August Provider Update

The new provider update is ready for you below. This month we have information about KEEF, Mtaji, SISDO, Fanikiwa, Micro Africa, and PRC.

–

KEEF

With an outstanding loan balance (OLB) of around €440,000, KEEF is one of the largest providers on the MYC4 platform. KEEF has been performing really well both on- and offline in its 19 months on the platform and the portfolio has been built steadily in a controlled way. This year it has been growing at an average of 3 % per month. At the moment, however, KEEF’s further growth is constrained by two MYC4 policies: first of all, one provider should not hold more than 20 % of MYC4’s overall OLB; and secondly, MYC4 should not hold more than 30 % of the provider’s total OLB. Both ceilings have been reached by KEEF at this point which means that MYC4 and KEEF will need to grow independently of each other before KEEF can grow again on the platform. Here it is worth noting, however, that repayments are coming in from KEEF’s borrowers on a weekly basis and investors will therefore still have the opportunity to fund new loans from KEEF as long as the value of these loans does not exceed the value of the repayments received.

–

Mtaji Credit Facility Ltd

Mtaji has been a provider on the MYC4 platform for 6 months now and we therefore carried out an on-site pilot evaluation this month in accordance with our policies. The findings from the evaluation are positive and the pilot period can be considered mutually successful, especially considering the institution’s steady but consistent presence on the platform and its solid operations. It is expected that Mtaji’s activity on MYC4 will be largely unchanged in the months to come, meaning that the OLB will continue to grow at a relatively slow pace. Mtaji has so far disbursed a total of €130,866 in 125 loans and its current OLB on MYC4 is around €110,000.

–

Fanikiwa Microfinance Company Ltd

Fanikiwa Microfinance Company Ltd (FMCL) has also been a provider on the MYC4 platform for 6 months and consequently a pilot evaluation was due this month. The outcome of the evaluation is positive and it is expected that we will soon see more loans from Fanikiwa on the platform. In the case of Fanikiwa, the pilot period on MYC4 has been somewhat irregular in the sense that the activity on the platform has been unpredictable – with a high level of uploads in the first three months, and hardly any in the following three – and the performance of the portfolio has not quite been satisfactory. The irregularity has to a large extent been due to a transition to new management (and the restructuring that followed) while the performance issues are caused by a lack of reconciliation between Fanikiwa’s own management information system (MIS) and the MYC4 platform, i.e. the relatively high PAR30 does not reflect the situation on the ground. This second issue is naturally being addressed.

–

SISDO

August has been a month of ups and downs for SISDO on the MYC4 platform. A lot of loans were uploaded – a total of 140 to be precise – and successfully funded. This is a very positive development for SISDO volume wise considering that the portfolio has been stagnant since the beginning of the year. Unfortunately, it coincided with some delays in SISDO’s weekly repayment transfers to MYC4 which necessitated that the funds for disbursement were withheld. Consequently the loans are still pending on the MYC4 platform; the situation has been regularised though and we expect these loans to be disbursed by the end of this week.

–

Micro Africa Ltd

Repayments from Micro Africa continue to come in on a regular basis and the exit is still progressing according to plan. Micro Africa’s OLB was reduced by another €77,000 in the month of August and it now remains with around 11 % of MYC4’s total portfolio. This is great news seeing as almost a third of our OLB was with Micro Africa four months ago when the exit was announced. Here it is important to note that MYC4’s OLB has in the meantime increased to reach €2.2 million owing to the growth of the other providers. The parting with Micro Africa has consequently not had as big an effect on the MYC4 portfolio as one could have feared at the time of exit.

–

Premier Resource Consulting

PRC, the only remaining provider in West Africa, no longer has an active portfolio on the MYC4 platform. PRC does, however, have a defaulted portfolio of approximately €51,000 corresponding to a default rate of 10.5 %. We have previously given detailed updates on the situation with PRC – read one from June here and one from December here – and we will make sure to keep investors informed on what is happening with this defaulted portfolio in Ghana. In August, we received €2,000 from PRC which is in the process of being transferred back to investors. We expect these funds to be in investor accounts some time in September.

