Gold Medal for Microfinance

While my compatriots compete to get on the podium in Beijing, I enjoy my last days sitting in the Geneva office of BlueOrchard. It is time to review the time I spent here working for the Microfinance Investment Fund Manager.

This afternoon, most of the desks are empty; many of my colleagues have gone on a journey, for either private or professional purposes. And I wonder if this wanderlust foreshadows my own future. Although I understand people suffering from jet lags and feeling uprooted (you can’t call it “holidays” to do Indonesia, Philippines and East Timor in two weeks), I begrudge my fellow-workers their knowledge of the world. In contrast to “ordinary” fund managers investing in big economies located in North America, Europe and the Far East, BlueOrchard analysts can avail themselves of having clients dispersed all over the world.

As a consequence, the microfinance market needs to rise up to challenges unknown to well-developed markets and this affects research and product design: how do you want to compare results from South America, Africa and South Asia? How easy is it to scale up new thriving methods of index-based microinsurance to a whole continent? Even though you might use randomized control trials providing “hard prove” by checking outcomes on control groups, it seems to me difficult to imagine that a successful pilot project carried out in Peru can be easily transferred to West Africa. Unlike in homogeneous Western civilisations, passing on best-practiced knowledge in a global scale looks set to be a tough task. Therefore, microfinance demands flexibility in reasoning, adaptation skills and the ability to draw analogies across countries and products without disregarding eventual differences. For me this bundle of ‘conditiones sine quibus non’ was the main lesson I learnt during the last ten weeks. It is impressive to work in an office with graduates from the best universities who bring in their different multicultural backgrounds to create a new ensemble.

Last week I could provide my own two cents to this project: I had the opportunity to present my results that I have accumulated during my work. On the agenda: which MFIs could be potential clients for our funds? How can we improve upon our selection criteria for new clients? And how can one measure social performance? Especially the last topic provoked a serious discussion and helped me to gain new insights.

There are many caveats to using numbers of average loan balances (ALB) as a simple proxy for social impact. At least, comparisons across regions have to be taken with a pinch of salt, even if you standardize your indicator (either by transforming it to an absolute poverty indicator by using PPP or by converting it into a measure of relative poverty by dividing by GNI per capita). The correlation between the proxy and the real poverty reduction is not likely to be linear, as the latter depends largely on the context. In Central America, for instance, - one of my colleagues explained to me - an opening of MFIs towards the middle class and the SME-sector – largely neglected by the formal financial market - would benefit the economy as a whole and therefore help to reduce poverty. The simple formula “the smaller the average loan balance, the bigger the poverty impact” (which forms the basis of the ALB-approach) does not seem to hold. Not every poor individual can start a microenterprise or can become a self-made man. For sustainable growth, the big bulk should work in small and medium enterprises to get integrated into the formal economy. This is especially the case in urban regions. To promote employment and economic growth assuring financial access to the middle class is crucial and maybe even more important than low-scale microfinance (this is an important lesson from the German economic miracle built on the “Mittelstand” after the Second World War).

Nevertheless, based on tables displaying raising ALB records, people continue to condemn this “mission drift”. Using my sample from the MIX market, I checked the evolution for the years 2005 till 2007. When you take the ratio in ALB of two consecutive years (2005 / 2006 & 2006 / 2007) you get for both time periods an average of more or less 0.9, meaning that the ALB increases over time. This seems to support the idea of a mission drift. But not necessarily: If the client pool hasn’t changed, these numbers could actually be a good sign: one explanation could be that borrowers are in fact getting richer. And if the MFIs have really moved their target to richer people, the above explained argument could justify and even endorse this development.

To clarify some of these questions it would be revealing to regress macro variables (GDP growth, HDI, college enrolment rates, employment rate…) on MF indicators. In some well-developed microfinance economies (like Bolivia or Bosnia), it could be possible to detect first impacts in a national level, but to get robust statements there’s much more time needed. A bottom-up process of economic development takes at least one generation.

