collateralized. The only collateral condition is the
submission to mutual guarantee mechanism.
• Better impact is achieved if the loans are granted to women as opposed to men.
Additional income earned by women is known to bring about better nutritional benefits to
the family in general and in infants and children in particular.
SEND invested in conducting market research to determine where the CCCUs would be most
viable. To introduce the SCA model SEND had to incubate the CCCU or agree with existing
CUs on the way forward especially with regards to the revolving fund concept which was proven
not to be efficacious under the operational conditions prevailing at the beginning of SEND’s
intervention.
Guided by the results of the market research and working with SEND staff, sensitization was
conducted among the chiefs, opinions leaders and the general population. The sensitization
included a general education on what benefits they stand to gain by having a community-based
financial institution which they own within their reach.
Kpandai was the area where the process was launched in 2002. Startup was usually with the
establishment of an interim Board of Directors and the identification of community volunteers.
The interim board decayed at the first annual general meeting where an elected board is
inaugurated. Based on ability to pay, permanent staff were hired. For the purpose of managing
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
20
costs, the CCCUs all started in rented premises and worked with volunteer staff who were paid
incentives. To allow the CUs to accumulate enough funds before engaging in lending operations,
no lending operations were started using internally generated funds. This introduced a six months
waiting period.
3.3 GRADUATING MICROFINANCE CLIENTS TO MAINSTREAM CU
The start of credit unions which are an important model for reaching underserved communities is
important. CUA Ghana has published a list of 16 criteria for the starting and operating CUs in
Ghana. Conditions that directly affect prospective members are the following:
a) Have a minimum of 150 members and potential members of not less than 600
b) Members must pay an entrance fee of not less than five Ghana cedis
c) Make monthly deposits of not less than five Ghana cedis
d) The society shall be required to acquire a permanent office
In view of the fact that these requirements impose a minimum entrance fee as well as monthly
deposit conditions they pose a major challenge for potential members especially in the area. It is
based on this situation that graduating MF clients become the most viable option for recruiting
members into the CU.
The general guidelines and operating procedures developed by SEND to promote its graduation
strategy include the following:
1) Prospective members are educated on the maximum loan cycle they have to go through
before graduating to the CU
2) Savings is mandatory but there is also a voluntary savings component
3) New groups must open a group account with the CU where the savings are lodged; this
account will be monitored by the CO and members reminded of the progress they are making
towards graduation
4) The CU manager and accounts officer by establishing a monitoring system to track such
prospective gradaunts and advice the loan officer accordingly
5) All clients who attain the minimum requirement are advised to apply for CU loan after the
current group cycle is ended
6) Where a client attains the minimum requirement to graduate to the CU but is unwilling to do
so the loan officer continues to advice and recommend graduation as long as the client is not
up to twelve loan cycles. The CO may advice management to compel a client to graduate
7) If a client successfully completes 12 loan cycles but does not meet the graduation criteria, the
client may loss membership on the programme
3.4 LESSONS LEARNED IN IMPLEMENTING THE MODEL
A number of important lessons have emerged from the implementation of the SEND model
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
21
which are worthy of noting.
d) Across all the credit unions in the northeastern corridor, governance system needed adequate
improvement. All members retire en masse at the end of their four year term of office but can
offer themselves for reelection. This exposes the credit union to the possible retirement of its
entire board and the loss of its institutional memory if all the board members fail to have
their mandate renewed. The best practice would be to have board members retire by rotation
so that at any particular time there are old members to assure continuity.
e) Training of Board members is expensive and therefore the practice of subjecting all board
members to election at the same time means that in the event the entire board fails in their bid
for reelection, the CU will fall into the hands of untrained persons who will require
immediate training to function. Most of the credit unions do not have the resources to offer
such expensive training to board members if they are turned over rapidly.
f) It was also noted that microfinance members of the various CCCUs were increasing rapidly.
In spite of this there is no mechanism for insuring that the microfinance clients are
adequately represented on the Boards. Given the fact this category of members are still
vulnerable and are still largely voiceless, it is unlikely that they can stand for, or win
democratic elections on the board under the standard credit union policies. There is the need
for designing special policies that target them so that the increasing number of persons who
contribute significantly to the development and success of the credit union are given
representation at the policy level.
g) It was noted that the microfinance loans were more performing than the standard CU loans.
This notwithstanding most of the portfolios was standing in the standard credit union loans
were the portfolio PAR30 in some cases was as high as 60%. This compromises the potential
of the CCCU to generate significant interest income as well as limits the number of
microfinance members who would otherwise be graduating to the credit union.
h) It was also noted that the management of most of the Credit Unions required training or
retraining. Continuing to put money into a non-performing loan product may be an indication
that management has problems with making the right credit investment decisions or failed
credit policies or lack of good skills to conduct proper loan appraisal. The average loans of
the standard credit unions are larger than the microfinance loans. This requires deeper loan
analysis. However the credit unions do not have the financial muscle to be able to hire and
retain the right quality of staff to conduct the level of credit analysis required.
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
22
4.0 IMPACT OF MICROFINANCE ON CREDIT UNIONS
4.1 MEMBERSHIP GROWTH THROUGH MF CLIENTS
Credit Unions in the Northeastern Corridor including the Tamale metropolis have made a
tremendous impact on the lives of many. In June 2010, there were 8,746 direct credit union
members including those who graduated from the microfinance programme. In December 2011
this number had grown to 10,012 representing a growth of 14%. As of June 2012 the growth of
CU membership had further improved to 10,808 members from the December position of
10,012. This represents a growth of 8%. When the June 2012 growth is compared with the 2010
position it represents a growth of 34% within the two year period, which is impressive.
The microfinance programme provides an important avenue for excluded people to join the
credit union. These potential members are people who received training and understand the
rudiments of the credit union. At the end of June 2010 microfinance in aggregate accounted for
5,464 microfinance clients representing 65% of the total membership of the eleven credit unions
in the northeastern corridor. By June of 2011 this figure had further grown to 6,991 representing
76% of the total credit union membership. At the end of June 2012, microfinance clients
accounted for 10,127 clients or 94% of credit union membership. With more assistance to
microfinance clients to increase their income and ipso facto simultaneously increase their savings
credit union could tap into a large reserve of potential members.
4.2 GRADUATION AS A MEANS OF INCREASING CU MEMBERSHIP
The strategy for graduating microfinance clients into the mainstream credit union has been
discussed in section 3.3. In this section the discussion will centre on the impact of the graduation
principle as a means of recruiting members and clients for the credit union. Graduation of
microfinance clients has played a significant role in the rapid membership growth of all the CUs
in the area. It is therefore important to note the contribution of microfinance clients to the
phenomenal growth of credit unions.
By December of 2010 when SEND’s intervention was in its early years yet, impressive
graduation numbers were reported. A total of 5,464 microfinance members joined the credit
union family as microfinance members. One thousand two hundred and thirty four (1,234) of
these opened an account directly with the credit union without necessarily dropping off their
membership to the SCAs. In the same year five hundred and twenty nine of them graduated to
mainstream credit union through the same process.
In 2011 the number MF members of the CUs in total had grown from 5,464 to 8,118 a growth of
over 48%. The number of members graduating to the CU opening accounts with the credit union
was 771 representing about over 9% of the membership. Beyond this, 1,763 of the microfinance
clients had opened an account directly with the CU. This represented over 21% of the entire
microfinance membership. By the half year of 2012 ending June 2012, the combined
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
23
microfinance membership of the CUs was 9,279 representing 85% of the total mainstream CU
membership. Out this number 1,209 had graduated to mainstream CU as members.
Table 3: Comparison of Direct CU members to MF members
LOCATION 2010 2011 2012
CU MF CU MF CU MF
1 TAMALE 864 318 1,042 980 1,087 893
2 KPANDAI 1,375 1,338 1,352 781 1,368 395
3 KETE KRACHI 2,511 1,503 2,869 1,669 2,964 1,680
4 BIMBILLA 1,767 1,134 1,964 1,179 2,051 1,226
5 CHAMBA 889 602 797 356 796 510
6 SALAGA 496 199 598 503 670 543
7 BANDA 385 300 371 390 372 390
8 BORAE 292 70 351 286 411 341
9 TATALE 44 0 246 750 413 1,237
10 CHEREPONI 0 0 112 415 163 842
11 NALERIGU 0 0 310 809 513 1,222
TOTAL 8,746 5,464 10,012 8,118 10,808 9,279 Source: Generated with data from SENDFiNGO monitoring reports
Notwithstanding the fact that the principle of graduating microfinance members into the
mainstream credit union appears to be working effectively, there are some concerns which need
to be addressed by SENDFiNGO and the various CU partners. These include the following:
• Microfinance members are indeed members of the credit union. They maintain a common
account with the CU and therefore have a collective membership to the CU.