Read Full Post »

Update on PRC

The only remaining MYC4 provider in West Africa, Premier Resource Consulting from Ghana, has been experiencing significant challenges in terms of institutional capacity and portfolio performance over the last 12-18 months. We gave a detailed update here on the blog back in December and we have made sure to include PRC in every monthly provider update this year. A couple of weeks ago, however, we could report that the majority of PRC’s remaining outstanding loan balance (OLB) had been defaulted; we therefore want to give some more details on the current situation in Ghana.

As we wrote in the last update, PRC has been active on the MYC4 platform since September 2008 and has over the years disbursed close to €490,000 to 57 small businesses in Ghana. PRC was part of the first “generation” of loan providers on MYC4 and managed to stay afloat even as other providers from those years were exiting due to malperformance, suspension, or even fraud. PRC has therefore had a good track record on the platform and has been an important part of MYC4’s journey, especially in the early years.

It became clear to us in the beginning of 2012 that PRC did not have the sufficient institutional capacity to handle collections and follow-ups on delinquent loans. PRC was consequently paused from uploading new loans to the platform in April last year in order to focus all efforts and resources on the management and monitoring of the loan portfolio. As intended, the outstanding loan portfolio reduced steadily month by month from April to October as loans were being repaid – a development that can be seen clearly in the graph above. Since then, the loan portfolio has been reducing at a much slower pace as repayments were received less frequently; and over the last three months, most of the remaining outstanding principal has had to ultimately be defaulted (less than €900 is now outstanding). The graph below shows PRC’s loan repayments and defaulted principal on a monthly basis from January 2012 to May 2013. Here it can be seen that close to €170,000 has been received in repayments in this period while around €50,000 has defaulted.

In 2010, PRC was one of the first MYC4 providers to sign a 100 % risk share agreement. Effectively it means that PRC is committed to cover 100 % of any defaulted amount, same as all other active providers on the MYC4 platform. With the introduction of these risk share agreements, the MYC4 investors no longer carry the risk of loan default – this risk has been moved to the providers. The investors do, however, still carry the risk of institutional default, meaning that investors may lose part of their outstanding principal in the event that a provider, such as PRC, should default. To safeguard against this risk, two measures have been introduced to the MYC4 model: first of all, each provider is required to cover the 100 % guarantee with a risk share instrument (e.g. bank guarantee, lien on bank deposit) equal to a certain percentage of its outstanding loan balance (OLB). For providers joining after 2011, the cover is between 15-20 % of the OLB. For PRC, the cover is 5 %. In the case of institutional default, MYC4 can call on the risk share cover to be returned to investors, thereby ensuring that at least a part of the outstanding principal is recovered. The percentages covered by the providers can be found on each of their profiles in the risk rating table; the second measure introduced is the provider risk rating. The risk rating is visible in the form of stars on each of the loans which allows investors to more easily assess the risk of lending through a certain provider on the platform. The fewer the stars, the higher the risk. In the case of PRC, its star rating is – and has consistently been – one of the poorest on the platform and the risk of institutional default should therefore also be considered significantly higher than for the other providers.

PRC is currently in the process of liquidating the bonds used as risk cover, and as soon as we receive these funds, they will be returned to investors. We are also following up on a number of repayments registered in the MYC4 system for which the funds are yet to be transferred. It is too soon to consider PRC to be defaulted as an institution, however it is a possible scenario. We will continue to work with PRC on minimising investor losses and we will also make sure to share the status on PRC in the monthly provider updates here on the blog.

Read Full Post »

May Provider Update

The fifth month of the year has nearly come to an end which means that we have our fifth monthly provider update ready for you. Read highlights about selected providers below.

–

Micro Africa Ltd

It has been one month since the exit with Micro Africa Ltd (MAL) was announced here on the blog. In a letter to MYC4 investors, MAL CEO Tim Carson expressed gratitude to the MYC4 community and urged investors to continue lending through MYC4 to finance “the thousands of small businesses in Africa that would find it difficult to fund their activities without the support of MyC4”. The exit is so far progressing according to plan: in May alone, MAL’s portfolio on MYC4 has been reduced by more than €90,000 through scheduled loan repayments. MAL’s outstanding loan balance (OLB) now stands at around €550,000 in Kenya, Uganda, and Rwanda with a PAR30 of 0 %.

