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The voices of microfinance clients: evidence from Ghana.


This paper explores and evaluates the needs (given voice in various ways within) of microfinance clients with data collected between July and September 2009 from clients of Sinapi Aba Trust, a leading microfinance institution (MFI) in Ghana. The data analysis finds at least two areas that depict clients' spirit of entrepreneurship. Firstly, they adopted multiple work and activity choices to broaden their sources of income, especially where their income is seasonal. Secondly, they mostly continue to save in traditional informal ways, since SAT's products do not fully meet their saving needs. Whereas multiple jobs (which we coin "multi-work plan") helps them earn additional income, the savings practices of clients allow them to accumulate lump sums of money to meet various socio-economic challenges as and when they arise. These needs, manifested in various ways, constitute "voices of the clients".

The motivation for this study is to evaluate the needs of clients of MFIs. Empirical evidence from existing research shows some positive results from some microfinance schemes, for example Pitt and Khandker (1998) and Pitt, Khandker and Cartwright (2006). In contrast, other findings show negative impacts, and suggest that some MFIs are excessively profit-oriented and aim above all at financial sustainability (see Goldberg, 2005, for a review). Such programmes do not benefit the poorest of the poor (Amin, Rai and Topa, 2003).


The term "microfinance" refers to the provision of financial services to people with no access to such services from traditional banks. These services often go beyond providing credit--and include, amongst a myriad of products: training clients in entrepreneurial and vocation skills; promoting other income generating activities; educating members on the importance of technical skills in their field of operation; and providing social safety nets to poor people among others (Rhyne and Otero 2006; Maes and Foose, 2006). Most of the people in MFIs are self-employed and commonly make up what is referred to as the "informal sector" (Robinson, 2001). Formal financial institutions have routinely avoided providing loans to such people, not least due to a lack of collateral. MFIs have developed various innovations in lending that decrease not only riskiness, but also the cost of making small loans without depending on collateral (Morduch, 1999 and 2000). The strategies facilitate efficient provision of credit to the informal sector, lower transaction costs as well as default rates compared to classical banking (on the impressive theoretical and empirical literature supporting peer lending, see Stiglitz 1990; Besley and Coate, 1995; Ghatak, 1999; Armendariz de Aghion and Gollier, 2000; Laffont and N'Guessan, 2000; Armendariz de Aghion and Morduch, 2005; Bhole and Ogden, 2010).

MFIs employ other methodologies as well, but "group lending" is the most prominent among them, and the microfinance scheme (Sinapi Aba Trust) at the centre of this empirical study practices it.

Formal banking institutions avoid providing credit to the informal sector, especially in the developing world, where it is also more important. This is due to a host of problems of which MFIs have partially overcome and to "demystify" some lending constraints. Using group lending and other approaches, MFIs provide poor people not only with credit facilities, but also with financial services hardly accessible hitherto under formal banking operating systems. Group lending refers to a situation where MFI provide credit to their clients who form self-selected groups. The Grameen Bank popularized the methodology and it is replicated in many countries, though it was not the first to practice group lending (Huppi and Feder, 1990; Ghatak and Guinnane, 1999). The recent attention largely originates from the prominence of Grameen, however, in lending to poor people--famously with higher repayment rates than those of formal lending institutions (Besley and Coate, 1995). The groups are "self-managed"; members elect their group leader, secretary and some rules and practices themselves. Critically, however, group members are jointly held responsible if any member defaults. In his celebrated work, Stiglitz (1990) coined the phrase "peer monitoring", and argued that it was an essential ingredient in the success story of many group lending schemes. There are some doubters nonetheless--according to Jain (1996), evidence gathered from Grameen Bank officials indicated that in practice, joint responsibility is never actually enforced. In recent years, due to various reforms and what has to be regarded as the rigid nature of group lending, the Grameen Bank has itself restructured its methodology to greatly de-emphasize lending to groups.