There’s still much research to do in the field of microfinance. Me too, following my internship with BlueOrchard, I would like to continue on this track: In fall I will get back to university to finish my last year of studies; in my degree dissertation I want to focus on microinsurance linked to microlending and how it could help people escaping from the poverty trap. Traditional economic theory predicts the existence of multiple – bad and good - equilibria of economic growth. A “big push”, for instance in form of coordinated government intervention, is necessary to put the economy on the right path. In my opinion, microinsurance could facilitate this process because it has the promise to unlock credits and to promote financial access. But this is still to be demonstrated – in a theoretical and a practical manner.

How to unlock agricultural loans and serve rural populations

The starting point of my latest research adventure was our last week’s credit committee. On the agenda: a loan to a new MFI client in El Salvador, focussing on lending to rural households. After summarizing the major opportunities and principal risks of this institution, my colleague justified the above what is usual interest rate spread for this credit by pointing out the MFI’s high portfolio concentration in agriculture. After the loan proposal was approved, I approached him, asking for an explanation of the risks inherent to agricultural loans. Essentially, this kind of loan is exposed to significant covariant risk, that is to say the probabilities of payment defaults are highly correlated across the agricultural sector. This lack of diversification combined with adverse weather conditions can eventually compromise the economic survival of the MFI: farmers facing crop losses due to supernatural forces (e.g. El Niño) are unable to pay back their loans, the MFI accumulates more and more defaults and unless it has subsidized alternative financing sources, it risks bankruptcy. In short, MFIs seeking profitability do not have an incentive to work in the agriculture sector due to the increased risks versus non-agriculture loans. This is a quite alarming because the poorest of the poor tend to live in rural areas.

But not only the supply side is hesitant to enter the market, even “farmers themselves limit their relationship with formal intermediaries because of the high cost of credit, relatively low profitability of agriculture, and fear that an unexpected problem will prevent them from repaying their loan” (see BASIS Brief # 46). Until today, for lack of developed credit markets, poor people exposed to hazardous weather rely mostly on informal risk management tools, including mutual aid among family members, neighbours and within social networks. But since these mechanisms fail in cases of regional natural disasters, farmers are likely to choose low-risk, low-return activities, hence reducing their chances to get out of the poverty trap. And with the prospect of climate change and more frequent extreme weather conditions, the situation will likely not improve, making farmers even more risk-averse.

In light of these circumstances, recent research in the microfinance sector has focused on microinsurance, considered as a promising tool to mitigate revenue and expenditure risk. After microcredit in the 80s, and microsavings in the 90s, microinsurance seems to be the new panacea to aid people, but the actual revolution will be a long time in coming. In 2006, only 3% of the world’s poor were policyholders, and the main product was life insurance which doesn’t really help people in smoothing out their short frequency consumption patterns. Microinsurance also faces several challenges, including high transaction costs and information asymmetries.

These are in particular the primary obstacles to crop insurance: in-the-field assessments of crop damages are costly (high transaction costs); insurance companies automatically attract “bad” risks, meaning exclusively farmers exposed to high risks are willing to sign an insurance policy (adverse selection); and insured clients have no incentive to mitigate potential risks by their own as they are covered by the policy (moral hazard). How can this business be profitable? Researchers are struggling to find new methods, enabling farmers to buy insurance policies at reasonable prices and offering insurers a profitable market at the same time.

An innovative approach deals with index-based insurance: instead of measuring crop damages directly, pay-outs are linked to a transparent index, optimally, one that is highly correlated to the farmer’s income. Different indexes have been proposed, ranging from rainfall to world market prices, to average regional yields. Since these are exogenous factors, beyond the farmer’s sphere of influence, insurers do not have to be afraid of asymmetric information problems. And transaction costs can be minimized. Today, several pilot projects have been launched and if the main challenges can be overcome, the development of an entire new market seems inevitable.

Market participants, including commercial funders like BlueOrchard , could benefit from this market development in several ways: in order to alleviate risks in agricultural loans, MFIs could link their credits’ interest rates to the amount of rainfall measured via weather stations. As such, farmers would be less reluctant to take loans (thereby getting the chance to pull themselves out of poverty) and demand will rise. At the same time, since weather risks sometimes occur across a whole region, MFIs with a limited regional outreach need to reinsure against these natural disasters, thereby transferring the risk to a reinsurance company holding a more diversified portfolio. Faced with MFIs with less risky portfolios, commercial funders would be keener to invest in these institutions.

