1 BY SAM AFRANE PH.D ASSOCIATE PROFESSOR, KNUST, KUMASI-GHANA MARCH, 2007 “PROMOTION OF RURAL SAVINGS THROUGH MICROFINANCE: THE EXPERIENCE OF SINAPI ABA TRUST, GHANA” GHANA” INTERNATIONAL CONFERENCE ON RURAL FINANCE RESEARCH ON RURAL FINANCE RESEARCH FOOD AND AGRICULTURAL ORGANISATION (FAO) ORGANISATION (FAO)

PRESENTATION OUTLINE 1.Introduction (Why the Scheme?) 2.Objectives of the Study 3.Methodology 4.Literature Review 5.Analysis 6.Key Findings and Conclusion

SINAPI ABA TRUST GHANA  Financal NGO  Started in 1995,  Member of Opportunity International Network  Number of clients: over 55,000 (2006)  Size of portfolio US 7.3 million  Operational sustainability: 109% (December, 2006)  Financial sustainability: 102% (December, 2006)  Operational coverage: All 10 regions in Ghana

INTRODUCTION (WHY SAVINGS SCHEME?)  Over-dependence on Donor Funds: Irregular, unreliable, and dwindling  Alternative source: Bank facility, commercial loans- found to be too expensive  Resulted in: Inability to meet client credit needs, loss of clients to competitors, loss of confidence and increase default  SAT provided only loans; while clients saved with other financial institutions including unscrupulous ones  Need to introduce savings scheme became imperative

1.Assess success of savings among the poor 2.Analyse the dynamics of the saving scheme 3.Draw important lessons about the role of savings in micro-finance OBJECTIVES OF THE STUDY

METHODOLOGY 1.Data source: SAT’s operational records 2.Two schemes: Compulsory and Progressive Savings a) Compulsory -10% Cash collateral b) Progressive – a voluntary accumulation of funds, through a gradual, continous and consistent savings 3.Loans Officers collect savings; submit records (electronically) monthly to head office 4.Research Period-January - December, Survey covered all 15 branches in 9 regions 6.Trend analysis

1.Paradigm shift – realization the inadequacy loans to help the poor (Zellar and Shama, 2000) 2.For the poor, access t savings is crucial (Johnson and Kidder, 1999; Kabeer, 2001) 3.Success factors of savings schemes:  Security,  Transaction Cost,  Design and  Interest rates LITERATURE REVIEW

RATIONALE OF THE SCHEME  Clients Perspective- Accumulated money to: – For compulsory cash collateral Working capital – Access to credit mobilised from community – Provide safe and secure place for saving – Defray debts  MFI’s Perspective- – Inexpensive source of funds – Additional funds to expand outreach – Serve as cushion during repayment difficulties

Targets and Achievements Levels MONT HSCOMPULSORYPROGRESSIVE Target ( ¢ )Actual ( ¢ ) % AchievedTarget ( ¢ )Actual ( ¢ ) % Achieved JAN 595,798, ,151, ,880,000 26,326, FEB 670,273, ,376, ,356,800 48,483, MAR 754,057, ,837, ,145, ,107, APR 848,315, ,193, ,203, ,557, MAY 954,354,394 1,031,266, ,924, ,059, JUN 1,073,648, ,506, ,001, ,466, JUL 1,073,648, ,764, ,740, ,962, AUG 1,207,854,780 1,129,576, ,065, ,413, SEP 1,358,836,628 1,185,273, ,390, ,470, OCT 1,528,691,206 1,419,074, ,715, ,199, NOV 1,719,777,607 1,633,992, ,040, ,512, DEC 1,934,749, ,037, ,412, ,156, TOTAL 13,720,006,961 11,693,049, ,464,876,800 3,697,713, US$1,524,445.22US$ 1,299,227,74US$ 273,857,20US$ 410,857.06

10 Average contributors: Comp ( ) Prog ( ) MONTHLY SAVINGS - 200,000, ,000, ,000, ,000,000 1,000,000,000 1,200,000,000 1,400,000,000 1,600,000,000 1,800,000,000 JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC MTHS AMT PROG. SAVINGS COMP. SAVINGS MONTHLY SAVINGS ANALYSIS

FINDINGS FINDINGS IndicatorsCompulsory savings Progressive savings Total funds mobilised$ 1.3 m$ 0.4 m Monthly Average Funds Mobilised $ 93,638$ 27,831 Achievement range50-110%70-225% Achievement level85%150%

SAVINGS CAPACITY OF CLIENTS MONTHS CLIENTSCOMP. SAVINGS AVE. CS CONT. CLIENTSPROG. SAVINGS AVE. PS CONT. JAN ,151,300195, ,326,00015,319 FEB ,376,450173, ,483,75029,260 MAR ,837,600166, ,107,05056,953 APR ,193,700165, ,557,35055,614 MAY6824 1,031,266,050151, ,059,90070,651 JUN ,506,400148, ,466,22098,683 JUL ,764,500135, ,962,050126,429 AUG7541 1,129,576,200149, ,413,220124,761 SEP7880 1,185,273,000150, ,470,000153,809 OCT7781 1,419,074,100182, ,199,671129,598 NOV6866 1,633,992,500237, ,512,000156,281 DEC ,037,900176, ,156,300140,724 AVERAGE ,693,049,700169, ,697,713,51196,507 US$ 1,299,227.7US$ US$ 410,857.06US$ Average contributors: Compulsory ( ) Progressive ( ) Progressive ( )

13 ) AVERAGE MONTHLY SAVINGS - 50, , , , ,000 JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC AVE. CS CONT. AVE. PS CONT. Average Amnt Saved: Compulsory.- $18.8 Progressivve. - $ 10.8 (60% of Comp. Savings) Progressivve. - $ 10.8 (60% of Comp. Savings)

14 ) CONTRIBUTIONS OF SAVINGS TO LOAN PORTFOLIO Savings as % of Loan Portfolio JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC Months

WITHDRAWALS OF SAVINGS  Compulsory - $ 81, > 9.6%  Progressive - $ 11, >4.7%  Total - $ 92, > 7.1%

16 ) OPERATIONAL EXPENSES Interest Expense - 20,000,000 40,000,000 60,000,000 80,000, ,000, ,000, ,000, ,000, ,000,000 JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC Interest if BorrowedInt on Mobilized Savings

 Interest rates paid by SAT clients – 8%  Commercial interest rates –5%  Borrowing rate from Banks – 22%  Percentage saved – 16%Challenges  All funds mobilised are loaned out- highly risky  Documentation and reporting constraints OPERATIONAL EXPENSES OPERATIONAL EXPENSES cont’d

 Capacity and willingness of the poor to save is confirmed  Savings mobilisation benefits both client and MFI’s  Clients respond favorably to voluntary savings, over 50% joined the Progressive. Savings Scheme  Compulsory savings tied to level of distribursements  Clients savings can increase the loan portfolio size at minimum capital cost KEY FINDINGS AND LESSONS

 Withdrawal levels of the poor is very low – roughly 7.0% in the scheme.  Through savings, MFI’s can help clients to depend less on loans  Funds exist in poor communities that can be mobilsed to promote local development.  What is necessary is approriate strategies and regulatory framework to mobilise them. KEY FINDINGS AND LESSONS cont’d CONCLUSION

20 THANK YOU