Table of Contents · Table of Contents ... deposit mobilization and enhanced profitability. ... principle of graduating microfinance members into mainstream credit union appears to

THE SEND MICROFINANCE STRATEGY: A MODEL THAT WORKS FOR THE MAJORITY

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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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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


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


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


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


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


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.


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


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


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”.


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”


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


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


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


32

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


33

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


34

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.


35

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.


36

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.


37

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.


38

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.


39

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


40

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.


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


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:


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.


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


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


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.


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.


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


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


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


51

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%


52

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


53

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


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


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

Documents

Table of Contents · Table of Contents ... deposit mobilization and enhanced profitability. ... principle of graduating microfinance members into mainstream credit union appears to