Empirical evidence shows that microfinance scheme positively impact the lives of their clients. Among the institutions most cited in this respect are the aforementioned Grameen Bank, Bank Rakyat of Indonesia, BancoSol of Bolivia, the Bank Kreda Desa of Indonesia, as well as various Village Banks across the world. Specifically, Pitt and Khandker (1998) made a detailed study of three leading MFIs in Bangladesh, and found that women borrowers had their household consumption increased by 18 taka (40) with every additional 100 taka borrowed. With the improvement in income earnings, 5 percent of borrowers in the study moved out of poverty annually after participating in microfinance schemes. These results were corroborated by Khandker (2005), who employed expanded panel data to improve on Pitt and Khandker's (1998) model.

In a more recent study, Pitt, Khandker and Cartwright (2006) widened their survey coverage to 8 different microfinance programmes in Bangladesh. They found that female borrowers have been empowered in the purchasing of resources, in mobility and networking, and in transaction management--among others. In Peru, Karlan (2007) finds that village bank clients with strong social connections have low default rates and accumulated more savings with the bank. Using data collected in 2000 for CRECER (41) scheme, and 2001 for the Batallas scheme (both in Bolivia), Maldonado and GonzalesVega (2008) found that rural household microfinance clients who received credit for more than a year were more likely to keep their children in school than clients who had just joined the programme. They found that the children of "old clients" of both Batallas and CRECER have a lower schooling gap of about half and a quarter of a year respectively, unlike for children of "new clients" who lack behind (and have more years) in schooling gap.


The Sinapi Aba Trust (SAT), also known as "Sinapi", was set up as a Christian not-for-profit business in May 1994, and is a leading MFI in Ghana. Like many other MFIs, clients form self-selected groups, but group sizes vary from one community to another. The communities (groups) meet either weekly or bi-weekly to discuss issues of common interest and, more importantly, to pay instalments on loans. "No collateral" is taken for loans, but clients pay compulsory savings and what they term "group dues". These replace (more or less) the collateral of formal banking arrangements. SAT offers loans to people from diverse sectors of the economy including, but not limited to, manufacturing, the food industry (selling prepared and raw food), and agricultural (to assist farmers in their farming activities) and service industries. Most of the clients are informal sector actors.

Generally, SAT offers three different loans to: so-called "Trust Bank" groups; "Solidarity" groups; and individuals. The Trust Bank group loan is purposely designed as development-oriented, and is given to poor micro-entrepreneurs in organized groups. This loan type attracts only very small business owners because the loan size is relatively "small" (at March 2007, the minimum loan size was GH 150 cents or US$167) (42). The recipients are principally poor women with household income below the poverty line (Sinapi Aba Trust, 2007). The Solidarity group loan has been developed for "graduated" trust bank clients who require a relatively smaller group size in order to receive "bigger loan amounts". The Solidarity group members are jointly liable for a member's nonpayment. Finally, individual loans are developed for somewhat larger business clients needing a larger amount of capital to boost the growth of their businesses; and a "Tier Two" Individual Loan category (GH 500-1000 cents). In a major deviation from established microfinance methods, clients need a guarantor as well as two referees to qualify for an individual loan (Sinapi Aba Trust, 2007).

There are three other loan products, namely: the Small Enterprise Loan (SEL), the Sinapi Special Agricultural Loan, the Sinapi Business Asset Loan (known by clients, in Akan, as ajuma nkoso aba) and the Sinapi Education Loan (nimdee aba). Individuals access these without being part of a group. Other products include a microschool loan scheme for deprived schools, and SAT's training program on loan management for other MFIs. However, a SAT product designed to mobilise savings for clients is missing. Apart from the compulsory savings meant to augment all loans from SAT (10 percent of the value of loans), it is not well publicized because SAT has no legal mandate to mobilize voluntary savings (Planet Rating, 2008). During data collection (September 2009), SAT was still waiting for a licence from the Bank of Ghana to mobilize savings.

Fieldwork for the study was undertaken in Ghana from July to September 2009 by interviewing 672 borrowers from three branches (Abeka, Tema and Kasoa). We randomly selected clients during community meetings at several centres of the branches. At some meeting centres, clients attended meetings in groups at irregular/ad hoc intervals. In such cases, systematic sampling method (every third client) was selected for the interview.


This section reports on the demographic characteristics of SAT clients, and findings about their experiences after becoming members of SAT.

