As some of you may know, I spent most of the month of November in Ghana visiting Lumana Credit in the Volta Region. I’ve known the founder of Lumana, Sammie Rayner, for several years as a result of both being active participants in the Seattle microfinance scene. So traveling to Africa gave me the perfect opportunity to spend some time in Ghana with an organization I was already familiar with. Unfortunately, Sammie and I couldn’t quite coordinate our trips to overlap (she is in Ghana now until sometime in March). However, I got to spend a bunch of time with the awesome Lumana volunteer staff currently on the ground – Chad, Duffy, Maggie, and Abbey.

Here are a few of my learnings:

1. It was fascinating seeing the operational side of a younger microfinance organization (Lumana has only been around about 2 years) since my only prior first hand experience with microfinance was with an organization (Esperanza International in the Dominican Republic) that had been around a decade and had thousands of clients. While in Ghana, I spent a morning visiting CRAN, an MFI with about 8,000 clients, with Sloane and Taylor, which gives me another microfinance comparable. There are a number of similarities between MFI’s like Lumana in high growth stages versus more mature MFI’s like Esperanza and CRAN, but also some differences. While they both conduct group meetings where they disperse and collect loan repayments, the largest overall difference is admin costs and structure. In CRAN’s case, with 8,000 clients, it takes a number of full time staff to manage the finances, IT, risk, marketing, accounting, and client relationships. In Lumana’s case, with about 200 clients, the volunteer staff handles everything from coordinating client meetings to entering data into MIFOS to emptying the garbage. There is no budget for someone to oversee the finances. There is no budget for a risk manager. But they still manage to get everything done while still growing their client base. Another difference is group size – Lumana cooperatives were 4-8 people, while CRAN and Esperanza could be up to 14.

A CRAN cooperative after a group meeting

A Lumana cooperative meeting

2. Ewe, the local language spoken by about 5 million people across Ghana, Togo, and Benin, is a fascinating language. Never have I heard so many people spend so much time saying the phrases “Are you fine?” “Yes, I am fine. Are you fine?” “Yes, I am fine”. Chad Skeers put together a introductory Ewe lesson here, complete with a few mp3s, if you want to experience a taste of Ewe yourself. At the same time, the focus on the importance of common everyday interactions was quite refreshing compared to the United States where often times people you pass on the street are too worried about sending that next email on their Blackberry or iPhone to bother to say hi, much less even look up at you to smile. I can honestly say the locals in the Volta region were some of the friendliest people I’ve ever come across (though Cambodia and Kenya are high on that list too).

3. I’m not a fan at all of extremely humid climate, but am a huge huge fan of Africa as a whole.

4. Loan officers are a critical critical part of the microfinance process. It’s quite an undertaking for an MFI, particularly in a growth phase, to replace a loan officer. As in business and life, it comes down to relationships — and the loan officers are the ones with the closest relationships with an MFI’s clients. If a loan officer moves on, it requires significant time to re-establish trust with a client and get a cooperative back on track.

5. “Material Stuff” has virtually zero correlation to happiness in life.

6. My month got me even more hooked on the power of microfinance. Yes, there has been some controversy in the media recently regarding Andhra Pradesh, but as with most things, it’s just an example of the media blowing the bad out of proportion and under reporting the positive side of things. Microfinance is not a fad. In my opinion, empowering individuals to break themselves free of poverty on their own accord via getting access to credit is one of the best things you can do with your philanthropic dollars — I’d urge you to support organizations such as Lumana, Kiva, Esperanza, Wokai, and United Prosperity that are helping entrepreneurs around the world do this on a daily basis.

If you want to learn more about what life is like as a volunteer in Ghana, head over to Ghana Make You Sweat. Whether it be with Lumana or another organization working in Ghana, I’d highly highly recommend the experience (especially if you enjoy humid climates).

And yes, I know I need to improve my lag time between my actual microfinance trips and posting recaps of those trips here on myKRO.org.

Check out what Opportunity International is doing — providing electronic bicycles to their loan officers in Africa as a test, and getting positive feedback. I definitely think this type of transportation would work here in the Volta Region of Ghana to help Lumana loan officers reach their clients more effectively.

[via One.org via Opportunity International]

This is a guest post by Fehmeen Khan, the founder of the Microfinance Hub Blog.

Micro-savings are perhaps as important is microcredit, if not more, because they help create a financial buffer that reduces the economic volatility of the poor. Realizing the potential benefits of micro-savings, many microfinance institutions are showing interest in developing this service. A recent post published my Microfinance Gateway mentions a few innovations in rural saving services in Sub-Saharan Africa, three of which have been summarized below.

Linking large informal saving groups to formal financial services

It is natural for community-based saving groups to grow to a point where the financial needs (credit requirement) of members exceeds the amount saved. CARE (an international microfinance institution) works with such saving groups in villages and helps bridge the gap by linking these saving groups to formal financial service providers (commercial banks and the famous Kenyan mobile banking service, M-Pesa), where customized loan products are delivered to the poor against the saved funds.

(This is similar to the treatment of saving groups in the Trickle Up model.)

Formalizing traditional saving practices

Susu collectors are one of the oldest forms of savings and credit services in rural Africa. An officer visits community members at their houses to collect periodic micro-savings and advance microloans as well. Leveraging this established delivery channel, Barclays Bank in Ghana offers bank accounts for safe storage of these funds and extends microcredit through susu collectors as well.