Once theoretical and practical questions on how to design insurance products have been solved, there remains one key to the commercialization of microinsurance: ‘massification’. Since margins per unit are thin at the bottom of the pyramid and institutions operating only regionally are exposed to the dangers of covariant risks, an efficient network is essential to scale up microinsurance and make it profitable. The chain from the poor farmer in El Salvador to the international operating reinsurance company is made out of many links, and somebody has to join them. Who will assume the role of such a broker?

ASA's venture into Private Equity

I met with ASA’s International division in Dhaka, Bangladesh to learn more about the microfinace institution's entrance into private equity investing. Catalyst Microfinance Investors, ASA's joint venture with Netherlands-based Sequoia recently raised US$150M in capital for an investment fund to make equity only investments in MFIs in Asia and Africa. The US$150M was raised in two rounds, the first was $25M while the second round was $125M. The second round was significiantly oversubscribed and was the largest equity raise ever in microfinance. Investors included socially responsible investors, pension funds, and private investors.

Most prior MFI investment funds have been debt investment-focused, which means they provide loan capital for MFIs and the investment fund receives interest to achieve return on their capital. The MFI is able to use the loan capital to accelerate the growth of the MFI loan portfolio. The MFI borrows from the investment fund at a lower rate than it lends to its microcredit borrower clients.

Private equity investment in MFIs has been challenging for several reasons. Since private equity investments are “private,” the investor cannot simply call a stock broker and sell the equity investment. The lack of exit opportunities is a challenge for private equity investment, with MFI equity positions beings an almost completely illiquid asset. One exit opportunity for an MFI equity investor is an IPO, such as the infamous Compartamos IPO in Mexico last year and others have been completed in countries like Kenya. Another option is to selling the equity position to another private equity investor or large MFI.

Now that we know how difficult it is to exit an MFI equity investment, let's take a step back to understand the challenge of finding an MFI candidate for an equity investment. Catalyst has deployed $10-15M of it its capital. The difficulty is finding an MFI to make a controlling investment in. It may not be challenging to find an MFI willing to sell a 20 or 30% stake to an investor but finding an MFI willing to sell more than 50% to an investor is quite challenging. Many MFIs were started by an individual who continues to retain 100% ownership of the MFI. The MFI owner is usually unwilling to give up control of an organization he or she nurtured for so long to a outside investor.


Catalyst ran into just this issue and decided to take the path of ASA starting MFIs to deploy the US$150M in capital they were flush with. ASA already has the expertise in replication and technical assistance with its ASA International division, very similar to Grameen’s Grameen Trust division. ASA International is starting MFIs that are 100% owned by Catalyst.

Exit options will continue to be a challenge for Catalyst though. The capital markets are expanding in many of the countries ASA is investing but probably not fast enough to be in a mature enough state to have the capacity for an MFI IPO. Similar to traditional private equity funds, Catalyst seeks 20%+ return on its capital and an exit within 5-7 years. One approach is that Catalyst can IPO their entire fund on a developed country stock market as some traditional private equity funds have done.

It is exciting to see ASA as a pioneer in equity investing. ASA continues to execute and expand its microcredit model in a successful efficient manner and it remains to be seen if ASA hopefully executes with the same precision with equity investing.

Caught in the “Universe of Numbers”

Feeling quite comfortable on my nice leather chair, sitting at my desk in front of the computer, I try to figure out how I could change human destiny… And it seems difficult to me, I have to admit, to keep some of my thoughts on poor individuals’ daily struggle for life when I take a look out of my BlueOrchard office over pretentious, seven story-tall Geneva buildings. Needless to say, most articles on this blog help me to understand better the numbers I am handling with by recalling me what kind of people are behind these numbers and giving me some part of reality I am desperately missing.