Demographic Characteristics of the Clients

The gender composition of clients in the data collected was 87 percent female and 13 percent male--thus, our sample was not significantly different from the 92 percent female client base for SAT as a whole (Sinapi Aba Trust, 2007). SAT is a Christian organization helping the vulnerable to earn a better living. In performing this function; however, it avoids any discrimination based on clients' religious affiliation (a claim supported by the wide religious compositional diversity of clients in the survey). Table 1 shows that about 90 percent of clients are Christian, including: Catholics, Anglicans, Methodists, Presbyterians, Pentecostals and others. Over 8 percent of the respondents were Moslems (51 women and 5 men). "Other denomination", includes "traditionalists" and clients without religion affiliation. The data on religious composition is not different from the religious composition in Ghana in general and Accra in particular. The Christian population in Ghana is large--they formed almost 82 percent in the Accra sample and almost 67 percent of the national sample in the Ghana Living Standard Survey fifth round report (Ghana Statistical Service, 2008).


This section reports on SAT clients' experiences and strategies.

The "Multi-WorkPlan"

The type of economic activities that a client is engaged in is important, especially for microfinance group members who have to repay loans every week or fortnight. Clients invest their loans in businesses to generate income "immediately" to ensure repayment. However, as shown in Table 2 (occupational composition of clients), it may be difficult for some clients to begin repayments without delay because some of their economic activities may fail to immediately generate enough returns to meet the repayments.

Almost all the respondents were self-employed and belonged to the informal sector. The first group of clients included food sellers (39.3 percent)--comprising raw food sellers (17.4 percent), cooked food sellers (13.2 percent) and street vendors (8.6 percent). The second group were retailers/businesspeople (43.9 percent), made up of sellers or retailers of provisions (15.8 percent), clothes and materials (10.6 percent), second hand goods (4.7 percent), hardware (4.2 percent), and "other business persons" (as defined below, 8.6 percent).

One main difference between retailers and street vendors is that, whereas retailers have a fixed store/shop in the market, a container (shipping or locally made equivalent) or a kiosk around the market area or along the street, most of the time street vendors sell along major road sides during peak periods when heavy traffic builds up. Fixed-retailers have an advantage in acquiring goods on credit at wholesale prices because their address is known. By contrast, in most cases street vendors have to buy goods with their own money (capital) since they may be difficult to locate in case of default. The term "other business" here refers to clients who trade between cities and towns, either during market days of the city or town, or who buy goods from these places (in large quantities at relative lower prices) and sell them on credit to other customers. Most bulk buyers have shops or warehouses where goods are kept.

We classified the third group as service providers (13.4 percent). It is made up of tailors and seamstresses (5.5 percent), hair dressers (5.4 percent), with mechanics, and shoemakers and repairers comprising the rest. This service providers' group includes individuals with relatively higher levels of specialized skills and who are able to earn comparatively higher incomes. The last category is "Other occupation" (4.3 percent), including drivers (transport owners), teachers and the proprietors of a basic school. They may be on a regular payroll of a formal institution, but mostly appear to be "non-poor".

Our data on clients' employment status confirms the point made by Banerjee and Duflo (2007) that poor families' look for economic opportunities and are not trained to specialize in any particular profession. Most of the work listed above may not earn the expected returns to ensure weekly repayment, as such some respondents have devised alternative avenues (multi-work plans and savings) to enable them to meet repayments schedules--what we have called "the voices of the clients". Firstly, some respondents do additional economic activities to avoid relying solely on one source of income; secondly, they accumulate savings (lump sums) to complement income shocks. These two strategies are discussed below.

In the development economics literature, as observed by Robinson (2001) as well as Banerjee and Duflo (2007), the business activities of poor people are mostly on a small scale and, therefore, suffer from a lack of economies of scale. Not only are such businesses usually unable to employ paid staff, but also they do not have the capital necessary for expansion. Most use basic assets such as tables, chairs and simple implements, and spend most of the day on the business. Yet little profit is usually earned, and so most engage in multiple works. The survey data tends to support this proposition, with 65 percent of the entire sample doing their main work for over five years as can be seen from Table 3. And more than 81 percent have spent at least three years in their main employment.