–

Yehu Microfinance Trust

When we last updated on Yehu, we could share the news that our pilot evaluation had been successfully completed and that things were generally looking very good. A key thing missing in this partnership has, however, been volume which now seems to be a problem of the past. In the last two months, Yehu has picked up its activity on the platform and new loans are coming through almost every day. With an average loan size of €350 – currently the smallest on the platform – Yehu’s portfolio is nevertheless growing very slowly. The outstanding loan balance (OLB) is up from €65,000 in March to €107,000 in 394 loans today. More than 88 % of these loans are to women.

–

KEEF

With the exit of Micro Africa, KEEF has become our largest provider in Kenya in terms of volume. Its outstanding loan balance (OLB) on the platform is close to €370,000 in 1,065 loans with a PAR30 (portfolio at risk above 30 days) below 1 %. KEEF has expressed a commitment to further improve its portfolio quality by obtaining a PAR30 of 0 %. While the annual review revealed that KEEF has the institutional capacity to build an even larger portfolio on the platform, MYC4 funding already constitutes close to 30 % of KEEF’s total loan portfolio. It is therefore not realistic that we will see a big increase in the activity of KEEF in the short to medium term.

–

Mtaji Credit Facility Ltd

Mtaji has been a provider on the platform for 3 months now. So far, Mtaji has disbursed €45,000 and has 39 active loans. Another 7 loans are awaiting disbursement. Loans from Mtaji are coming through on the platform regularly and the portfolio is growing in accordance with expectations. Repayments have been received in a timely manner on a weekly basis since the end of April, a total of €2,120, and the PAR30 is kept at 0 %. All in all, Mtaji has had a very strong start on the platform. It will be interesting to follow Mtaji over the next three months as we approach the pilot evaluation.

–

BELITA

It has been a while now since BELITA started having performance problems on the platform and therefore was paused from uploading new loans. On the positive side, repayments have been coming through every other week and the outstanding portfolio has been reduced significantly without any loans defaulting. A total of €22,600 remains outstanding in 67 loans. BELITA is working hard on turning around the institution, and we are following this process closely. We are hoping to be able to welcome back new loans from BELITA once the quality of the existing portfolio has been improved and the causes of the current troubles have been sufficiently addressed.

–

PRC

Quite a lot has happened with the PRC portfolio in the month of May. Of its remaining outstanding loan balance (OLB) of €30,700 as much as 97 % was defaulted. This has meant that PRC’s default rate increased from 3.71 % at the end of April to 9.84 % today. Total defaulted principal for PRC thereby amounts to €47,972 in 19 loans with €188 recovered so far. Only three loans remain active and PRC’s total OLB is €864. While we have been hoping to see PRC turn things around, we are now in the unfortunate position that we could be facing a case of institutional default. We continue to be in frequent contact with PRC’s CEO Felix Quansar who is in the process of liquidating bonds used as PRC’s risk sharing fund. He has also confirmed that the pending repayments registered on the platform should be settled as soon as possible. We realise that investors will be interested in knowing more details about PRC and we will therefore make sure to write a separate post here on the blog in the next 1-2 weeks similar to the update we made in December.

–

If you are interested in following MYC4 in more detail, check out our brand new portfolio report here. You can also get frequent updates on Twitter, Facebook, and other social media. We will be back with the next provider update in one month’s time.

Read Full Post »

February Provider Update

The month of February has come to an end and it’s therefore time for another provider update as promised.–

–

Yehu Microfinance Trust

As mentioned in last month’s update, it is about time for Yehu’s pilot evaluation which was initially scheduled for the end of February. Due to some planning circumstances, the evaluation was postponed to early March instead so there is not a lot of new information to share today. Yehu’s growth on the platform has been relatively slow so far, but more than 30 loans were uploaded in February, amounting to around €11,000, which is good progress. We are optimistic that we will be seeing more loans from the coastal part of Kenya in March and in the months to come.