• By the way the current graduation policy has been designed and is being implemented
microfinance clients are being coerced into becoming mainstream CU members which in
deed should be their free will decision. Microfinance members should be given the choice to
join the credit union if they so desire. This position is corroborated by several microfinance
members who have graduated to the mainstream credit union but have chosen to retain active
membership to their SCAs. Interaction with microfinance members on the ground indicates
that some of groups actually predate the microfinance SCAs. In this regard if care is not
taken over-emphasis on graduation may cause well-functioning pre-existing groups to
dismember.
• Experience elsewhere supported by conclusions drawn from interaction with microfinance
members suggest that some SCA members actually rally around individual members who are
high flyers and early adopters. These are usually fairly successful in their endeavors. Such
people tend to serve as role models. Graduation has the effect of decapitating natural leaders
from their groups thus robbing them of natural leadership.
• Notwithstanding the numerical preponderance of the microfinance members in the various
Credit Unions, who are largely women, this has not reflected in the board membership.
Women are grossly under-represented on the governing boards of all the credit unions as well
as the various committees. Affirmative measures must be put in place to ensure that women
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
24
receive a fair representation on the various governing boards as well as the board
committees.
• Some SCA members who graduate to the mainstream CU are facing problems with meeting
the lending conditions. SEND’s impact assessment has revealed that many MF graduants are
off loans because they are unable to meet the collateral requirement. It is important to
develop and introduce a bridge product that will allow MF graduants to transition seamlessly
into mainstream operation. The standard products that they face when they graduate are
inappropriate for them.
4.3 IMPACT OF MICROFINANCE ON MEMBERS
4.3.1 Increasing savings and working capital
The SEND microfinance programme has led to impressive direct benefits to members.
Discussions with programme members were
replete with examples of how the programme
had taken them out of the vicious cycle of
poverty into a virtuous cycle of prosperity. In
Salaga an excited member who is in her early
sixties explained how the programme had
assisted her to develop her business. She
explained that she was operating her business in
a single room in a compound house buying her supplies on credit. She reported that with an
initial loan of GH¢60.00 she had developed to the point where she now paid cash for her supplies
and stocks inputs during harvest. She now has a savings of GH¢800.00 as her own in the credit
union. She had diversified from her cooked food business and added a provisions store.
In Tatale another programme member also recounted how she was able to acquire a shop from
where she now sells a larger variety of items rather than being the itinerant seller she was,
carrying her entire business on her head. She added that she had acquired a parcel of land,
molded some sandcrete blocks and was hopeful that in months rather than years she would be
operating from her own premises which
would also provide accommodation for her
family.
4.3.2 Better business management skills
As a result of the education delivery
component of the programme several
members reported that they are now better
able to manage their income generating
activities. In Kpandai a member reported
“I did not know how to separate my family
expenses from my business expenses. As a
result my business was running out of
capital frequently. I had to be requesting
money from my husband and relations who
accused me of mismanaging my business”.
“The microfinance programme has helped me
to improve my business. I have now added
another line of business. My business is more
profitable because I now buy my inputs on cash
basis rather than on credit. Now I work for
myself rather than work to pay my creditors”.
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
25
that although she was already operating an income generating activity prior to joining the
microfinance programme, her capital kept running out all the time. She had to resort to her
husband and relations to recapitalize her business in order to remain in business. This lowered
her self-esteem before her husband and relatives. With the training she has received, she is now
better able to manage her business and does not frequently eat into her working capital as was
previously the case.
4.3.3 Increasing access to education
The opportunity accorded ordinary women
many of them not previously engaged in any
income generating activity has brought about
a dramatic impact on their ability to educate
their children particularly the girl child.
Although available information is based on
qualitative self-reporting, several women
recounted with excitement how the
microfinance programme had helped them to educate their children. In Bimbilla an elated mother
of eight bemoaned the illiteracy of virtually all her children because she and her husband were
unable to find the money to send and keep their children in school. She recounted with
accomplishment how she is now able to look after her youngest daughter in school.
If parents have to make a decision on which child should be educated as a result of lack of funds,
the female child is usually the one sacrificed. There are several examples of women who are
educating their children using the income earned through their income generating activities
funded from the microfinance loans. It was even more reassuring that some women understood
that the educational facilities in their own communities were not of standard and therefore
decided to pay more by sending their children outside their local areas to Tamale and other urban
centres so that their children could have access to better educational facilities.
4.3.4 Reduction in morbidity
The increase in income generation capacity has increased general food security and improved the
consumption of higher and better quantities of food in the family especially for children. One
member in Chamba described how her membership had led to drastic reduction of the hunger
gap. The hunger gap is the period between the planting season and the next harvest. In the
eastern corridor there is only one rainy season. This means that people have to harvest and store
food against the lean season. Unfortunately the lean season is getting longer pari-passu with the
increasing length of the dry season due to climate change.
4.3.5 Increase in familial respect and harmony
The microfinance programme is offered only to women. Several women were dependent on their
husbands for everything. In a lot of cases even the capital women use for the income generating
“I have eight children. The oldest is 31 and my
last born is twelve years. Except the last born
none of the others has gone to school because
I could not afford the school fees. When I
decided to send my last girl to school my
husband said he had no money to look after
her and that if I did it would be my business. I
send her to school and I am looking after her.
She is now in class three”
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
26
activity was provided by their husbands. This dependency tends to lower the self-esteem of
women. At the Suglo Society in Bimbilla it was confirmed that women manage the house
keeping funds or the money set aside for the sustenance of the family. This is often used for
income generating activities and the profit retained by the women and the seed money reverted
to its original purpose. If the investment failed to generate profit tension was created between the
couple. With access to funds from the microfinance programme women are now independently
capable of generating income without depending on the house keeping money granted by the
husband. This has reduced their vulnerability and given them a voice in the family as well as
deepened spousal consultation.
4.4 SUSTAINABILITY OF OPERATIONS
4.4.1 Interest Rate Policy
The CUs have two different interest rates that they charge on loans to different categories of
borrowers. For their microfinance loans a flat interest is charged at 10% per loan cycle. As
explained elsewhere in this paper, microfinance loan cycle is 16 weeks (four months). For
practical reasons and to enable members relate their installments payments with the loan cycle,
SEND prefers to count the loan cycle in weeks rather than months. There are no other added fees
charged on the loan. However the SCAs themselves have imposed an additional interest of 1%
which is retained by the SCA as part of its own internally generated income. Accordingly the
annual nominal interest rate that all MFI clients are required to pay is 33% inclusive of the SCA
interest. Since repayment is by weekly installments the effective interest rate could be much
higher. The disadvantage of charging flat interest is that borrowers continue to pay the same
amount even though they progressively reduce their outstanding balance. This imposes loan
repayment challenges on borrowers. This can be seen in the fact that most borrowers who default
usually do so towards the end of the loan cycle. This notwithstanding the flat interest basis
remains the best method yet for the CU given their MIS and staff capacity constraints.
For mainstream CU borrowers, interest rate on loans is 3% per month calculated on the reducing
balance. This translated to a nominal annualized interest rate of 36%. Most MFIs in the country
charge interest to their clients on a flat rate. The CUs must be commended for the interest
calculation regime which is beneficial to their clients.
Compared with Savings and Loans Companies, Microfinance companies and community banks,
the interest rates charged by the CUs are competitive. Most Rural and Community banks charge
an annualized interest rate of between 36% and 39% (3% - 4% per month).
4.4.2 Income trends of the CUs
An analysis of the income buildup of the CUs indicates that most of the income is derived and
expectedly so from interest charges and other fees directly linked to the loans portfolio which is
the core business of the CUs. The average income not linked to portfolio is about 8%. This is a
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
27
healthy development. However this strong dependence on interest income also puts a strong
linkage between portfolio quality and interest income. Interest income fluctuates in sympathy
with the gyration of portfolio quality i.e. the lower the portfolio quality the lower all incomes
predicated on portfolio.
The Tamale CCCU was founded in 2004. By 2010 it was able to cover all of its operating
expenses from internally generated income with a net surplus of GH¢13,503. In 2011 the surplus
made had increased to GH¢24,709 or an increase of 82%. By the end of the half year 2012, the
Tamale CCCU had reported a net surplus of GH¢24,344. The Kete Krachi CCCU was founded
in 2004. By 2010 the Kete Krachi CCCU had raked in GH¢7,384 after covering all its operating
expenses. As of December 2011 it had made a net surplus after covering all operating cost of
GH¢22,393. This represented an increment of over 200%. By the end of the half year ending
June 30, 2012 it had made provisional surplus of GH¢34,365, a growth of 55% in six months.