But since I cannot provide any miracle story of a single mother being able, thanks to a microcredit, to build up her own business and thereby to send her children to school (and I really like these stories), I settle for giving some revealing figures out of my “Universe of Numbers”. Last time, I touched already on the subject of social performance, arguing that the great challenge for the microfinance sector should be the measurement of its impact on poverty. It is essentially this point which puts the cherry on the cake for the investor. For BlueOrchard, as a social fund manager, this issue is crucial if we want to create a niche in financial markets big enough to be profitable. But while the financial return for the shareholder is quite easy to measure (expressed as the interest rate on her investment), there is still no clear concept how you want to put a figure on a story of poverty. And although I believe that investors do not necessarily follow strict economic ideas based on monetary return and risk, communication of social impact should be made as simple as possible, best in a quantitative way to facilitate comparison across institutions, countries and regions. It is in this context that microfinance rating agencies (like M-Cril, a company working in particular in South Asia) try to establish a common framework for social rating and an indicative list of dimensions and indicators for social performance. This includes different categories, describing the services offered by the MFI, evaluating its mission, investigating its social responsibility towards clients and the environment and finally measuring the real outreach of its activities. Whereas it is complicated to assess the different visions of a MFI, at least its outreach can be calculated and compared. For this purpose, different indicators have been proposed (% of clients living below the poverty line, % of clients in areas with lower than average socio-economic development,…), however, data on these values are either tricky to gather or little reliable (especially when you do not work for a microfinance information platform or for the World Bank). As a result, researchers suggest several proxies, among others the “Average loan size / GNI per capita”. The reasoning behind this indicator is quite simple: Assuming a more or less stable relationship between an individual’s credit and its wealth, it states that people asking for smaller loan amounts are supposed to be poorer. To compare the loan sizes across countries, they are standardized by dividing through the GNI per capita, hence transforming the figure into a measurement of relative poverty. Doing this you advantage relative rich regions because they can claim to fight against distress by disbursing loans going up to $4000 – $5000 and which are certainly relative less costly than smaller loans. It does not seem to be perfect and can lead to biased decisions when you want to get a first idea of the issue.

Nevertheless, lacking concrete information on the social performance of MFIs (and impatiently waiting for some results of social rankings), we decided to research on the basis of available data (which is essentially the MIX market data base) to see how well our own clients score. In defiance of all possible measurement errors and unadjusted figures, but strong believing in the law of large numbers I founded my study on a sample of more than 750 MFIs for 2006. Trying to correct for the shortcomings of the concept of relative poverty, I calculated the average loan size in PPP, that is to say in purchasing power parity which allows evaluating performance across regions and creating an indicator of absolute poverty. Taking the medians I got the following results:

Furthermore, I added the Financial Self-Sustainability to measure the financial performance over regions (coming from the MIX). Even if this chart isn’t based on an academic rigorous research study, it can give you a hint about major trends. And there are several lessons I learnt from using this method. First of all, loan amounts vary largely across regions: while the bulk of loans in East Europe are tailored between $2500 and $6500, most south Asian MFIs disburse credits of less than $500 on average. Thus, saying that we only disburse credits to MFIs having less than $1000 average loan size would discriminate against clients from our main regions East Europe, Central Asia and South America. On the other hand, asking for a good impact on relative poverty (defined as an average loan size / GNI per capita of less than 50%) would penalise Africa in particular.

This brief example illustrates quite well the difficulty of defining poverty (my second lesson from the project) and raises the question of which kind of poverty you want to eradicate. There are three regions performing fine in both ways: Central America, East Asia and South Asia. Reason enough to justify a rectification of BlueOrchard portfolio? Even now, our clients are well represented in these areas, except of South Asia because of legal obstacles. And a little bit surprisingly for sceptics, our “median” client in each region performs only slightly worse than the overall sample. So, what is about the famous trade-off between social and financial performance? Having a look on the chart you only find some correlation between absolute poverty and FSS, however, this issue needs to be more seriously investigated, especially to detect the main external drivers of average loan sizes (e.g. population density). This would help to qualify the big differences in poverty impact across regions and to take right social investment decisions.

Komon ou ye?- TUP in Haiti

“How are you?” in Creole, this was one of three phrases I had at my disposal during my first few days in Twoudino, and next to “Where’s the bathroom?” and “What’s in this?” it was certainly the one I practiced most while working alongside Fonkoze’s staff. I must have seemed like the most concerned intern they’d ever seen, asking how everyone was doing every five minutes. Eventually I sat myself down, and with the help of our interpreter I can safely say that we’ve managed to improve my proficiency to a level at least on par with a 5 year old….maybe 6.

