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BY BY

SAM AFRANE PH.DSAM AFRANE PH.DASSOCIATE PROFESSOR,ASSOCIATE PROFESSOR,KNUST, KUMASI-GHANAKNUST, KUMASI-GHANA

MARCH, 2007MARCH, 2007

““PROMOTION OF RURAL SAVINGS PROMOTION OF RURAL SAVINGS THROUGH MICROFINANCE: THROUGH MICROFINANCE:

THE EXPERIENCE OF THE EXPERIENCE OF SINAPI ABA TRUST,SINAPI ABA TRUST,

GHANA”GHANA”

INTERNATIONAL CONFERENCEINTERNATIONAL CONFERENCE ON RURAL FINANCE RESEARCH ON RURAL FINANCE RESEARCH

FOOD AND AGRICULTURALFOOD AND AGRICULTURAL ORGANISATION (FAO)ORGANISATION (FAO)

PRESENTATION OUTLINEPRESENTATION OUTLINE

1. Introduction (Why the Scheme?)

2. Objectives of the Study

3. Methodology

4. Literature Review

5. Analysis

6. Key Findings and Conclusion

SINAPI ABA TRUST GHANASINAPI ABA TRUST GHANA

Financal NGO Started in 1995, Member of Opportunity International Network Number of clients: over 55,000 (2006) Size of portfolio US 7.3 million Operational sustainability: 109% (December,

2006) Financial sustainability: 102% (December, 2006) Operational coverage: All 10 regions in Ghana

INTRODUCTION INTRODUCTION (WHY SAVINGS SCHEME?)(WHY SAVINGS SCHEME?)

Over-dependence on Donor Funds:Irregular, unreliable, and dwindling

Alternative source: Bank facility, commercial loans- found to be too expensive

Resulted in: Inability to meet client credit needs, loss of clients to competitors, loss of confidence and increase default

SAT provided only loans; while clients saved with other financial institutions including unscrupulous ones

Need to introduce savings scheme became imperative

1. Assess success of savings among the poor

2. Analyse the dynamics of the saving scheme

3. Draw important lessons about the role of savings in micro-finance

OBJECTIVES OF THE STUDYOBJECTIVES OF THE STUDY

METHODOLOGYMETHODOLOGY

1. Data source: SAT’s operational records

2. Two schemes: Compulsory and Progressive Savings

a) Compulsory -10% Cash collateral

b) Progressive – a voluntary accumulation of funds, through a gradual, continous and consistent savings

3. Loans Officers collect savings; submit records (electronically) monthly to head office

4. Research Period-January - December, 2006

5. Survey covered all 15 branches in 9 regions

6. Trend analysis

1. Paradigm shift – realization the inadequacy loans to help the poor (Zellar and Shama, 2000)

2. For the poor, access t savings is crucial (Johnson and Kidder, 1999; Kabeer, 2001)

3. Success factors of savings schemes: Security, Transaction Cost, Design and Interest rates

LITERATURE REVIEWLITERATURE REVIEW

RATIONALE OF THE SCHEMERATIONALE OF THE SCHEME

Clients Perspective-Accumulated money to:– For compulsory cash collateral Working

capital– Access to credit mobilised from community– Provide safe and secure place for saving– Defray debts

MFI’s Perspective-– Inexpensive source of funds– Additional funds to expand outreach– Serve as cushion during repayment difficulties

Targets and Achievements LevelsTargets and Achievements Levels MONTH

S COMPULSORY PROGRESSIVE

  Target (¢) Actual (¢)%Achieved Target (¢) Actual (¢)

% Achieved

JAN 595,798,750 656,151,300 110.13 30,880,000 26,326,000 85.25

FEB 670,273,594 561,376,450 83.75 69,356,800 48,483,750 69.90

MAR 754,057,793 775,837,600 102.89 100,145,600 139,107,050 138.90

APR 848,315,017 801,193,700 94.45 174,203,200 134,557,350 77.24

MAY 954,354,394 1,031,266,050 108.06 212,924,800 241,059,900 113.21

JUN 1,073,648,694 805,506,400 75.03 239,001,600 268,466,220 112.33

JUL 1,073,648,694 717,764,500 66.85 253,740,800 333,962,050 131.62

AUG 1,207,854,780 1,129,576,200 93.52 261,065,600 470,413,220 180.19

SEP 1,358,836,628 1,185,273,000 87.23 268,390,400 604,470,000 225.22

OCT 1,528,691,206 1,419,074,100 92.83 275,715,200 504,199,671 182.87

NOV 1,719,777,607 1,633,992,500 95.01 283,040,000 536,512,000 189.55

DEC 1,934,749,804 976,037,900 50.45 296,412,800 390,156,300 131.63

TOTAL

13,720,006,961 11,693,049,700 85.23 2,464,876,800 3,697,713,511 150.02

US$1,524,445.22 US$ 1,299,227,74 US$ 273,857,20 US$ 410,857.06

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Average contributors: Comp. 5772 (3244-7781)Prog. 2901 (1657-3930)