Another CCCU which demonstrated strong growth in profitability between 2010 and June 2012
is the Chamba CCCU. In 2010 Chamba CCCU posted a surplus of GH¢9,469 after covering all
operating cost. In 2011 net operating profit increased to GH¢13,010 which represented an
increase of 37.4%. In the half year up to June 30, 2012 the Chamba CCCU reported a
phenomenal growth in net profit of GH¢34,318 or 163.8%. In aggregate the eleven credit unions
produced a consolidated profitability position of GH¢11,673, GH¢19,243 and GH¢22,834 in
2010, 2011 and half year ending June of 2012 respectively.
However the story of profitability among the CUs in the area is a mixed one. Some of CUs
reported significant losses during the same period while the profitability of others fluctuated
between profits and losses. Bimbilla CCCU reported a net surplus of GH¢3,811 in 2010 but
slipped into loss making the following year when it reported an operational loss of GH¢1,622.
As of the end of the first half of this year (2012) the Bimbilla CCCU had reported a provisional
loss of GH¢10,821. Another example is the Chereponi CCCU which has been making
progressively higher losses since 2010. In 2010 it reported an operational loss of GH¢5,328. This
increased to GH¢9,516 in 2011 and for the first half of 2012 its losses further increased to
GH¢20,105.
SEND is aware that many of the CUs require subventions to build up their capacity for higher
performance. Accordingly subsidies are paid to the new and weaker CUs. Subsidies are
progressively reduced and ultimately withdrawn. In 2010 two of the CUs made losses in spite of
the subsidies provided by SEND. In 2011 and the half year of 2012 all the CUs subvented by
SEND were able to cover all of their operating costs. It is important to note that all the older CUs
are no longer subvented by SEND. Two of these CUs which are no longer subvented were
unable to cover their operating costs from internally generated income. The table below shows
the net operating performance with and without SEND subsidies for operations.
Table 4: Reported profits with and without SEND Subventions
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
28
LOCATION
2010 2011 2012
Without
Subvention
With
Grant
Without
Subvention
With
Grant
Without
Subvention
With Grant
1 TAMALE 13,503 13,503 25,709 25,709 24,344 24,344
2 KPANDAI 6,570 6,570 3,541 3,541 (1,581) (1,581)
3 KETE KRACHI 7,384 7,384 22,393 22,393 34,685 34,685
4 BIMBILLA 3,811 3,811 (1,622) (1,622) (10,821) (10,821)
5 CHAMBA 9,469 9,469 13,010 13,010 34,318 34,318
6 SALAGA (4,926) (1,036) (3,074) 8,033 (4,631) 13,315
7 BANDA (4,720) (1,140) (8,579) 887 (8,392) 1,400
8 BORAE (3,263) (593) (6,714) 978 (3,426) 9,432
9 TATALE (5,567) 990 (5,983) 5,656 (6,746) 12,321
10 CHEREPONI (5,328) 230 (9,516) 241 (20,105) 1,805
11 NALERIGU (5,260) 1,248 (9,932) 3,146 (14,811) 2,915
Source: Generated with data from SENDFiNGO monitoring reports
4.4.3 Generating Potential for Clients
The microfinance model offers wonderful opportunity to improve their income generating
capacity. In the external monitoring report prepared by Ayani for SEND on April 12, 2012 the
findings corroborated the findings by the study in 2008 and provides support for the proposition
that the benefits to members are not transient but are lasting. It reported the following findings:
• 49% of women expanded their business;
• The women saving money increased from 24% to 40%;
• Women contributing to household expenditure increased from 12% to 45%;
• Women contributing to household decisions increased from 36% to 54%;
• The women with business skills increased from 42% to 56%; and
• The women involved in leadership matters increased from 20% to 46%
In an earlier study done for SEND by CCA in 2008, it was established “that microcredit can be
used as a tool for improving the lives of marginalized rural women. Furthermore, it confirms that
a comprehensive Microfinance scheme adequately supported by Credit Unions can have a
tremendous impact on women beneficiaries at the enterprise, individual and household level”3.
Providing details on this claim the study revealed that SEND MF members reported 37% higher
sales and 29% higher profits compared to the controlled group outside the SEND MF. According
the SEND/CCA study, as enterprise performance of MF members increases, the financial
security of the members simultaneously increases as well and they are more likely to have
multiple economic activities.
Table 5: Indicators of Financial Security
MF Beneficiaries Control Group
Average Monthly income (in Ghana Cedis) 36.9 28.8
% of women with supplementary income 41.0% 29%
% of women with savings 99% 64%
Average Total Savings (in Ghana Cedis) 80.05% 51.96%
3 Conducted by CCA and Published by SEND August 2008
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Credit: CCA/Send Publication, August 2009
4.4.4 Portfolio Quality of Microfinance Operations
Loan repayments of microfinance loans are excellent due to a number factors key among which
is the two tier mutual guarantee system factored into the delivery methodology. In the model all
members will not qualify to take a new loan as long as an unpaid installment on the group loan
and this includes those who have finished paying their own loans. To avoid this situation
members usually support each other as required by the product methodology to ensure that a
defaulting member pays up. The second reason is that the CU exercises the right of lien over the
group savings. In the event that any member defaults and group fail to enforce the group
guarantee mechanism the CU applies its right of set off. However over-reliance of lien and right
of set off to enforce loan repayment often discourages savings as members fear that their savings
may be applied to pay off the outstanding balance of a defaulting member. Thirdly, where the SG
is unable to secure repayment the SCA steps in to ensure payment. The SCA then activates
measures provided under its byelaws to elicit repayment from the defaulting member(s). Other
ameliorating factors include peer pressure. However there are some members who are quite
unhappy with the mutual guarantee mechanism arguing that it encourages laziness. Most of the
members who have graduated to the CU but have chosen to leave their SCAs belong to this
category.
On the other hand the mainstream CU loans have large over-due loans due mainly to ineffective
loan appraisal, in adequate security and inability of the management to strictly implement the
lending policy. Clients are often granted loans far in excess of their ability without security or
co-making of the loans and this includes directors and committee members.
4.4.5 Trends in Portfolio Quality of CUs
Review of financials of the CUs indicates that they make allowances possible for loan losses.
Given the level of PAR30 of a few of the CUs, it is doubtful if the allowances made by them are
adequate and in accordance with good practice. For example the loan loss allowance of Kpandai
CCCU for 2011 was 11% while its PAR30 for the same period was 18%. The Banda CCCU made
a provision of 14% while its PAR30 was 29% for the same period. However, generally speaking
the CUs are doing a good job in making provisions for loans losses. Table 6 below shows the
actual provisions in financial statements against gross portfolio outstanding.
Table 6: Loan Loss Provisioning
Location
2010 2011 2012
Total Loans Loan
Provision
Total Loans Loan
Provision
Total Loans Loan
Provision
1 TAMALE 141,325 7,985 164,744 4,004 165,766 5,937
2 KPANDAI 139,738 14,721 96,503 9,815 91,124 9,815
3 KETE KRACHI 716,485 31,041 762,792 24,178 771,111 24,178
4 BIMBILLA 106,350 11,523 82,152 5,464 67,882 5,464
CHAMBA 254,375 14,592 233,009 6,733 191,976 6,733
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Source: SENDFiNGO monitoring reports
A review of the financials statements of the CUs indicate that although allowances were made
against possible loses due to nonpayment of loans, none of the CUs actually cleaned up their
loans portfolio of toxic loans through loans write off. The result is that current assets were held
above their net realizable values. It is recommended that loan write off be done periodically to
clean up the portfolio and make loans provisioning more reflective of the reality on the ground.
A further analysis of the breakdown of the PAR30 of the CUs as between general CU loans and
microfinance portfolio indicated that the general CU loans were the ones that accounted for
almost 100% for late loan repayments and ultimately loan delinquency. This can be seen in the
fact the new CUs being incubated which do not currently make mainstream loans to members do
not have repayment problems and consequently their PAR30 is close to zero in all cases. The
older CUs which have both general CU and microfinance portfolios have no repayment problems
with their microfinance loans but have serious problems with their general loans to members.
Some of the problems leading to the repayment problems with the general purpose loans made to
members include the following:
a) Loans sizes are much larger and often beyond the ability of borrowers to manage.
b) In some cases there is often a disconnect between the loan size and the ability of the
investment to generate income. This mismatch between the amount, loan term and the
repayment schedule has implications for the timely repayment of loans.
c) Loans are processed and disbursed without due regard to the general principles governing
lending under the credit union movement. Loans exceed the member’s savings and shares
several times and yet there are no co-makers to the loan to provide additional security.
Loan officers do not have the capacity to do quality loans appraisal for larger loans which
require deeper financial analysis having regard to the amount involved.
d) A large proportion of delinquent loans stand in the names to Board and committee
members and their cronies and surrogates. This seriously compromises their supervisory
and oversight responsibilities.