–

Fanikiwa Microfinance Company Ltd

Fanikiwa became a MYC4 provider on Monday this week and has had a flying start on the platform; 16 loans are open for bidding right now and the funds for the first 3 loans have already been transferred to Fanikiwa’s bank account in Tanzania earlier today. Fanikiwa is one of MYC4’s smallest providers and it is expected that growth will be slow, however. As mentioned previously on the blog, it is positive to note that Fanikiwa is supported by Gatsby Charitable Foundation which is also a key strategic partner for MYC4’s second largest provider, Gatsby Microfinance Ltd.

–

KEEF

The Annual Review – as well as a spot check – of KEEF was carried out in February by MYC4’s Nairobi team. While the reports are yet to be finalised, the following takeaways can be shared at this point: significant improvements were noted, particularly in terms of governance, portfolio size, asset base, profitability, and operational capacity. MYC4 loans constitute around 1/3 of KEEF’s overall portfolio, and it is expected that KEEF will increase its volume on the platform in parallel with the growth of its overall loan portfolio.

–

SISDO

Last month, we reported that new loans from SISDO were expected on the platform once the pilot evaluation had been finalised. This is still the case as there have been some delays in the process, primarily due to change of staff in key positions at SISDO. As is most often the case with new providers, there have been some teething problems operationally which is especially evident in SISDO’s relatively high PAR30 (the part of the portfolio that is more than 30 days late) on the platform. This is being addressed by our team in Nairobi on a daily basis and we expect the situation to be regularised in the short-term.

–

BELITA

The situation with BELITA remains unchanged from last month’s update. There are still challenges with the performance of the portfolio and the PAR30 remains very high. On a positive note, repayments from BELITA have been coming through without delays in February and the outstanding portfolio has therefore reduced by around €4,000 to end the month at €33,500. Eric Naivasha, MYC4’s Africa Director, is in Tanzania this week and is spending some time with BELITA’s management and staff to assist in solving the challenges and finding the best way forward.

–

Mtaji Credit Facility Ltd

Mtaji joined the platform this week, making the total number of MYC4 providers in Tanzania reach 4. The addition of Mtaji is in line with MYC4’s overall strategy to grow the loan portfolio and provider network in Tanzania this year. Mtaji has been in our pipeline for quite some time, but had kindly been asked to wait its turn while due diligence was being carried out on other, larger, institutions. It is therefore particularly exciting to finally have Mtaji live on the platform. Training of the staff began yesterday and the first loans are expected to be open for bidding tomorrow or early next week.

–

Premier Resource Consulting

Since last month’s update, PRC has resumed entering repayments into the MYC4 system and there are currently two batches of repayments pending to be transferred (a total of around €6,000). We are working together with PRC to get these funds returned to investors as soon as possible. Things are unfortunately happening fairly slowly with PRC at the moment, but progress is nevertheless being made step by step. The challenges continue to be related to institutional capacity and portfolio quality as was described here on the blog in an update back in December.

–

We will be back with the next provider update in the last week of March.

Read Full Post »

January Provider Update

This year we will introduce something slightly new on the blog, namely monthly updates with key information about the MYC4 providers. We will not cover all providers in each update, but rather select the ones where we have some news to share. Considering that this is the first update, however, we have included all the active providers below.

 

Micro Africa Ltd

Micro Africa Ltd (MAL) currently has a combined outstanding MYC4 loan portfolio of approximately €620,000 in three countries (Kenya, Uganda, and Rwanda) and has now become the biggest provider on the platform in terms of volume. MAL has furthermore the responsibility for the Growth Africa portfolio which has around €600 left in 4 active loans. The efforts to recover on the defaulted Growth Africa portfolio will continue after the active loans have been cleared. It is expected that MAL will further grow its portfolio on MYC4 in the coming months in all three countries of operation.

–

Tujijenge Tanzania Ltd

Last year, Tujijenge Tanzania grew its outstanding MYC4 portfolio from €75,000 in January to €300,000 in December. Despite a slow start to the year, it is expected that the growth will continue in 2013 and that Tujijenge Tanzania thereby will become one of the largest providers on the platform. This is a positive development considering that Tujijenge Tanzania is a well established institution with a proven track record on and off the platform; and furthermore that the country diversification of the overall MYC4 portfolio will be improved with more volume in Tanzania.