The aim of most SAT clients is not to depend on a single source of income. Almost 42 percent of the respondents indicated that they were doing additional work to support their main activity, obviously implying that they had multiple sources of income. About 90 percent of these additional activities involved trading of some sort. Mainly traded (sometimes from home) were essential commodities such as sugar, bread, ice water, mineral/soft drinks, milk and salt.

It was not uncommon for those involved in other activities to sell items such as toffees or use either a refrigerator or a deep freezer to sell mineral/soft drinks, ice water and ice blocks (which are in great demand in Ghana during the dry season) to earn extra income. Among the reasons given for doing extra work, over 85 percent of respondents indicated it was a means to earn additional income, whilst about 10 percent indicated that it was because their main work was seasonal, so they served as ways to diversify their economic activity and provide for continuity in earning. A critical look at the data reveals that a majority of the clients' work appeared to be small-scale, with little income. Smallscale business with little income accounts for the rationale of a multi-work plan. Thus, the clients' voices perhaps were: "We need loans that will help us expand our work to earn enough profit to stop doing multiple jobs".

Clients' Savings Portfolios (43)

There is a long-standing belief that poor people are too poor to save. Findings from recent studies, and deposits mobilized by institutions such as the Bank Rakyat Indonesia (BRI) and the Grameen Bank, indicate a different picture. Aside from these, poor people also undertake various informal forms of saving that include, but are not limited to, Rotational Savings and Credit Association (ROSCA) and Susu savings. ROSCA refers to a group of participants who decide to contribute a fixed sum of money on a weekly or monthly basis into a common fund. At the end of the meeting (weekly or monthly, as the case may be), the saved money (commonly known as the "pot") is given to one member of the group. The "pot" then rotates until every member has taken his/her turn of the "windfall". Thereafter, the group either disbands or the cycle begins again (44).

In Ghana, a very popular variant on the ROSCA phenomenon is "Susu", where a collector moves from client to client in shops, work places, market stalls and houses at specific times of each day to purposely collect money towards a savings plan. Each client agrees and determines the exact amount to save every day for a period of time (in most cases a month, or 30 days). The accumulated savings are returned to the client with no interest; instead, one day's deposit, a commission to the Susu collector, is deducted from the deposits (for comprehensive details, see Aryeetey and Steel, 1995).

Data from our survey shows that ROSCA and its variant Susu are regular activities among SAT clients, exhibiting the saving power of poor people, as indicated in Table 4. Almost 61 percent were saving with either a Susu or ROSCA before they joined SAT and, afterwards, close to 60 percent were still saving with these long-standing institutions. There are also other forms of savings by the clients: about 44 percent still operate a savings account with a formal financial institution, while 5 percent save in a secure box in their house.

The popularity of Susu and ROSCA is simply explained, and can be seen in the responses summarized in Table 5 to the question: "Why do you save with a Susu collector or with a ROSCA?" Almost 46 percent said it is easy to embark on, and over 33 percent indicated there is flexibility in these forms of savings (unlike what was termed the "rigid" conditions of formal banking institutions). The less demanding documentation process of these savings makes them attractive. Indeed, in dealing with people who are not well educated, merely requiring documentation is off-putting.

These responses suggest that most clients do not want lengthy procedures (complex documentation) for embarking on savings and/or withdrawals. Furthermore, the study found that over 40 percent of SAT clients had saved in these old ways for more than 4 years and less than 10 percent for under one year. This suggests that many clients had raised lump sums for quite a long time before they participated in the SAT scheme. The study found three types of savings that clients undertook after joining the programme: compulsory group savings, voluntary group savings and saving with a Susu collector or a ROSCA. Thus, the second message of the clients might be: "We need a savings product from microfinance institutions". This is similar to Karlan's (2007) result in Peru, in which he finds clients were involved in diversified such savings strategies.


Most MFIs take compulsory savings from their clients even before they provide them with loans, mostly as a pre-emptive "statement" of intent not to default. A client forfeits the entire accumulated compulsory savings if the debt is greater than the savings, or receives the savings less any outstanding debt on ceasing to be a member. This saving is also known as "group dues" and is paid during group meetings to the group leader or secretary, and handed over to the microfinance officers. The SAT, like most schemes, takes compulsory group savings from clients. Table 6 (below) indicates the accumulated savings from respondents and voluntary group savings by clients at weekly or bi-weekly meetings. The intervals are unequal and arbitrarily determined. About 86 percent of respondents accumulated over GH 88,000 cents ($97,777) in total. The mean per client was GH 153.71 cents ($171). Clients are not permitted to withdraw "even in hard times".