Table 7: Trends in Portfolio Quality PAR30
LOCATION 2010 2011 2012
1 TAMALE 9% 3% 4%
2 KPANDAI 15% 18% 19%
5 SALAGA 38,729 1,360 50,686 2,412 73,440 2,342
6 BANDA 5,222 1,477 7,959 1,091 6,313 1,091
7 BORAE 28,310 486 49,547 749 58,018 749
8 TATALE - - 4,469 - 10,390 -
9 CHEREPONI - - - - 2,075 -
10 NALERIGU - - 11,974 - 24,935 -
TOTAL 1,430,534 83,185 1,463,835 54,446 1,463,030 56,309
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3 KETE KRACHI 10% 8% 8%
4 BIMBILLA 20% 10% 11%
5 CHAMBA 11% 5% 6%
6 SALAGA 8% 7% 4%
7 BANDA 53% 29% 37%
8 BORAE 3% 3% 3%
9 TATALE 0% 0% 0%
10 CHEREPONI 0% 0% 0%
11 NALERIGU 0% 0% 0%
TOTAL 12% 8% 8%
Source: SENDFINGO monitoring Reports
4.4.6 Operational Sustainability of the module
It is clear from testimonies of programme participants that the programme has been of
tremendous benefit to them in terms of providing them with working capital, shoring up their
revenues and by extension their disposable incomes. It had also given them non-financial
benefits which include how to manage their businesses better and helped in no small measure to
improve spousal relations.
The main drivers of sustainability are:
• Scale of operations in terms of outreach,
• Portfolio outstanding,
• Effective interest, or cost of funds and
• The measures the CUs put in place to maintain high portfolio quality.
Table 8: Trends in Profitability Quality PAR30
LOCATION Income
Expenses
% of cost recovery
Total Without
Grants
Total Excluding
Grants
1 KETE KKRACHI 25,121 22,848 10,820 232% 211%
2 KPANDAI 25,937 24,937 7,846 331% 318%
3 BIMBILLA 15,329 12,339 9,131 168% 146%
4 CHAMBA 18,207 13,548 10,941 166% 124%
5 TAMALE 23,981 21,672 13,989 171% 155%
TOTAL 108,575 96,343 52,727 206% 183%
Credit: SEND/CCA Report 2008
Studies as well as SENDs external assessments have shown that the CUs can incorporate
microfinance into their operations sustainably. The external monitoring assessment for April
2012 observed that on aggregate SEND had achieved 61% operational self-sufficiency as
compared with a projected performance position of 58% for the period. In deed apart from the
area of reaching farmers with microfinance loans where SEND did not achieve its projected
growth rate, it had exceeded all other performance indicators that it set for itself.
Earlier in 2008 the SEND/CCA report found that from June 2007 – May 2008 revenues from all
SEND supported CCCUs amounted to GH¢108,575 inclusive of GH¢12,232 in grants. Expenses
on the other hand expenses totaled GH¢52,727. It was noted that even after eliminating grants
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and donations from revenues the CCCUs still made significant surpluses. It must however be
noted that this performance was against the background that expenditures had been kept
artificially low.
SEND/SENDFINGO funded the incubation of its CU partners with funding from donor sources.
Without donor funds which are usually for both operations expenses as well as capital
investment, local CUs would find it difficult to incorporate microfinance into their portfolios.
For microfinance to be sustainable, its needs to come to scale; the faster the scale-up, the faster
and better the movement towards sustainability. Although funding from deposits offers the
cheapest source of sustainable funding, with microfinance clients all members are usually net
borrowers. This means loans they take compared with their deposits are much higher. Any
attempt to fund the microfinance operations with internal funds means there will be less money
for on lending to traditional members and this can lead to discontentment.
4.5 MONITORING SYSTEM
4.5.1 SEND/SENDFINGO
The relative high performance and rapid growth of the CUs was predicated on the monitoring
system SEND put in place. The regular monitoring ensures that Board members are held
accountable, CU managers deliver on the targets set out in their workplans and also to ensure
that recommendations made by both external audits by CUA and from SEND/SENDFiNGO are
adhered to and implemented. The following form the basis of send monitoring activities.
• Review the performance of directors and credit union committees;
• Review the performance of loan officers and also the other credit union management and
staff;
• Ensure that operational targets, e.g. members, interest income, expenses etc, are met;
• Draw attention to lapses/weaknesses which need remedies;
• Provide skills training on simple matters that need prompt redress;
• Monitor the attainment of milestones and targets within plans;
• Ensure that management and the BOD implement the strategies within plans;
• Assess the overall performance of the credit union;
• Make sure that the monitoring and evaluation framework are consistently used by both
management and the Board of the credit union; and
• Follow up on previous findings to ensure that any problems have been remedied.
4.5.2 CUA’s monitoring role
CUA has overall responsibility for the development of credit unions in Ghana. However at this
time CUA’s monitoring responsibilities are mainly in the area of providing external auditing
services and training to Directors, Committees and Management. CUA does not provide internal
auditing service. Its audits are annual in nature and as such are too infrequent to provide as a
basis for effective oversight. In view of the fact some of the CUs are still being incubated, they
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fall outside the remit of CUA. Accordingly SENDFiNGO deals with closely.
To clarify the responsibilities of CUA as well as give it the legal power to function as sector
regulator, a Credit Union bill has been drafted and is waiting parliamentary action to pass it into
law. The new law should provide the CUA with legal muscle to carry out its regulatory and
supervisory functions. However it is not clear when this will happen. The draft bill has been
pending for years and the current parliament has risen and it is unlike it will deal with it before it
is dissolved.
PART TWO
5.0 REPLICATION PACKAGE FOR CU-MICROFINANCE GRADUATION
MODEL
5.1 COMMUNITY ENTRY DYNAMICS
Community entry dynamics encompass all the steps that are taken in order to meet the people
where they are and discuss with them what their needs are and how to get them to sign unto the
programme. Not all members within the community may be interested in signing unto the
programme for a variety of reasons. These may include the following:
• Some of them may consider themselves too poor to burden themselves with a loan which
would impose more burden on them
• Although the poor save money most people see themselves as being too poor to be able to
save money
5.2 GROUP FORMATION STRATEGIES
5.2.1 Criteria for Group Formation
It is important to keep the group formation process completely self-selecting. This means that
group members should be allowed to determine who can become a member of their group.
However, while ensuring that the group formation process is completely self-selecting, it is
important to ensure that potential group members adhere to certain basic concepts which help to
enhance group cohesiveness, ensure that members know each other well and minimize the
tendency of conflicts arising along the way after the group has come together. In this regard the
attention of potential group members should be drawn to the following:
a) Potential group members should be persons who live in the same community. This is
absolutely essential because an important requirement of the group is that they have to
meet weekly and later on less frequently. In this regard where a member needs to travel
some distance involving time and travel cost, it would most likely affect the person’s
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ability to attend meetings regularly and consequently effect the ability of such a member
to repay and save as required by their common agreement.
b) It is strongly advised that persons who are closely related should not be in the same small
group. For example mother and daughter, siblings, or women who are rivals or share the
same husband. This is because in the case of an emergency all of those people in the
small group would be equally affected and therefore would put the solidarity group under
stress if several persons in one group fail to honor their repayment obligations. Secondly
although relations are not part of the mutual guarantee mechanism it is customary for
people who run into financial difficulty to seek assistance from their close relations first.
c) For persons who are in the same trade and are therefore more or less rivals, the solidarity
is seriously compromised. For example two women are selling bread and one of them
after baking her bread is confronted by a family emergency such as sending her child to
the hospital, it is unlikely that her colleague would give customers a free choice of buying
the bread of her solidarity group member who could not turn up due to an emergency.
The situation would have been different if the two were not dealing in the same product.
Secondly if the group members are engaged in the same income generating activity a
slump in the market would hit them equally and therefore make it difficult for them to be
of assistance to each other.
d) All group members must agree on all the members seeking to join the solidarity group.
e) It should also be made clear to the SG members that they will be required to join other
SGs in order to form the SCA.
Unless the group previously exists it is important and often helps to create strong SG if this is
done in the presence of the Credit Officer. The credit officer does a simple check to ensure that
group members truly know themselves that they are not merely fulfilling conditions. Simple
questions the credit officer can use to check whether the group members know themselves very
well include the following:
• How many children does she have?
• What is her husband’s name?
• How many of her children are in school?
• Which school(s) do her children attend?
• What activity does she do in the market?
For this to be done more effectively it may be necessary to capture these basic information about
the potential members so that answers to these questions may be verified as being correct.