–

Yehu Microfinance Trust

Yehu has had a slow but good start on the platform since joining in June last year, and its outstanding MYC4 portfolio is currently close to €60,000 in 174 loans. The average size of Yehu’s loans is around €390 which is the smallest of all active MYC4 providers. It is therefore necessary for Yehu to have a large number of loans in order to build some volume. MYC4 has scheduled a pilot evaluation with Yehu next month where growth projections for this year will be determined. The expectation at this point is that Yehu will begin increasing its volume in the next couple of months, however more information will come once the evaluation has been completed.

–

Tujijenge Uganda Ltd

Tujijenge Uganda is one of the smaller providers on – and off – the MYC4 platform. The current outstanding MYC4 portfolio is around €90,000 where it has been more or less steady over the last 12 months. Tujijenge Uganda specialises in group loans in rural areas with a particular focus on women and youth. It was also a Tujijenge Uganda group that inspired the post Disability is not Inability here on the blog back in September. In terms of projections for this year, it is expected that Tujijenge Uganda will continue to upload loans for €15-20,000 per month and thereby maintain the current volume, or alternatively grow its portfolio slightly.

–

KEEF

When KEEF joined the platform in January last year, all growth expectations were quickly exceeded; its outstanding MYC4 loan portfolio reached €350,000 in less than 6 months and KEEF immediately became one of the largest providers on the platform. At the pilot evaluation in April last year, it was agreed that KEEF’s portfolio on MYC4 should remain below €350,000 until further notice to ensure that the institutional capacity could keep up with the portfolio growth. This week, MYC4 is carrying out the annual review at KEEF and we should therefore have more information to share in next month’s provider update.

–

SISDO

The newest provider on the MYC4 platform, SISDO, had a strong finish to 2012 with more than €180,000 disbursed in November and December alone. The current outstanding MYC4 portfolio is around €200,000 which was the maximum target for the pilot phase. MYC4 carried out the pilot evaluation a couple of weeks ago and we are now in the process of agreeing on the best way forward with SISDO. Once the evaluation has been finalised, SISDO is expected to resume uploads of new loans to the MYC4 platform.

 

Gatsby Microfinance Ltd

Gatsby Microfinance Ltd (GMFL) is the second largest provider on the platform in terms of volume, having only recently been overtaken by Micro Africa. While GMFL was previously holding more than 40 % of the overall MYC4 portfolio, its share has now come down to 25 % which is a very positive development in terms of provider diversification and risk. The size of GMFL’s portfolio on MYC4 has not changed much in absolute amounts, however, as it has stayed around €650,000 for the most part of 2012. It is expected that 2013 will be business as usual for GMFL on the MYC4 platform.

–

BELITA

BELITA is another small provider on – and off – the MYC4 platform, and since joining in November 2011 focus has been on slow and controlled growth. While BELITA had a good first 10 months as a MYC4 provider, the last couple of months have been relatively challenging in terms of performance. The portfolio at risk above 30 days (PAR30) started to increase back in September and since then BELITA and MYC4 have worked hard to get the loans back on track. While these challenges are being addressed, no new BELITA loans are being uploaded to the MYC4 platform.

–

Makao Mashinani Ltd

When Makao Mashinani Ltd (MML) became a MYC4 provider two years ago, expectations were high. MML has an innovative approach to providing low-cost housing for people moving out of slum areas and MYC4 was excited to be part of funding these loans. Unfortunately, MML only managed to upload four loans on the platform before it became clear that the partnership was premature; the pipeline of new loans was insufficient. It was therefore decided to do a slow exit with MML, meaning that the four loans are being repaid on a monthly basis (around €4,500 remain outstanding) while no new loans are uploaded.