Accumulated amounts per client ranged from GH 1 cents to GH 900 cents. A little over 6 percent had accumulated up to GH 24 cents, and over 61 percent had up to GH 149 cents with more than half (61 percent) accumulating GH 80-149 cents. The remaining (39 percent) accumulated savings ranging from GH 150 cents to GH 900 cents, with around 11 percent saving GH 301-900 cents. Reasons for the large variance are not clear. One reason may be that SAT is not strict on clients who default in paying group dues, and members had decided not to pay them any longer. Some of the respondents reported that they had accumulated so much in the group account that they did not want to pay group dues any more.


Individual voluntary savings is another tool the SAT clients used. Unlike group dues, these are not compulsory and withdrawals are unconditionally allowed. Close to 82 percent used this saving tool. Probably, their third message was, then, "we want to save voluntarily. The amount saved by members per week ranged from GH 1 cents to GH 320 cents ($0.9 to $355). But this range is smaller than for the compulsory savings tool. The data indicate that about 17 percent of the clients who undertake voluntary savings save less than GH 1 cents a week (depending on the group's meeting schedule). Also, 34 percent of this group saved GH 2-2.99 cents during meetings. Almost 20 percent saved GH 5 cents during meeting days, and about 4 percent saved GH 10 cents to 320 during meetings. Here too, it was not clear why there was such a wide variance in the amount saved.


A third savings portfolio the clients used, albeit outside the SAT, was saving with a Susu collector or via joining a ROSCA. Some clients used these saving tools before they joined SAT, and most were still using them. About 58 percent were still involved in saving with a Susu collector or with a ROSCA. Their fourth message might be: "We want a saving product that will help us raise lump sum." The distribution of various amounts clients saved daily or weekly is shown in Table 7.

As with the first two savings methods already discussed, the amount clients saved daily and weekly via these means differed greatly. About 20 percent of the clients using either tool saved up to GH 1.00 cents, and almost another 20 percent saved GH 1.10-3.00 cents. About 3 percent saved GH 60.1-350.00 cents. The methodology of the Susu system may cause great variations here. For example, assuming a client saved GH 350 cents per week, then average daily savings ranged between GH 50.00 cents and GH 70.00 cents per person (compared with GH 1.10 cents by all the others). A client who saves GH 50.00 cents a day might be earning a huge income, including: clients who sold cooked food in specific places ("chop-bar operators" who sold food in shopping centre food courts or restaurant owners); retailers trading between cities or towns; and commercial transport owners. Such clients cannot be considered as poor compared to a client who, for example, sells ice water along the road.

Again, there was a large variation between amounts saved. Explanations may include that some clients intended to raise a lump sum to embark on a specific project, such as an investment in his/her business, or to save towards a prearranged social event, such as a wedding or a festival during a certain period (see Banerjee and Duflo 2007). Another reason, that perhaps better explains the huge differences, may be that both poor and non-poor self-selected into different groups, and saved according to their ability.


This paper set out to identify what microfinance clients' need in addition to the financial services they receive from MFIs, using a survey of clients of SAT, a MFI in Ghana. The study observed that some clients do extra work to overcome income shortfalls and in order to repay their loans on schedule. In addition, the findings showed that poor people know how to diversify their portfolio as a form of safety net, by employing three alternative saving portfolios: SAT compulsory savings, SAT voluntary savings and the Susu collector or ROSCA. Clients adopt these savings techniques to cope with eventualities that came their way. These are the voices of the clients that we looked out from their behaviour. Perhaps the voices were, firstly, "We want loans that will help us expand our work to earn adequate profit to stop doing multiple jobs"; secondly, "We need a savings product from microfinance institutions'"; thirdly, "we want to save voluntarily", and fourthly " We want a saving product that will help us raise lump sum'".