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5.2.2 Solidarity Group Formation
The group formation process is a two tiered. The first stage is the Solidarity Group (SG). A
solidarity group is group of women or persons in the case of a mixed group, who not being less
than 4 or more than 7 in number has agreed to come together to mutually guarantee each other’s
loans. The purposes of the SG are to:
• Assess the potential for the success of each group member’s loan request for an income
generating activity and recommend approval or decline approval
• Guarantee one another’s loan repayment of both the principal and interest thereon.
• Share experiences and discuss ideas emanating from the meeting
• Encourage each other to use the ideas disseminated at the meeting
• Look for ways to share information and practices learned at the meeting with family
members, friends and the community at large.
In particular the SG must agree on the following:
• That in the event of one or more of their members failing to repay her loan on time they
will be collectively responsible for ensuring that defaulting person’s loan is paid on time.
• That until and unless all members repay their loans the entire solidarity group will be
responsible for ensuring that the outstanding loan balance is repaid.
• That the entire group would not be qualified to take the next loan notwithstanding the fact
that some members may have fully repaid.
• Finally that their outstanding collective savings balance should be applied to set off any
unpaid loan balance should one or more members fail to repay their loans and the rest of
the group members are unable to deal with the situation.
After going through this process the Credit Officer may then assist the group to admit all their
members. Every potential member of the SG should arise to be formally admitted by the rest of
the group members. If any potential member feels uncomfortable about any potential member,
the entire group should resolve the member’s discomfiture before moving on.
When everyone is agreed on the small group membership, then they will appoint a solidarity
group leader. Such a person usually emerges naturally and by consensus. However, if there
appears to be no consensus, a solidarity group leader will be elected by the entire group. The SG
leader also serves as their representative on the CSA management committee.
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5.2.3 Savings and Credit Association Formation
The second tier in the group formation process is the Savings and Credit Association (SCA). It
is an informal savings and borrower club and need not be formally registered with the
department of cooperatives or any other statutory body. The SCA is made up of between 4-7 SGs
depending on average size of membership of the SGs that want to come together. Persons who
intend to form a SCA must first go through the SG formation process described in section 5.2.2
above.
With the assistance of the Credit Officer or Field Agent (FA), SGs that have been properly
formed agree on a date on which all potential members must meet in a general meeting to
validate the membership of SG membership in plenary meeting. If any member of any SG draws
concerns from other SGs, the chairperson of that solidarity group must convince other members
that they have absolute confidence in their member. If the chairperson’s intervention does not
bring about agreement, then that member must be made to withdraw otherwise the entire SG
should be made to withdraw.
When the SGs have vetted all potential CSA members, they shall resolve to form the CSA. With
the assistance of the Credit Officer the new CSA now proceeds to develop their bye laws to
guide the functioning of their CSA. However before the CSA develops the byelaws the Credit
Officer will give them the general policies under which they will operate. These include the
following and shall become part of the SCA bye laws:
1) Members of the SCA shall be women who are 18 years or older and have grouped
themselves into solidarity groups.
2) All members are required to pay a one-time membership fee of five (5) Ghana cedis at the
time of formation of the SCA or subsequently as may be determined by the SCA from time
to time.
3) Each SG shall mandate their SG leader to represent it on the management of the SCA
members. It is from among the SG representatives to the management body that the officers
of the SCA shall be elected by the entire membership.
4) Officers of the SCA shall include Chairperson and Vice Chairperson, Secretary and
Financial Secretary who must both be able to read and write, Treasurer and another
position that the group may want to put in place such as organizing secretary/porter or
trustees. If there is no literate among the management body for the position of the Secretary
and Financial Secretary, the group may consider appointing someone from the SCA or
even outside the SCA. If the person appointed is an outsider, she shall have no vote in
arriving at a resolution on any issue.
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5) The SCA shall meet once a week from the first to third loan cycle but may choose to meet
less frequently after the third loan cycle.
6) Loan applications from members shall be approved first by their SGs and then by the SCA
before any disbursement can be made.
7) The SCA shall not approve any loans for members above the limits determined by the
Credit Union.
8) Interest shall be charged on all loans to the SCA based on a flat interest by the Credit
Union. The threshold of the interest shall be determined by the Credit Union and reviewed
from time to time.
9) The SCA shall charge a small interest on the loan to each member. The exact amount to be
charged shall be determined by the SCA.
10) The SCA shall collect loan repayments from its members in equal installments over the
loan duration and pay the same to the Credit Union or any other institution at which their
account is held.
11) All loan disbursements, repayments and savings shall be done at the meeting in the full
view of all members. Members shall not pay any money to the Treasurer or Financial
Secretary outside the meeting. Any member who makes such payments does so at her own
risk.
12) All members agree to practice the messages disseminated during the meeting and/or
training sessions. They further pledge to support each other to overcome difficulties that
may occur along the way in implementing ideal behaviors.
5.3 SAVINGS AND CREDIT ASSOCIATION MEMBER TRAINING
5.3.1 Preparation of Byelaws
The guidelines listed in section 5.2.3 above constitute an important component of the CSA
byelaws. These should however not be imposed on members. Care must be taken to review them
carefully with members explaining to them why each of these guidelines is important for the
smooth functioning of their association to enable the Credit Union to extend credit to them and
also give them the opportunity to save money for themselves and towards becoming members of
the credit union in future.
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The Credit Officer/Field Agent or loans Officer should also guide the association to add their
own byelaws to these general programme rules. Care must be taken to ensure that byelaws which
are added by members themselves do not conflict with the programme rules but rather help in re-
enforcing them. In other words byelaws added by the members must be consistent with the
programme.
Other byelaws added by members have often included the following:
a) Meeting attendance e.g. absenteeism, lateness and early departure from meeting before
the end of the meeting;
b) Late payments, half payments or failure to save persistently
c) Quarreling at meeting,
d) Welfare issues e.g. weddings, out-doorings and naming ceremonies, bereavements etc.,
e) Use of their internally generated funds among others.
The Credit Officer must assist members to develop workable byelaws that assist them to
efficiently and effectively manage their association. This should include helping them to develop
sanctions on infracting the byelaws.
5.3.2 Training of Members and Office Bearers
It is important that the members and particularly the office bearers are given some training and
orientation to prepare them to assume their various roles. It must be noted that these are adults
and therefore techniques in dealing with them must be based on participatory adult learning
principles. With regards to the entire membership the required orientation should be geared
towards getting them to understand the programme rules as well as the byelaws that they
themselves have added. As part of the training the programme rules are usually listed at the back
of the member passbook. This helps in reminding them of the rules binding the programme
which they need to comply with. The complete byelaws including what the members have added
is printed and copies kept at the CU and also on the SCA secretary’s file. Individual members
may also be given copies.
From time to time the Chairperson or the CO must remind members of the byelaws. This is
particularly appropriate when someone has infracted any of them. This will make members alert
and realize that they need to respect their own byelaws. Initially the executive may not have the
courage to enforce the byelaws. The Credit officer needs to provide support and encouragement
so that overtime the courage and culture of enforcing the byelaws is developed.
Specifically training of office bearers should include a discussion on:
a) Duties and responsibilities of the various office bearers: In discussing this topic office
bearers must be engaged to come up with what they perceive as the duties and
responsibilities of the various positions.
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b) Qualities and qualifications of the various office bearers
c) How to manage a meeting
d) Leadership training
e) Conflict resolution
The training techniques should include a mixture of role plays, short stories, social drama, skits
etc.
5.4 CREDIT UNION MICROFINANCE STAFF TRAINING
5.4.1 Responsibilities of the Credit Officer
The training of staff for microfinance programme is extremely important for the success of any
microfinance programme. In this regard it is crucial for the microfinance staff and in deed all
those who will be associated with the operations of the programme to fully understand the
underlying values of the programme and what it seeks to achieve.
The responsibility of the CO is at four levels. These four levels are interdependent and the
success of one depends on the success of the others. They are:
1) Education and Motivation at the CSA Member level: At this level the Credit officer helps to; a)
build self-esteem and self-confidence of each member of the CSA; b) Assist members to
access credit for their income generating activities c) Provide practical live transforming
information to members
2) Organization and Training at the CSA Level: Organize, train and supervise community
members in very poor areas to manage their CSAs. This involves training and supervising the
management committees of the CSAs to maintain their passbooks, registers and their internal
fund and to help them carry out other management committee responsibilities and duties for
the effective running of their CSA.
3) Reports and Records at the Credit Union level: Maintain accurate records of the CSA under
his/her supervision and prepare and submit reports for the financial and performance
monitoring systems.
4) Conflict Resolution Skills: Disagreements among SCA member is usually the greatest threat
to solidarity. Sometimes differences between two individuals can degenerate into a society
wide canker as members take sides. The CO therefore requires some basic skill in conflict
resolution and management.