–

Premier Resource Consulting

As we reported in an update last month, Premier Resource Consulting (PRC) is currently experiencing challenges in terms of institutional capacity and portfolio quality. No major improvements have been made since then in relation to the portfolio performance; however, the bundled repayment that had been pending in the MYC4 system since November did come through last week. The backlog of repayments which has been the source of frustration for investors over the last 4-5 months has thereby been cleared. We will be back with more information on PRC in next month’s provider update.

–

Growth Africa

MYC4 and Growth Africa mutually agreed to terminate the partnership approximately one and a half years ago when Growth Africa decided to exit the lending business. A handover agreement was then made with Micro Africa (MAL) who took over Growth Africa’s MYC4 portfolio. As mentioned above, MAL continues to manage this portfolio which at this point has less than €600 outstanding. Recoveries on defaulted loans will continue after the active portfolio has been cleared.

–

 

Read Full Post »

Update on PRC

Our provider in Ghana, Premier Resource Consulting (PRC), is currently experiencing some challenges in terms of institutional capacity and portfolio quality. Furthermore, bank bureaucracy has led to significant delays in the transfer of repaid funds.

PRC has been active on the MYC4 platform since September 2008 and has over the years disbursed close to €490,000 to 57 small businesses in Ghana. At the beginning of 2012, PRC’s outstanding loan balance (OLB) was around €150,000, and since March it has been reducing slowly but steadily every month to its current volume of €45,000 (see graph below). The large reduction in OLB is due to the fact that PRC has not been allowed to upload new loans to the MYC4 platform in the last three quarters of the year. This decision was made by MYC4 together with PRC with a view to ensure that all PRC’s resources were utilised to monitor and manage the outstanding loans. From a credit risk perspective, it was also important to keep PRC’s share of the total MYC4 portfolio small considering their relatively poor risk rating. It is therefore positive to note that PRC’s share of the total portfolio has gone from 12 % in January to 2 % in November.

While PRC’s Portfolio At Risk above 30 days (PAR30) has been fairly stable, albeit too high, most of the year, it unfurtunately shot up to 100 % last month. Several actions have been taken to rectify this situation: most importantly, PRC is working on reconciling their accounts with the MYC4 system to make sure that all received repayments are entered correctly and transferred to investors; in addition, PRC is using the services of a debt collection agency to follow up on the most delinquent loans.

Finally, there have been some large delays with repayment processing on PRC loans the past couple of months which have been caused by a lot of bureaucracy in the bank that we use for international money transfers in Ghana. Most of the backlog was cleared two weeks ago when MYC4’s CEO went to talk to the bank manager together with PRC’s CEO, however one bundled repayment is yet to come through.

We will give monthly updates on PRC and their portfolio in 2013.

Read Full Post »

On the MYC4 Forum: Dollarization of Ghanaian Economy

The MYC4 Forum has been live for a couple of months now and though it is mainly intended for dialogue between investors, we make sure to check it out from time to time to better understand the priorities and concerns of our investors. At the moment, for instance, investors are asking for more transparency on how money is transferred and converted back and forth from euro to local African currencies – a request that we will make sure to respond to here on the blog in the near future.

Another interesting thread was started last week by Felix Quansar from PRC, MYC4’s sole provider in Ghana. He updates on the current instability of the Ghana Cedi and talks of a phenomenon known as the dollarization of the Ghanaian economy:

Ghanaians have adopted the US Dollar as the preferred currency in most of their internal transactions, local prices are quoted in US Dollars and leading to sudden upsurge of U S dollar and rendering the Ghana Cedi weak.

Felix Quansar, PRC

Presently, one would require appropriate documentation to purchase the foreign currency; the process has been quite restrictive therefore causing considerable delays in foreign currency transactions. This has also affected our weekly foreign currency and transfer transactions causing backlog.

To join the conversation or to read Felix’s full post, go to the Investor Forum here: Dollarization of Ghanaian Economy.

Read Full Post »

First Susu loan is open for bidding

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.

SUSU COLLECTION

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.

The Dilemma
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.

Read Full Post »

Susu collectors – an ancient banking system soon ready for MYC4 investors

CEO of Premier Resource Capital in Ghana, Felix Quansar

If you go to a market in Ghana you can hardly avoid meeting some of the Susu collectors. They have conducted their trade, which originates in Nigeria, for at least three centuries. The concept is not only old, it is also simple and a useful service for small traders.