We interviewed 11 members of Fonkoze’s CLM program this past week in Twoudino (one of the three sites in Haiti where the ultra-poor pilot program has been started), and I tried to start each interview myself with “Mwen rele Constantino. Nou vreman kontan rankontre ou jodia. Komon ou ye?” My name is Constantino. We’re very happy to meet with you today. How are you? I have to admit, I felt pretty proud of myself for being able to make myself understood at least at this very basic level, but the frustrations would come later.

The women were usually very receptive and welcomed our interest in their lives by bringing out all the chairs they had, boxes, palm leaves, straw mats, anything to make us comfortable on the dirt floors of their homes (often 1-room, but CLM had been helping many build new, sturdier shelters). The questions I was given to follow as a guideline were fairly basic; How old are you?, How many dependents do you have living with you?, How often do you and your family eat? Questions meant to paint a general picture of where the person was before entering the CLM program, and how their quality of life had changed since, if at all. I learned quickly that the wording of questions is extremely important to getting an honest answer. For example, ask about expenditures in place of income.

We’ve been lucky to have such accommodating hosts in Fonkoze’s staff; every day they’d take us out to the “field” and find us members to interview. The frustrations began when I realized that the director of CLM, our host for the month, removing any fear I had of a biased sample of only the programs best and brightest cases, had arranged for us to meet members who were enjoying various levels of success with the program. This is a good thing, right?

One member, Melani, had been living with her three children under a makeshift tarp made of two plastic sacks sewn together before entering the program. Her house had burned to the ground and a flood had soon after wiped away all of her possessions. Yesterday, we took her to the market in town in our pick up truck (~3 mile walk) where she buys fruits to resell back in her more remote neighborhood, and there she bought us a small amount of fruit to thank us for sharing her story, but I think also to show us that she could. She now has a two-room house, goats she’s been raising, and a means to feed her children and hopefully begin sending them to school this October. The difference was remarkeable.

On the other end of the spectrum were clients who, through some misfortune, and at times their own mismanagement, were living lives largely unchanged by the asset transfers, training, and stipend the CLM program had provided them. They continue to struggle to find food to eat, have little or no money in their savings accounts with Fonkoze, and tragically spread their assets ever thinner among a growing group of dependents; some of the members we interviewed had just become pregnant again.

I was confused though, or rather, a bit discouraged. Even the success stories seemed bleek and I wondered about the future of these women, if they could graduate into Fonkoze’s microcredit programs. It was a hard pill to swallow, but I realized that the ultra-poor program had to celebrate success on the smallest of scales, because these women had absolutely nothing. It was the difference between a one-room house made of mud and sticks, and a solid two-room home made of cement and rock. It was going days without food, to being able to feed their children once a day comfortably. It meant having nothing, and now having the security of some savings and animals they can breed and sell. It is a move from extreme poverty to a more bearable situation (think extreme poverty-lite), and one through which micro-credit can be a promising foothold.

The CLM program tries to cover all the bases. ‘If we give them asset transfers like goats and chickens, what will they most likely spend it on…medicine and food. SO, we give them free healthcare with a local partner organization and an 8 month stipend.’ But in Twoudino, all the chickens given to their members had died, and CLM’s relationship with their healthcare provider had gone south. Consequently, the families were forced to sell what was left of their assets and empty their savings to pay for the high costs of medical care in Haiti.

I expected seeing women with beaming smiles eager to show us all of the things that now made life easier, hopeful. While we did have one or two cases like this, most were still scraping by. I’m eager to see this program as it was meant to be run, and they tell me Boukankare is where I’ll find that. As the week falls behind me, I think a little of my own naivety does as well.

Adapting the Grameen Model to NYC

In a previous blog post I explored how domestic microfinance in New York City differs from microfinance in the developing world (see July 23rd post). In this post I would like to present the opposite perspective – how domestic microfinance can, in fact, look remarkably similar to its international counterpart.