The Credit officer will need to be given adequate training on how to carry out each of these four
interrelated activities effectively. Without good training CSA members will not be empowered to
become confident and believe in themselves. This will lead to weak CSAs and ultimately a weak
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programme incapable of delivering the required benefits to members and the community.
5.4.2 Investigation, Promotion and Organization of CSAs
Community investigation starts with the first entry into a new community. This involves meeting
with community leaders, with the community as a whole and later with the potential members of
the new CSA.
There are three steps in the CSA investigation process. Each of them carries a number of
activities.
Step 1: Community Investigation: This step involves several activities including the following:
a) Map the area taking note of roads, rivers markets, clinics, schools and distances between
settlements;
b) Review the map carefully and select communities to be visited having regard to the time of
year, accessibility and population density.
c) Do a recognizance visit to the particular communities selected. During the visit learn more
about the presence of other organizations offering credit including NGOs and government
agencies and the experience of the people in dealing with those institutions.
d) Also learn more about nonagricultural economic activities. It is also important to assess the
population size and opinion leaders in the community etc.
At the end of the community investigation which may take one or more visits, a report should be
prepared to guide the next steps. Note that one does not need to be an expert to be able to
conduct the investigation. The end result is not a survey quality document but a rather a useful
guide to the credit officer.
Step 2: Promoting the Credit Union Microfinance Programme: The second step in the CSA
animation process involves two major activities. These are:
a) Getting acquainted with the community: In this activity some time is spent in the community
trying to know them better and also trying to seek legitimacy in the area. In this regard the
first meeting is usually with community leaders with opinion leaders, the general community
members and then those members who are interested in joining the CSA. In meeting with
these people the discussion should centre on how the model works and the benefits members
enjoy. Note should be taken of concerns raised by community members. The community
investigator must take particular care to ascertain that community meetings involve the poor
and is also attended by women who are an important target in the model.
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
41
b) Making a presentation on the Credit Union Microfinance model: Once the Community and
opinion leaders have shown interest in the model, they will help to schedule a meeting with
the entire community. The purposes of holding such a meeting are to:
• Explain to community members how the model works
• Highlight the benefits
• And explain how to form SGs and the CSA
Step 3: Savings and Credit Association Organization: This step illustrates how the two tier group
guarantee mechanism is developed. This step is particularly important because if it is not
properly carried out the CSAs that will be animated will be weak, lack cohesiveness and will not
be long-lasting and dismember quickly. The CSA formation process involves two activities. Staff
will need to be trained to understand these steps very well as they are critical to the development
of viable associations. The two activities are:
a) Solidarity Group identification: The first step is to identify individuals who are interested in
joining the CSA to form SGs. Time will need to be spent with the small groups of potential
members to help them understand the responsibilities that come with joining the SG and
subsequently forming the CSA. The purposes of the SG have been presented in section 5.2.2
above.
b) Savings and Credit Association organization: COs need to have a strong foundation on how to
bring together various SGs to form the CSA. It is important to note that a good CSA should
normally have between 35 and 40 members. There is no magic about the number. The
guiding principle is that the number of members should be large enough to make economic
sense for a credit officer to meet them once a week. It should be small enough to enable
members to participate in discussions.
It should be noted that some communities may be large enough to accommodate more than
one CSA. In this case it is best to have two separate CSA with the optimum members rather
than one CSA with bloated membership.
The names of all SG members who come together to form the CSA are registered in the CSA
registration form and is kept on a file by the Credit Officer. Some organizations choose to
show this list to the community leaders and seek their opinion regarding the honesty and
credibility of the persons whose names appear on the list. However in doing this care must be
taken not to violate the privacy of individuals or turn community leaders into loan
contractors. Refer to section 5.2.3 on how to bring the various SGs into the CSA.
Other areas in which COs will require training to put them on top of their job of animating
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
42
strong, viable and durable associations include the following:
• Key information on choices for a healthy family
• Microenterprise development topics
• Self-confidence Development
• CO meeting facilitation techniques
• The Credit Association Accounting system
5.5 RECORDS KEEPING AT THE LEVEL OF THE CSA
Keep it Simple: It is important to ensure that records-keeping at the level of the SCA is simple
to understand having regard to the fact that most of the members and ipso facto SCA officials
may not be literate and may find a complex records keeping system too demanding and
frustrating. The amount of paper work should be reduced to the barest minimum to what is
needed to understand what happens at each meeting.
Keep it basic: The records that are kept at the level of the women should be adequate to capture
transactions that happen at the regular meetings since no additional records will be kept
anywhere else. However it should avoid technical jargon and/or bookkeeping or accountancy
knowledge to operate. All that is required to implement the system should be numeracy. If a
person is ordinarily literate and can do simple arithmetic that should be adequate to operate the
records keeping system
Keep it short: It must be noted that all officers carry out their work voluntarily. Spending a lot
of time to implement a complex system at the expense of what they do will not be generally
acceptable. In this regard all documentation required should be short enough to be completed at
the end of the meeting so that the office bearer does not have to go home and do anything else to
bring the record keeping to completion. It is important that all members go satisfied with
everything about the meeting including the financials records.
In the light of this the following are the essential records that need to be kept by the CSA: 1)
Meeting Attendance Register, 2) Loans Repayment Register 3) Savings Register, 4) Withdrawal
Register 5) Summary Journal 6) Savings Passbook.
1. Meeting Attendance Register: Attendance at CSA meetings is very important. Poor meeting
attendance is usually a precursor to loan delinquency and eventually the collapse of the
CSA. In view of this it is important that the programme ensures that meeting attendance is
properly tracked and lateness and absenteeism addressed.
The meeting attendance register also serves as the role of members. At the beginning of
every new cycle, a new attendance register is prepared as some members may have
dropped out and new members admitted. The ruling of the attendance register is as follows:
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
43
The names of members are written in the rows in order of their SGs while in the columns
the date of the meeting is written. At the start of the meeting the Secretary calls out the
names of members as sequentially as they appear in the register and the member responds.
A diagonal line or a single stroke is made to indicate that the member is present and a zero
or an X is made to indicate that the member was not at the meeting. Some CSAs choose to
capture reasons for not attending the meeting some of which include sick (S), travel (T) etc.
Some CSA choose to call the roll of members at the end of the meeting so that they can
capture those who were punctual to the meeting and those who were late. See Annex one
for the ruling on the Members Attendance Register.
2. Loan Repayments Register: Loans obtained by members are spread over the loan cycle. The
loan cycle is usually sixteen (16) weeks. At each meeting all members who have taken
loans are required to repay their loans through their SGs. The loan repayment by each
member is calculated as follows:
{Total loan of each member + Loan interest + CSA interest}/number of installments in the loan
cycle
It is important to note that in a weekly loan repayment cycle, the number of weeks in the
loan cycle is not necessarily co-terminus with the number of total installments during the
loan cycle. The two may be different if a) there is a grace period b) the programme uses
one week during the current loan cycle to approve loans for the next loans cycle.
The total loan cash repayments for the payments due during the payment period is obtained
by adding the payments made by all members in the repayment column of the register.
Where there is a difference it means a default has occurred. The total obtained through this
summation is posted to the Receipts column of the Summary Journal
3. Savings Register: This is the section where all savings by members are tracked. In this
register all the names of members are entered usually by SG. Listing by SGs presents a
better picture of how the SGs are performing. The names of the members by solidarity
groups are listed in the rows while the dates of the meetings during the cycle are listed in
the columns. To ensure the solidarity groups remain cohesive, both principal loan
repayments and interest including interest thereon and the interest added on by the SCA are
collected by the SG leader or a representative and paid on behalf of all members during the
SCA meeting. This way defaults are detected and addressed even before the meeting starts.
At the end of the meeting the savings column is added up and the balance transferred to the
Summary Journal. The figure obtained from here is entered in the receipts column of the
Summary Journal.
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44
4. Member Passbook: CSA operates like a Village Bank. All members transact their business
with the CSA directly as their relationship with the Credit Union is only vicarious. In view
of this all members are issued with membership cards which entitle them to transact all
their business with the CSA. For example all loans disbursements are entered into the
member passbook as are loan repayments, savings and withdrawals. The member passbook
is not valid for any transaction with the Credit Union and can only be used at the CSA
level.
The top portion of the passbook provides information on the member’s borrowing and
repayment calculation. It shows the principal loan amount, interest both for the loans and
the CSA interest, the total amount due the number of payments to be made, regular
payments and membership fees.
The rest of the passbook provides information on the following: Meeting No in the cycle,
date of meeting payment, remaining balance and signature to authenticate the transaction.
On the other side of the passbook the following columns are provided: Deposits,
withdrawal, balance of deposits and signature of the treasurer. Below is sample of the
member passbook.
