Bank of Ghana to Regulate Susu Collection Agencies

In the wake of several scandals surrounding susu banking in Ghana, The Bank of Ghana, the government’s supervisory and regulatory authority pertaining to the country’s financial sector, is embarking on a project that aims to regulate the susu banking industry. Over the past year, several freelance susu collectors, and at least one susu collection agency, have scammed clients out of their savings, in the amount of more than USD 65,000 equivalent in several cases. The Bank of Ghana will advocate for laws by which susu-collection agencies—currently free from governmental regulation—can be monitored and regulated through standardized practices and formalized operations.

By Susu banking in Ghana is a more-than-¢160 million cedi (USD 160 million), or £75 million, economy that operates in the informal sector. Services range from individual susu collectors serving a handful of clients to large agencies that serve close to 10,000 clients. The magnitude of this industry necessitates some sort of governmental regulation.

The Institute of Susu Collectors, Ghana is a one year-old umbrella body to which many susu collection agencies belong that acts as a networking and self-monitoring body. The susu collection agency that cheated its clients out of their savings (the director disappeared to a northern region and the office experienced a fire) was neither a member nor known to the Institute of Susu Collectors. In response to the scandals, Mr. Godwin Ofori-Atta, executive secretary of the Institute of Susu Collectors and also the executive director of the susu banking agency for which I intern (the Microfinance and Community Development Organization), stated to the local press that, “the Institute was established to collaborate with the Government and Bank of Ghana to organize 'susu' companies under proper regulation for the general benefit of all 'susu' patrons and the national economy.” One short year later, the government, through the Bank, has joined the movement to regulate susu banking.

To learn the details of susu-banking operations, the Bank has invited three members of the Institute of Susu Collectors to participate in a study to learn about their susu savings and loans operations: the Open Heart Solutions Agency, the MFCDO’s susu-banking division, is one of the three. The Bank is examining the financial management of the selected agencies, conducting audits, and studying their day-to-day savings and loans operations.

Through the Institute of Susu Collectors, the Bank has already encouraged susu collection agencies to incorporate as a LLC, which will facilitate regulation and legally define liability in the industry. Once freelance susu collectors, unregistered susu-collection agencies, and sole-proprietary or NGO-registered companies are LLC registered, the owners can be held legally liable to their clients for funds collected.

One susu banking practice that the Bank will closely regulate is loan extension. Most susu collection agencies grant loans to their clients from money collected from other clients in the susu savings operations. Although loan-default rates are low in susu banking (as in micro lending), this is an obviously risky practice because borrowers have no collateral and susu agencies and freelance susu collectors are uninsured. Instead of lending against client savings, the Bank of Ghana has encouraged members of the Institute of Susu Collectors to seek funds for extending loans from outside sources, such as commercial banks or international agencies that offer loans or grants.

Once the Bank of Ghana determines the official operating and monitoring processes that will govern susu collection agencies, it will empower the Institute of Susu Collectors to certify susu collection agencies. This government-approved certification will identify those agencies whose operations abide by approved accounting and banking practices in regards to both the clients they serve and the large banks or other institutions with which they may have partnerships (for example, an institution that grants funds for the loans extension).

The Open Heart Solutions Agency is currently registered as a sole-proprietary company but will roll over its operations to a new, LLC-registered company. The organization will maintain its current operations and mission as it moves toward a formalized, and government-regulated, industry.