Project Enterprise, a Harlem-based MFI, was established in 1996 as a New York version of the Grameen Bank. Founded by Nicholas Schatzi, a narrator for television documentaries and Debra Franlkin-Schatzi, managing director of M&K Financial Services, Project Enterprise was created to provide individuals excluded from the formal financial sector with access to capital and other financial services. After initially conceptualizing the idea of a Grameen-style MFI in New York City, the co-founders traveled to Bangladesh to visit the Grameen Bank and study its innovative lending practices. For the last twelve years, Project Enterprise has been working with the Grameen-style group-lending model to provide much needed microfinance services to low-income residents of New York City.

Today, Project Enterprise offers clients a variety of loan options. Its three basic programs are listed below:

1.) Peer Classic. The Peer Classic program is designed to serve entrepreneurs who have been in business for a year or less and lack the sufficient credit histories and/or collateral necessary to receive a traditional bank loan. Lending occurs on a group-basis, with groups being composed of four to six entrepreneurs. Initial loans start at $1,500, and can gradually increase to $12,000. In addition to loans, the Peer Classic program provides entrepreneurs with ongoing support and technical assistance.

2.) Fast Track. Fast Track loans are designed to provide capital to entrepreneurs who have been in business for one year or longer. With a group-based lending scheme, clients can initially borrow $3,000, and can subsequently borrow up to $12,000. The Fast Track program also provides clients with ongoing technical assistance, as well as networking opportunities.

3.) Direct Loans. This third loan program is directed toward entrepreneurs who have had three or more years of experience with formalized business operations. Loans start at $5,000 and can reach up to $12,000. This program differs from the previous program in that borrowers receive loans on an individual basis, rather than on a group one.

While the Direct Loan Program is similar to the individual-based lending programs provided by many other MFIs operating in New York City (see July 23rd and July 14th posts), the Peer Classic and Fast Track programs follow a different model – the group-lending model. I’d therefore like to spend some time exploring Project Enterprise’s first two loan programs.

Although they service different groups of entrepreneurs (Peer Classic loans are for less experienced entrepreneurs), the two programs are fundamentally similar. Individuals interested in either program must first register for a six-week training course that instructs them about PE’s lending process and imparts basic knowledge about how to start-up and run a business. About half-way through the course, participants form self-selected groups (of four to six members in the Peer Classic program, and six to ten members in the Fast Track program). Ten or so groups are then joined together to form a Center. A Center holds biweekly meetings to issue loans, collect repayments, review loan applications, and generally monitor the financial wellbeing of group members.

The formation of the group and the Center is an integral part of Project Enterprise’s Lending scheme. Group and Center members serve a variety of functions: Firstly, they behave as friends and advisors. They provide their peers with emotional support as well as financial advice, often assisting fellow group members with the development of a loan application or business plan. Secondly, group members function as loan officers. A completed loan request is initially submitted to the entire group for review. Group members must decide whether their peer is in a financially suitable position to receive a loan, and if so, whether the money requested is the optimal amount. Only after the entire group approves the loan request does the application get passed along to Project Enterprise staff members for review.

Thirdly, and most importantly, group members act as loan guarantees that replace the need for collateral. By making a group, rather than an individual, responsible for repayments, material collateral is rendered unnecessary because social pressure acts as the loan guarantee. Let me explain: Project Enterprise issues repeat loans to clients based on their repayment histories. These histories are composed of three factors – a client’s personal performance, his group members’ performances, and his Center’s performance as a whole. These factors have differing levels of importance, with individual performance mattering the most and Centers’ performances mattering the least. However, if any one borrower in each of these three sectors defaults, all of his group and Center members’ credit histories are negatively affected. This means that the amount of money that any client can receive in a subsequent loan is drastically lowered due to his fellow borrower’s behavior. In the group-lending scheme clients are reluctant to default because they know that if they do, not only themselves, but their peers as well will suffer as a result of their actions.

By adapting the Grameen-style group lending scheme, Project Enterprise has succeeded in reaching out to low-income residents of New York City in an innovative, effective and unique way. They have managed to eradicate the need for collateral as a loan guarantee and have therefore succeeded in providing basic financial services to those who would otherwise have to make due without. They have showed that there is not one single way to administer domestic microfinance services, but rather a myriad of effective methods that generate optimal results for low-income residents of the United States.