Fig 1: Member Passbook
+ + =
Loan principal and interest payments Savings record Balance ¢15
Meeting
No
Date Payment Balance Signature Deposit Withdrawa
l
Balance Signature
1
2
3
4
5
6
7
8
9
10
Loan
GH¢100.00
Org. Int.
10% =
GH¢10.00
15
regular
payment
s
CSA Int =
1%
GH¢1.00
Total
Due= GH¢
111.00
No. of
payments
16
Final
Payment
GH¢ 6.00
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
45
5. Withdrawal Register: Members of the CSA who have not yet graduated do not have any
direct link with the Credit Union. Those who have graduated but still maintain their
membership to the CSA also do not have any direct link to the Credit Union in transactions
with their CSA operations. The withdrawal register is therefore designed to allow CSA
members to withdraw from their savings if they so desire. Like all the other registers, the
Withdrawal Register has the names of all the members of the CSA listed in the rows. In the
columns the dates of each meeting are listed.
6. Accounting Journal: The Summary Journal summarizes all the financial transactions that
happen during the meeting. It is a five columnar book containing the following columns:
date, description of transaction or narration, payments, receipts and balance. It is important
for every transaction to be linked to a particular date usually the date on which the meeting
was held. The next column in the summary journal is the narration column. This column
briefly describes what the transaction is for, e.g. total loan repayments, total interest
repayment, cash lodgment at the credit union, cash withdrawal at the credit union, cash
withdrawal by members etc.
If the programme is implementing a system where a credit officer attends all association
meetings and at the end of the meeting receives all the residual cash after all transactions
have been concluded there should be no balance on the summary journal unless the
association has otherwise permitted the treasurer to maintain a cash float. A balance in the
journal in the absence of a float being held by the treasurer is either a shortage or a surplus
as the case may be and would need to be investigated immediately. See sample Journal
below
The Accounting Journal
Meeting
No
Date Description Cash-In Cash -Out Balance Sign
11
12
13
14
15
16
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
46
END OF INCUBATION TRAINING – CYCLE ONE
7. Credit Union Savings Passbook: Only one savings account in the name of the CSA. This
account is maintained at the holding institution. No member of the association has authority
to make any entry into the savings passbook. The savings passbook is updated as and when
there is a transaction with the holding institution. The following transaction may be
recorded by the holding institution into the passbook:
a. Savings deposits
b. Savings withdrawal
c. Payment of interest
d. Payment of dividend
At every meeting the person who has custodial responsibility for the savings passbook,
usually the treasurer, must produce the passbook for verification to ensure that all
transactions authorized by or arising from the previous meeting have been duly carried out
by the Credit Union.
5.6 RECORDS KEEPING AT THE CREDIT UNION LEVEL
The nature of records keeping at the CU level counts a lot in defining the quality, reliability, and
cost effectiveness of the system. Without an appropriate MIS platform it is advisable that the
system that is put in place is simple to deploy, easy to have staff trained and come to speed on it
while at the same time being able to provide information to all stakeholders including CU
management, Board of Directors and committees of the Board, regulators and other stakeholders
who frequently come the CU asking for operational and impact information.
The following records should be maintained at the CU on its MF operations:
a) Shares Accounts: A share account should be maintained for every shareholder. This
includes group and corporate account holders who will be treated as one shareholder.
SCA groups that decide to buy shares as a group shall also be treated as a group whether
incorporate or pre-incorporated. It also important to treat microfinance graduants who
purchase shares to be treated as individual shareholders whether they retire from their
group or not.
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
47
b) Savings Account: As in the case of the shareholders all savers should have an account
opened in their personal or group names. MFI SCAs shall have one account in their group
name and managed only by the official signatories as from time to time amended.
Graduants from SCAs can directly open accounts in their own names. This account
should be able to track transaction including withdrawals, lodgments, interest payments
and other approved payments and/or credits.
c) Income and Expenditure: All income derived from the Microfinance programme should
be tracked. These include, interest income, fees and commissions, fines, interest on
secondary investments such Treasury Bills etc. The expense analysis should be
comprehensive to exclude cross subsidies. Prominent among the expenditure heads are
staff salaries, allowances and benefits, honoraria paid to volunteers if any, vehicle
running, travel and transport, Board expenses, provision for loan losses and in deed any
expenses incurred in the ordinary furtherance of the business.
d) Financial Statements: The CU should produce financial statements including the
Income Statement, Balance Sheet, etc.
e) Monitoring Reports: Information which should be captured in the monitoring reports
should include financial and operational information. Key indicators which should be
tracked in the monitoring reports are discussed in section 5.8 below.
5.7 SAVINGS AND CREDIT ASSOCIATION MONITORING
The weekly meeting is at the heart of the SCA programme and provides the opportunity for the
association members to exchange ideas and learn about health and nutrition, microenterprise and
credit management. Decisions to try out new actions and behavior are also made at these
meetings. Finally the weekly meetings are a place where women can freely discuss the problems
they face in trying out new behaviors and give each other mutual encouragement and support to
overcome those challenges.
An essential condition is that members must make good decisions in managing their associations.
These decisions can result in the growth and progress of the association towards a sustainable
service enterprise.
The CO has an important role to play at these weekly meetings. During the first cycle, the CO
would normally attend all weekly meetings of the SCA and assists in facilitating the management
of the meeting itself and recording of the financial transactions. The CO’s primary role with the
SCA early in the first cycle is on credit management issues. When the group begins to get
comfortable with credit management, the emphasis is shifted to facilitating learning sessions.
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
48
The checklist for effectively managing the SCA weekly meetings are as follows:
• Brief preparatory meeting with the SCA leaders regarding the plan for the meeting
• Ensure that the meeting is opened on time and that the norms and traditions for opening
such gatherings within the society are respected. Visitors should be introduced.
• The recordings of the previous week’s meeting should be read aloud and validated by the
SCA.
5.8 KEY INDICATORS TO TRACK AND MONITOR
CUs in Ghana follow the PEARLS monitoring indicators recommended by CUA and WOCCU.
It is important that the indicators in each of the categories are tracked. Below are some selected
CGAP/Microfinance Transparency consensus ratios used by many MFIs. The complete WOCCU
monitoring tool is provided as Annex I of this report,
Sustainability/Profitability Ratios
a) Return on Assets: (Net Operating Income – Taxes)
Average Assets
Measures how well the MFI uses its total assets to generate returns. This ratio may also be
calculated on an adjusted basis to address the effects of subsidies, inflation, loan loss
provisioning and other items that are not in an MFI’s net operating income
b) Return on Equity: (Net Operating Income – Taxes)
Average Equity
This ratio calculates the rate of return on the average equity for the period. Because the
numerator does not include non-operating items such as donations, the ratio is often used as
proxy for commercial viability.
c) Operational Self Sufficiency:
Operating Revenue
(Financial expense+ Loan Loss Provision + Operating Expenses)
Measures how well an MFI covers its costs through operating revenues. Financial expenses and
loan-loss expenses is included in this calculation
d) Financial Self Sufficiency
Operating Revenue
(FE + LLP + OE+ Operating adjustments)
Measures how well an MFI covers its costs through operating revenues taking into account a
number of adjustments. The adjustments are to model how the MFI could cover its costs if its
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
49
operations were not subsidized.
Assets/Liability Management
e) Yield On gross Loan Portfolio: Cash financial Revenue from Loan Portfolio
Average Gross Loans Portfolio
Compares revenue actually received in cash with revenue expected from the portfolio. While a
small gap is common, a substantial yield gap (>10%) may indicate significant revenue seepage
through significant past due payments, fraud inefficiency or accounting error.
f) Current Ratio: Short-term Assets
Short-term Liabilities
Measures how well the MFI matches the maturities of its assets with liabilities. Short-term as
defined here means assets or liabilities that have a due date or maturity date within twelve
months.
g) Funding Expense Ratio: Interest and Fees Expenses on Funding Liabilities
Average Gross Loans Portfolio
This ratio shows the blend of an MFI’s interest rate on funding liabilities which the MFI is
paying. It may be compared with yield on gross portfolio to determine the interest margin
h) Cost of Funds Ratio: Interest and Fees Expenses on Funding Liabilities
Average Funding Liabilities
This ratio gives the blended interest rate for all of an MFI’s funding liabilities. Funding liabilities
do not include interest payable or interest on loans to finance assets.
