We are happy to announce that the first Susu loan in Ghana opened up for bidding this morning. It’s a 7,273 euro loan to JAA Secretarial & Susu Services who have indicated the names of seven Susu Borrowers who will benefit from the loan. The concept of Susu collectors was presented here on the blog back in February:
In short it is a system where Susu collectors handle the cash management of micro entrepreneurs or traders – both their savings and their loans. The Susu collectors, who typically have 500 clients, collect an agreed daily amount of savings from the trader every day and deposit this on a bank account. The collector’s fee is the sum of one day’s collections every month.
We noticed that the initial presentation of Susu loans created interest among investors, so we asked Felix Quansar, CEO of Premier Resource Capital who provides the loans, to elaborate a bit on the topic. You can read his text below.
The financial sector in Ghana is made up of the Banking sub-sector, Non-Bank Financial sub-sector, a Semi-formal financial sub-sector and the Informal Financial sub-sector.
The Informal Financial sub-sector includes the activities of Moneylenders, Susu Collectors (savings mobilizers), Agricultural processors and input distributors, Susu group/Rotating Savings and Credit Associations (ROSCA) and friends and relatives.
Susu groups are grouping of individuals who have come together with the common interest of raising capital or target amount for specific purposes through daily saving scheme arranged with a collector, referred to as Susu Collector.
The collection schemes allow and motivate the clients or individuals to contribute fixed small amounts from daily wages or incomes to their savings each day. This scheme has encouraged the very economically active poor and marginalized individuals to raise capital due to the flexibility that allows the individual to contribute any convenient amounts to the collector – traditionally, the formal banks in Ghana demand specified minimum amount to open and maintain saving account. Invariably, many of the economically active poor and deprived have remained marginalized when it comes to access to financial services.
A number of Susu Collectors are registered with The Ghana Co-operative Susu Collectors’ Association established in 1994 as an umbrella organization. The Association has developed self regulatory framework that enables the Association to regulate and control the activities of the collectors to control the risk of clients losing their savings.
By the Financial Institution Law Susu Collectors are not permitted to offer loans to clients from the savings mobilized. However, they are allowed to on-lend funds to clients. Hence the Susu collectors are considerably experienced in on-lending scheme and have demonstrated high degree of success, achieving 100% loan recovery with Barclays Bank and Women’s World Banking on-lending schemes.
In this regards, the Susu groups and Collectors have emerged to provide avenue for small loans offered through on-lending arrangement as well as advances and providing mutual guarantee scheme and realistic security for the marginalized economically active poor. Susu collectors have invariably developed and demonstrated significant competences and skills in managing client savings and client loan repayments.
Then recently, some formal banking institutions have engaged in Susu Collection operation to mobilize savings from the lowest tier. The capital muscles of these banks have created serious competition for the local Susu Collectors and critically impact on the operation of the Susu Collectors.
Due to the high demand for growth capital for micro enterprises within this segment, accessibility to micro credit has remained crucial factor to the stability of the clientele of the Susu Collectors. Nonetheless, the Susu Collectors provide the extensive coverage and access to these individuals across the entire country including areas where banks dare to venture. Invariably, the Susu Collectors have developed much cheaper and sustainable mechanism for delivering micro-credit to this segment.
For example Mr. Jonathan Aryee of JAA Secretarial and Susu Service is losing clients because his clients are attracted to the micro loans offered by the banks to assist micro entrepreneurs engaged in Susu to expand their businesses. These are the same economically active poor and marginalized individuals JAA had groomed or empowered over the years. This situation is becoming more challenging for JAA. However, it is believed that the banks cannot replace the Susu Collectors as their reach would not be able to cover the core of the economically active poor.
It is therefore crucial for Susu collectors to thrive spreading the financial gains from the upper end of the segment to cover the financial constraints of the lower end. We should have in mind that the upper end of the segment makes larger daily contribution compared to the lower end who in many instances are unable to meet their daily contribution pledges.
For Susu Collectors to meet their clients’ needs and sustain their operations, GCSCA facilitated linkages to financial institutions to provide on-lending funds to its registered membership to improve the competitiveness of the Susu Collector. Unfortunately, the banks have become unwilling to lend to the Susu Collectors.
Invariably, GCSCA conceives the MYC4 Susu facility that facilitates on-lending micro credits directly to the clients of Susu Collectors through the Susu Collectors as vital intervention to support and enhance the competitiveness of the Susu Collectors.