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.

There are approx. 4000 Susu collectors in Ghana collecting from 650,000 savers, 60% of whom also obtain loans through the Susus and the repayments are recalculated to a daily repayment amount which is collected along with the savings.

Traders pay a small sum to register with a Susu collector. The collector makes his daily rounds and collects a similar amount over a 31-day rolling period from each of his customers. At the end of the period, the collector pays out lump sums to the customers, while retaining one day’s payment from each customer for his services. The system runs so well that people from Senegal, Tanzania and Kenya have come to Ghana to study it, as Ghana has a record of good implementation and governance of it. But as simple as it may be it isn’t always simple or cheap to set up a Susu operation.

Samir knows all about that, he’s the CEO of a small company called Uniplux Ghana Ltd., where Susu is the key. Samir and his partner have had a tough time getting started. They saved money for five years but still needed capital to launch their business, and the banks were either shutting the door on them or demanding a very high interest rate. They’d have to pass on the high interest to their clients which wouldn’t work as they could put their clients at risk of becoming over-indebted instead of helping them grow their micro businesses.

– That’s why we came to you, says Samir, who’s hoping that MYC4’s investors can help.

Same thing with his colleague, who’s running a company called Royal Gold Investment. He had to sell some property to get going and to put in his car as collateral for a loan in a bank – and not only did he have to give it as collateral, he had to hand it over to the bank and park it there for six months.

During a meeting in Accra in February 2009, the GCSCA (Ghana Co-operative Susu Collectors’ Association) confirmed their interest in using MYC4 as one of the loan options to offer their members to access even more affordable financing. Hence MYC4 and GCSCA are working to start supplying the first SUSU collector pilot loans with Premier Resource Consulting as Provider. The project has been long underway, but the first Susu product was approved for the MYC4 platform earlier this month. The first loans are expected to be opened for bidding in the next two weeks’ time.

Read Full Post »

Creating Ear Awareness in Ghana

In May last year, during my first trip to Ghana, I remember noticing a colourful billboard on the side of a busy road in Accra advertising for Krispat Ear Centre (GH) Ltd. I recognised the name from somewhere, but only later that evening did I realise where I had first been introduced to this small business: Krispat Ear Centre was applying for a loan on MYC4 at that very moment!

I was fortunate enough to return to Ghana a couple of months ago and meet the founder and owner, Christian Kweitsu, in his office at the ear centre. I asked him why he spends his limited resources on billboards and advertisement in the media. “Hearing is virtually a green area here,” he said, “many people are actually not aware that they have a problem. Nobody talks about hearing and ear problems, so people tend not to be conscious of whether there’s a facility. We therefore need to create awareness among the people.”

Founder and owner, Christian Kweitsu, in front of the first Krispat Ear Centre

Christian founded the company in 2003 together with his wife, Patience, after finishing a course in technical audiology in the United Kingdom. “We started right here, my wife and I. She was the receptionist and I was the managing director and the doctor.” In the beginning, the couple used whatever personal resources they had, and with a product loan from a foreign supplier, they were able to gradually grow the business. Today, Krispat Ear Centre has three branches in Ghana and a work force of 25 people.

Their third branch was opened in the summer of 2010 using the loan that I had seen on MYC4’s platform in May. “I obtained a loan of 25,000 cedis, although I did ask PRC for about 50,000” Christian explained, “the loan is not big enough, but I must say that it’s a help which I really appreciate. It enabled us to open the third branch. So right now I’m ploughing back the little money I get from here and there into this branch to finish it”.

Christian and Patience didn’t always dream of having their own ear centre. The idea came when Christian worked in a primary school as a teacher and was offered to do a diploma in special education, specialising in hearing impairment. “That’s where I saw the vision. That I could branch into providing a service rather than teaching. You know, for a very long time in this country people hardly notice their ears until they have pain. All the time it’s sight, sight, sight. Krispat Ear Centre is on a mission to change that”.

You can visit Krispat Ear Centre’s own website here, and their business profile on MYC4.com here.

Read Full Post »