An important lesson for MFIs is to listen to the voices of their existing and potential clients and tailor their products according to their needs. We have seen here that clients of SAT have been saving outside the institution, despite the fact that they pay their so-called group dues. MFIs can do market surveys of their clients on the types and nature of products they want the MFIs to provide. Institutions could introduce such saving products that could go a long way to minimize the institutions' over dependence on foreign donors. The mobilized savings by MFIs will benefit both institution and clients alike. Thus, MFIs may no longer depend solely on donors for funding. The "freed" money could be used for other development projects. Clients' deposits may serve as source of capital and a buffer in terms of uncertainties. This fits the modern business approach of being a customer-centered business.


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Paul Adjei Onyina

Macquarie University

Sean Turnell

Macquarie University

(40) Taka is the Bangladesh currency.

(41) Credito con. Educacion Rural (CRECER) was founded in Bolivia in1999.

(42) The exchange rate for the Ghana cedi (GH cents), was US$1=GH 0.9 cents in March 2007.

(43) For a detailed report on how the poor manage their portfolios see Collins, Morduch, Rutherford and Ruthven (2009).

(44) For detailed literature on ROSCAs, see Geertz, (1962); Ardener, (1964); Bouman, (1979) and (1995), and Besley, Coate and Loury, (1994).
Table 1: Religious Denomination

Survey Data                               Accra

Denomination   Observation   Percentage     Religion     Percentage

Catholic           36           5.4       Catholic          9.3
Anglican           19           2.8       Anglican          3.8
Methodist          59           8.8       Methodist         8.1
Presbyterian       76           11.3      Presbyterian      14.0
Pentecostal        192          28.6      Pentecostal       31.4
Spiritual          43           6.4       Other             12.0
  churches                                  churches
Other              178          26.5      Spiritual         3.0
Islam              56           8.3       Islam             11.8
Others             13           1.9       Others            6.9
Total              672          100       Total             100

Source: Drawn from our survey data and, with respect to Accra, from

Statistical Service (2008)

Table 2: Type of Employment by Clients

Employment type                            N    Percentage

Food sellers                              264      39.3
Trading/ Business                         295      43.9
Service Providers (trained profession)    84       13.4
Others                                    29       4.3
Total                                     672      100

Table 3: Years in Main Employment

Years         <1    1 to   2 to   3 to   4 to   Over   Total
                     2      3      4      5      5

Observation   22     48     56     38     71    437     672
Percentage    3.3   7.1    8.3    5.7    10.6   65.0    100

Table 4: Saving with Susu/ROSCA

Before receiving loan from SAT         After receiving loan from SAT

Do Susu   Observation   Percentage   Still    Observation   Percentage
OrROSCA                              saving

Yes           409          60.9       Yes         392          58.6
No            263          39.1        No         277          39.1
Total         672          100       Total        669          100

Table 5: Why Save with Susu or ROSCA?--Responses

              Easy to    No        Less      Others   Total
Reason         save     Rules   Paper work

Observation     186      136        75         12     409
Percentage     45.5     33.3       18.3       2.9     100

Table 6: Distribution of Accumulated Compulsory and Voluntary Savings
by Clients (Unequal Intervals)

Accumulate Compulsory Savings

Amount (GH cents)     Observation    Percentage

Up to 24              35             6.1
25 to 50              50             8.6
51 to 79              80             13.8
80 to 100             89             15.4
101 to 149            100            17.5
150 -to 200           83             14.2
201 -to 300           76             13.2
301 to 400            33             5.7
401 to 900            32             5.5
Total                 578            100

Voluntary Savings
(per week or fortnightly)

Amount (GH cents)     Observation    Percentage

Up to 1               95             17.3
1.1 to 1.99           91             16.6
2 to 2.99             187            34.0
3 to 4.99             48             8.8
5                     108            19.7
10 to 320             20             3.6
Total                 549            100

Table 7: Additional Savings Daily, Weekly or Fortnightly
(Unequal Intervals)

(GH cents)      <1     1.      6.     14.    30.    60.    Total
                     1-6     1-14   1-30   1-60   1-350

Observation    79    109      89     64     39     12      392
Percentage    20.2   27.8    22.7   16.3   9.9     3.1     100
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Author:Onyina, Paul Adjei; Turnell, Sean
Publication:American Journal of Entrepreneurship
Geographic Code:6GHAN
Date:Jul 1, 2012
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