Expanding Financial Literacy

The need for financial literacy training and business-skills development is widely acknowledged by nearly every microfinance institution that offers savings and loans products. Seminar series and one-time workshops are offered by most of the MFI giants, including ACCIÓN International and New York as well as partner-MFIs of the Grameen Bank. Fellow FAI-blogger Thea Garon recently noted the importance of financial education in improving the financial lives of the unbanked in New York City. Financial literacy is equally important for the informally banked in Ghana, yet it is not a part of the traditional services offered by the susu-banking industry.

On the first day of my internship with the Microfinance and Community Development Organization (MFCDO), the executive director, Godwin Ofori-Atta, and I discussed what I might do in my two months with the organization. Knowing that this NGO has several programs and projects centered

around microfinance activities—including an intensive development training program for women, a soon-to-be-inaugurated microfinance school, and a susu-banking agency (for small-scale savings, see June 17 post)—I was excited by the opportunities at my fingertips. After Mr. Godwin Ofori-Atta explained the timeline of current and upcoming programs and the organization's plans for seeking funding for some of their programs, I suggested that we hold a series of financial literacy workshops through the susu-banking agency, the Open Heart Solutions Agency.
Above right, MFCDO Director Godwin Ofori-Atta reviews the details of a savings plan to susu clients.

With the assistance of the MFCDO office staff, I embarked on the task of implementing two financial literacy workshop series: one for susu agents, and one for susu clients. The first
step in organizing these workshops was to determine the needs of each group. What do susu agents, the daily collectors of small savings, need to know in order to better serve their

clients? What do susu clients, as petty traders in the market, need to learn about basic banking and business expansion in order to save more or use a loan more efficiently?

To answer these questions, I talked to the office staff and accompanied the susu-agent supervisor, Florence, on her daily rounds to each of the 20 susu agents. I learned that susu agents were unclear on the principles of credit and debit and interest rates and that susu clients wished to work on basic record keeping and ways that they could expand their trade. The initial survey administered (unscientifically, I must admit) to susu clients indicated that the majority was unaware of some of the microfinance products offered by their susu agency.

Directed by this mini-investigation into the needs of both employees and clients of the agency as well as my own observations of activity in the market and the microfinance sphere, I outlined agendas for the first workshops for the agents and the clients. The first agent workshop, which was held on a Saturday morning, focused on an in-depth review on the products and services offered by the agency, and also included lessons on customer service, credit and debit, and a review of the redenominated currency which set 10,000 Ghana cedis to one new Ghana cedi (while the Ghana cedi was redenominated over a year ago, in July 2007, many Ghanaians still conduct financial transactions with verbiage of the old currency). The first workshop for the clients focused on lessons in bookkeeping and the redenomination of the cedi, and it included a session on the financial products and services offered and ways that a loan can be used for business expansion. Both workshops included a presentation by an office-staff member, role-playing to practice products presentation (for susu agents) and financial transactions in the new Ghana cedi (for both agents and clients), and skills development in small groups of three to four individuals.

Once the agenda was set (and reviewed and approved by the office staff), I created the necessary materials, worked with Florence (the susu-agent supervisor) so that she felt comfortable leading some of the lessons, and held a dress rehearsal the day before each workshop. While the director mandated that the susu agents attend their respective workshop, Florence and the other office-staff members and the susu agents were vital in advertising the workshop for the clients. Above, Florence presents to susu agents.

Above, susu-agent Auntie Hope clarifies the details of a loan product.

Susu agents Dufua and Tommy practice presenting a MFCDO financial product.

Susu clients attend a financial literacy workshop.

Both first workshops were quite successful—even a bit more than I had expected!—and the agents and clients seemed to think that they were a worthwhile activity. As follow up and to serve as a guide in planning the agenda for the next workshops, I distributed workshop feedback forms to all attendees. There has been talk among susu clients that did not attend the workshop of wanting to a chance to participate in such an activity. I am eager to see how this workshop series will develop for the Open Heart Solutions Agency!