Portfolio Quality
a) PAR Ratio: Portfolio at Risk > X days
Gross Loans Portfolio
The most acceptable measure of portfolio quality is PAR. PAR is the total of all loans
outstanding with one or more installment of the principal past due. PAR should always specify
the number of days past due. It should indicate whether restructured loans are included in the
calculation.
b) Loan impairment Ratio/ Risk Coverage Ratio: Loan-Loss Reserve
Portfolio at Risk > X days
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50
Shows how much of the PAR is covered by the MFI’s loan loss allowance. It is a rough
indication of how robust the MFI is to absorb shocks such as default by clients
c) Write of Ratio: Value of loans written off
Average gross loans Portfolio
Write off represents the percentage of an MFI’s loans that have been taken off from the balance
of the gross portfolio because they likely to be defaulted. A high write-off ratio is an indication
that the MFI has a serious problem with its loan recovery effort.
Efficiency/Productivity
• Loan Officer Productivity (Caseload)
• Average Disbursed loan size
• Average Loan Outstanding
• Operating Expenses Ratio
• Cost per Borrower
• Cost Per client
Capital Adequacy Ratios
• Debt to equity Ratio
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
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ANNEX 1
WOCCU RECOMMENDED RATIOS UNDER PEARLS
AREA PEARLS BRIEF DESCRIPTION NORM
P = PROTECTION
P1 Allowance for Loan Losses / Allowances Required for
Loans Delinquent >12 months
100%
P2 Net Allowance for Loan Losses / Allowances Required
for Loans Delinquent less than 12 months
35%
P3 Total Charge-Off of Delinquent Loans >12 months 100%
P4 Annual Loan Charge-offs Minimal
P5 Accumulated Loan Recoveries/Accumulated Loan
Charge-offs
100%
P6 Solvency >= 100%
E = EFFECTIVE
FINANCIAL
STRUCTURE
E1 Net Loans/Total Assets 70-80%
E2 E2 Liquid Investments / Total Assets Max 20%
E3 E3 Financial Investments / Total Assets Max 10%
E4 E4 Non-Financial Investments / Total Assets 0%
E5 E5 Savings Deposits / Total Assets 70-80%
E6 E6 External Credit / Total Assets Max 5%
E7 E7 Member Share Capital / Total Assets 10-20%
E8 E8 Institutional Capital / Total Assets Min 10%
E9 E9 Net Institutional Capital/ Total Assets Same as E8
A = ASSET
QUALITY
A1 A1 Total Loan Delinquency / Gross Loan Portfolio <=5%
A2 Non-Earning Assets / Total Assets <=5%
A3 Net Institutional & Transitory Capital + Non-Interest -
Bearing Liabilities / Non-earning Assets
>200%
R = RATES OF
RETURN &
COSTS
R1 Net Loan Income / Average Net Loan Portfolio Entrepreneurial Rate
R2 Total Liquid Investment Income / Average Liquid
Investments
Market Rates
R3 Total Financial Investment Income / Average Financial
Investments
Market Rates
R4 Total Non-Financial Investment Income / Average Non-
Financial Investments
Greater than R1
R5 Total Interest Cost on Savings Deposits / Average
Savings Deposits
Market Rates
>Inflation
R6 Total Interest Cost on External Credit / Average
External Credit
Market Rates
R7 Total Interest (Dividend) Cost on Shares / Average
Member Shares
Market Rates >= R5
R8 Total Gross Income Margin / Average Total Assets Variable - Linked to
R9, R11, R12
R9 Total Operating Expenses / Avg. Total Assets 5%
R10 Total Loan Loss Provision Expense/Average Total
Assets
Dependent on
Delinquent Loans
R11 Non-Recurring Income or Expense / Average Total
Assets
Minimal
R12 Net Income / Average Total Assets Linked to E9
L = LIQUIDITY
L1 S.T Investments + Liquid Assets - S.T. Payables /
Savings Deposits
Min 15%
L2 Liquidity Reserves / Savings Deposits 10%
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L3 Non-Earning Liquid Assets / Total Assets < 1%
S = SIGNS OF
GROWTH
S1 S1 Growth in Loans to Members Dependent on E1
S2 S2 Growth in Liquid Investments Dependent on E2
S3 S3 Growth in Financial Investments Dependent on E3
S4 S4 Growth in Non-Financial Investments Dependent on E4
S5 S5 Growth in Savings Deposits Dependent on E5
S6 S6 Growth in External Credit Dependent on E6
S7 S7 Growth in Share Capital Dependent on E7
S8 S8 Growth in Institutional Capital Dependent on E8
S9 S9 Growth in Net Institutional Capital Dependent on E9
S10 S10 Growth in Membership > 12%
S11 S11 Growth in Total Assets >Inflation
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
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ANNEX 2
FEEDBACK FROM VALIDATION WORKSHOP
GROUP MAIN ISSUES IDENTIFIED
GAPS IDENTIFIED
1 • The poor can access financial assistance
• The poor are assisted to diversify their income
generating activities (IGA)
• The Cost/benefit of the programme is
blurred
• Security of funds is a major challenge and
needs to be addressed
• A good corporate social responsibility
(CSR) agenda should be developed
2 • A major issue is how to determine if the source
of loan repayment money is through gains
made on the money through its judicious use
or that the beneficiaries have actually sourced
this repayment from other sources
• Training on how to manage the funds. This is to
ensure that loans given out are judiciously
utilized by the beneficiaries by employing best
accounting standards and principles to
manager their businesses.
• Strategies should include those who are left
out of the equation i.e. those who cannot fit
into any group
• Why are groups or SCAs not organized
along proper cooperative guidelines to
ensure that there is a pool of money for
all to part take in as against giving outs
that may be considered meagre
• The Credit Unions should use their own
internal funds (deposits) to fund the
microfinance product without necessarily
having to pass through SENDFiNGO or
similar bodies. This can be started as a
pilot before graduating into a full blown
programme
3 • The cost of running and monitoring the
programme is overly high
• There is lack of transparency in the system.
Credit Union Managers need to explain
explicitly the workability of the scheme to the
members
• The women’s groups should be members of
the Credit Union from the start at a lower level
or category
• The programme excludes the urban poor
from benefiting
• The use of mobile payment technology
should be considered
4 • High interest rate (30% per annum) on
microfinance loans presented is high and
therefore needs reconsideration
• Operating cost is high. Therefore funds should
be provided for managing the main fund.
• Time for graduation is too long and should be
made shorter maximum should be 4 cycles
• Graduation from microfinance to Credit
Union development
• Women should decide how much
instalments to pay
• Modification should be made based on
the situation on the ground
WAY FORWARD WAY FORWARD/NEXT STEPS FOR
COUNTRY/INSTITUTION
KIND OF ASSISTANCE REQUIRED TO
IMPLEMENT NEXT STEPS 1 NIGERIA
a) Groups should be formed according to the
cooperative principles of cooperation among
members. Loans should be disbursed to
a) Technical support
b) More funding to scale up operations
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
54
members along trade lines so that members
can jointly run a common business.
b) The Credit Union should increase the loan
size to group members to reflect present day
realities. The Current GHȻ100 is grossly
inadequate and cannot improve the
economic wellbeing of members. Instead it
will keep members in a cycle of stagnation.
c) The Credit Unions should source for funds
from within the credit union and seek
support from donors if nay. Instead of using
external institutions to source for funds and
implement the use of the funds using the
cooperative model
d) The Credit Unions should use the mobile
payment system and other available
technology to reduce the risk of handling
cash and make the transactions easy and
user friendly
2 SALONE/GAMBIA
a) Conduct feasibility studies first
b) Get a deeper understanding of how the SGs
and SCAs work
c) Training of personnel in the area of
microfinance and Credit Union development
a) Source Funding for Microfinance
3 SOUTH SUDAN
a) More enlightenment on the CU-graduation
model and its benefits
b) More knowledge on the Group formation
process
c) Mobilization of local resources to start
d) Technical Assistance on the best practices to
implement the programme
a) Technical Assistance to build capacity of
Board, Management, Staff and
Community
b) Mobilize funds and try to replicate the
Ghana model
4 SWAZILAND
a) A copy of the full report on the CU-
graduation to be packaged into a user
manual
b) Desegregate baseline information reports by
community
c) Appreciate the level of training required
d) Secure prototypes of Management
Information Systems available and determine
which most appropriate.
e) Explore the feasibility of mobile telephony
technology to facilitate payments in the
programme
a) Will require hands-on training especially
from Ghana to learn more about the
Ghanaian experience
b) Provide a programme to assist regional
blocks in Africa
5 GHANA
a) Research should be conducted into the
model on whether the repayments of loans is
coming from the loan activity or elsewhere
b) There should be group assessment of the
a) There is the need to build the Human
Resource capacity before launching the
programme
b) Clear operating policies should be
THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY
55
credit so that people in the same business
work together and share the profit according
to the capital invested
c) For any Credit Union to adopt the SEND
model it should set aside some reserves and
operate on a pilot bases using the
cooperative model and should not rely on
any donor.
developed to guide the programme
implementation
c) Develop materials for training including
those for Counseling
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