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INTERNATIONAL CONFERENCE ON RURAL FINANCE RESEARCH FOOD AND AGRICULTURAL ORGANISATION (FAO). “PROMOTION OF RURAL SAVINGS THROUGH MICROFINANCE: THE EXPERIENCE OF SINAPI ABA TRUST, GHANA”. BY SAM AFRANE PH.D ASSOCIATE PROFESSOR, KNUST, KUMASI-GHANA MARCH, 2007.
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INTERNATIONAL CONFERENCE ON RURAL FINANCE RESEARCH FOOD AND AGRICULTURAL ORGANISATION (FAO) “PROMOTION OF RURAL SAVINGS THROUGH MICROFINANCE: THE EXPERIENCE OF SINAPI ABA TRUST, GHANA” BY SAM AFRANE PH.D ASSOCIATE PROFESSOR, KNUST, KUMASI-GHANA MARCH, 2007
PRESENTATION OUTLINE • Introduction (Why the Scheme?) • Objectives of the Study • Methodology • Literature Review • Analysis • 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
OBJECTIVES OF THE STUDY • Assess success of savings among the poor • Analyse the dynamics of the saving scheme • Draw important lessons about the role of savings in micro-finance
METHODOLOGY • Data source: SAT’s operational records • Two schemes: Compulsory and Progressive Savings • Compulsory -10% Cash collateral • Progressive – a voluntary accumulation of funds, through a gradual, continous and consistent savings • Loans Officers collect savings; submit records (electronically) monthly to head office • Research Period-January - December, 2006 • Survey covered all 15 branches in 9 regions • Trend analysis
LITERATURE REVIEW • Paradigm shift – realization the inadequacy loans to help the poor (Zellar and Shama, 2000) • For the poor, access t savings is crucial (Johnson and Kidder, 1999; Kabeer, 2001) • Success factors of savings schemes: • Security, • Transaction Cost, • Design and • Interest rates
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
MONTHLY SAVINGS ANALYSIS AMT MONTHLY SAVINGS 1,800,000,000 PROG. SAVINGS 1,600,000,000 COMP. SAVINGS 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 - JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC MTHS Average contributors: Comp. 5772 (3244-7781) Prog. 2901 (1657-3930)
SAVINGS CAPACITY OF CLIENTS Average contributors: Compulsory. 5772 (3244-7781) Progressive. 2901 (1657-3930)
AVERAGE MONTHLY SAVINGS 250,000 AVE. CS CONT. AVE. PS CONT. 200,000 150,000 100,000 50,000 - JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ) Average Amnt Saved: Compulsory.- $18.8 Progressivve. - $ 10.8 (60% of Comp. Savings)
Savings as % of Loan Portfolio 30.00 27.42 27.10 26.70 26.59 26.32 24.81 25.00 22.39 20.58 20.49 20.00 18.91 16.57 15.00 14.16 10.00 5.00 0.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Months CONTRIBUTIONS OF SAVINGS TO LOAN PORTFOLIO )
WITHDRAWALS OF SAVINGS • Compulsory - $ 81,453--------> 9.6% • Progressive - $ 11,511--------->4.7% • Total - $ 92,964---------> 7.1%
OPERATIONAL EXPENSES Interest Expense 180,000,000 160,000,000 Interest if Borrowed Int on Mobilized Savings 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 - JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC )
OPERATIONAL EXPENSES cont’d • 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
KEY FINDINGS AND LESSONS • 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 cont’d • 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. CONCLUSION