MONTHLY SAVINGS

-

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

1,800,000,000

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DECMTHS

AMT

PROG. SAVINGS

COMP. SAVINGS

MONTHLY SAVINGS ANALYSISMONTHLY SAVINGS ANALYSIS

FINDINGSFINDINGS

Indicators Compulsory savings

Progressive savings

Total funds mobilised $ 1.3 m $ 0.4 m

Monthly Average Funds Mobilised

$ 93,638 $ 27,831

Achievement range 50-110% 70-225%

Achievement level 85% 150%

SAVINGS CAPACITY OF CLIENTSSAVINGS CAPACITY OF CLIENTS

 MONTHSCLIENTS COMP. SAVINGS

AVE. CS CONT.

CLIENTS PROG. SAVINGSAVE. PS

CONT.

JAN 3357 656,151,300 195,458 1719 26,326,000 15,319

FEB 3244 561,376,450 173,051 1657 48,483,750 29,260

MAR 4665 775,837,600 166,310 2443 139,107,050 56,953

APR 4839 801,193,700 165,570 2420 134,557,350 55,614

MAY 6824 1,031,266,050 151,123 3412 241,059,900 70,651

JUN 5441 805,506,400 148,044 2721 268,466,220 98,683

JUL 5283 717,764,500 135,863 2642 333,962,050 126,429

AUG 7541 1,129,576,200 149,791 3771 470,413,220 124,761

SEP 7880 1,185,273,000 150,415 3930 604,470,000 153,809

OCT 7781 1,419,074,100 182,377 3891 504,199,671 129,598

NOV 6866 1,633,992,500 237,983 3433 536,512,000 156,281

DEC 5545 976,037,900 176,021 2773 390,156,300 140,724

AVERAGE 5772 11,693,049,700 169,334 2901 3,697,713,511 96,507

US$ 1,299,227.7 US$ 18.815 US$ 410,857.06 US$ 10.723

Average contributors: Compulsory. 5772 (3244-7781)Average contributors: Compulsory. 5772 (3244-7781) Progressive. 2901 (1657-3930)Progressive. 2901 (1657-3930)

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AVERAGE MONTHLY SAVINGSAVERAGE MONTHLY SAVINGS

-

50,000

100,000

150,000

200,000

250,000

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

AVE. CS CONT.

AVE. PS CONT.

Average Amnt Saved: Compulsory.- $18.8Average Amnt Saved: Compulsory.- $18.8 Progressivve. - $ 10.8 (60% of Comp. Savings)Progressivve. - $ 10.8 (60% of Comp. Savings)

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CONTRIBUTIONS OF SAVINGS TO LOAN PORTFOLIOCONTRIBUTIONS OF SAVINGS TO LOAN PORTFOLIO

Savings as % of Loan Portfolio

14.16

16.57

18.91

20.58 20.49

22.39

24.81

26.32 26.70 27.10 26.5927.42

0.00

5.00

10.00

15.00

20.00

25.00

30.00

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DECMonths

WITHDRAWALS OF SAVINGSWITHDRAWALS OF SAVINGS

Compulsory - $ 81,453--------> 9.6%

Progressive - $ 11,511--------->4.7%

Total - $ 92,964---------> 7.1%

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OPERATIONAL EXPENSESOPERATIONAL EXPENSES

Interest Expense

-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Interest if Borrowed Int on Mobilized Savings

Interest rates paid by SAT clients – 8% Commercial interest rates –5% Borrowing rate from Banks – 22% Percentage saved – 16%

ChallengesChallenges All funds mobilised are loaned out- highly risky Documentation and reporting constraints

OPERATIONAL EXPENSESOPERATIONAL EXPENSES cont’d

Capacity and willingness of the poor to save is confirmed

Savings mobilisation benefits both client and MFI’s

Clients respond favorably to voluntary savings, over 50% joined the Progressive. Savings Scheme

Compulsory savings tied to level of distribursements

Clients savings can increase the loan portfolio size at minimum capital cost

KEY FINDINGS AND LESSONSKEY FINDINGS AND LESSONS

Withdrawal levels of the poor is very low – roughly 7.0% in the scheme.

Through savings, MFI’s can help clients to depend less on loans

Funds exist in poor communities that can be mobilsed to promote local development.

What is necessary is approriate strategies and regulatory framework to mobilise them.

KEY FINDINGS AND LESSONS cont’dKEY FINDINGS AND LESSONS cont’d

CONCLUSIONCONCLUSION

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THANK YOU