Mobile savings services as part of mobile banking

M-Pesa is a prominent mobile payments service in Kenya, but regulations related to microfinance prevented M-Pesa from entering the micro-savings market (even though consumers found a loophole and retained funds in the M-Pesa platform). As a result, M-Pesa’s owner, Safaricom, partnered with Equity Bank to offer mobile savings to anyone with a mobile phone and a connection.

Read about these initiatives (and two others not mentioned above) at the Microfinance Gateway website.

Source: Microfinance Gateway Staff. (2010). Innovations in Savings Services in Rural Sub-Saharan Africa . Available: http://www.microfinancegateway.org/p/site/m/template.rc/1.26.14353/. Last accessed 2nd Nov 2010

As I’ve mentioned, I’m headed to Ghana on October 23rd to volunteer with Lumana Credit for a month. Of course I’m well aware of Lumana Credit, but if any myKRO.org readers know any individuals or organizations in the microfinance industry based in Ghana – I’d love your help to connect with them. My good friend Sloane Berrent, who is no stranger to microfinance having been a Kiva Fellow in the Phillipines, will be there as well for some of my stay and we’d like to get as many different perspectives as possible on microfinance, and that means talking to as many individuals & organizations with an interest in microfinance as physically possible.

Any pointers or introductions you can provide would be great appreciated!

On Friday morning, I visited Kito International here in Nairobi. I met with Wiclif Otieno, the co-founder of Kito International, and visited their office in the Kawangware community of Nairobi. Over the course of several hours, we talked at length about microfranchising, marketing ideas, Kito International, and life for youths in Kenya. Kito International is a relatively young organization focused on providing guidance and education to today’s street youth in Nairobi, who will be tomorrow’s up and coming entrepreneurs. Their focus is not on microfinance like many organizations we cover here on myKRO.org, but rather on microfranchising (more on microfranchising at Wikipedia). The 7 youths in their program spend half of every day working fulfilling orders for paper bags (photo below) and the other half of their day receiving training on topics such as banking and entrepreneurship. The average order size is 1,000 bags and it takes Kito 7 days to fulfill an order that size. At the end of each month, the teenagers receive a stipend that is enough to cover housing and food for the month, which keeps them off the streets and increasing their knowledge base as they grow. Microfranchising provides Kito a means to help the teenagers earn money without the personal risks and stress that would be inflicted on the youths if they took out their own loans from a microfinance institution.

I found both Wiclif and Joshua, another Kito employee who arrived later during my visit from a meeting with Accendo (their partner on the new lights they are about to start selling), extremely passionate about Kito’s mission — which is exactly what I like to see from those tackling today’s problems. The more passionate someone is, the more likely they are to succeed in my mind.

Below are a few photos from my visit:

WiClif and me outside Kito’s office

Here’s a photo with me and the 7 youths in Kito’s pilot program.

Here is a photo of the bags they currently sell, along with the new Accendo lights they are just about to begin to offer to residents of their community.

For those that want to learn more about Kito International, check out their website and their Tumblr Blog.

Also, before I wrap this up, I have to thank Maria Springer (Kito’s other co-founder based in Los Angeles) for connecting me with Wiclif and Joshua.

For those with experience with microfranchising, please leave your comments below regarding how you’ve seen it used — either successfully or unsuccessfully.

I’m really looking forward to my trip to Ghana coming up in late October – my friend Dan and I are planning to fly to Accra about October 23rd after a month in Kenya. It’s been a couple years since I last visited the Dominican Republic and got an in person look at the impact microfinance has on the ground, but I couldn’t be more excited to get back out in the field! I’ll be helping Lumana Credit, a microfinance organization based in Seattle but focused in Ghana, for a couple weeks doing whatever they need — – I’m not sure what I’ll be helping out with as of yet, but that’s the fun of it. I’ve known their founder Sammie Rayner as a result of both being involved in the Seattle microfinance scene for the past couple years, and she’ll be working from Ghana at the same time my friend and I are planning on visiting!

Also, it sounds like my friend Sloane Berrent, who is a former Kiva Fellow, is going to pop in for a visit at the beginning of November for 10-14 days.

It’s still a little ways off, but looking like it’s going to be an awesome trip — I’ll certainly try to share some photos and stories here on myKRO.org during my stay!

Fehmeen Khan works in her individual capacity as a microfinance blogger, at Microfinance Hub.

Ever heard of interest-free loans in microfinance? Probably not, because some microfinance institutions need to cover their expenses and others are in it for the money. But Seeds for Development, which is a UK-based microfinance charity specializing in micro crops, is different because interest rates play no role in their business model. I recently had the privilege of interviewing Alison Hall, the chairperson of the charity, and decided it was worth sharing.

Fehmeen: Please tell me a little about yourself and how you, along with your friends, setup this charity.

Alison Hall: Well, first of all, I have no background (or previous experience) in Africa, microfinance, microcredit, farming or charity work! I am a marketing manager at IBM. In September 2007, along with the 3 other founding trustees, I was sent to a conference in Oslo where Josephine Okot, the MD of Victoria Seeds, gave a very emotive talk about Uganda and the challenges farmers face, especially around

access to affordable credit. I had a light-bulb moment and decided to do something to help, and after some deliberation, we came up with the idea of lending farmers seeds (which is what they needed).

Seeds for Development was born!

Fehmeen: What exactly is it that Seeds for Development does a microfinance institution?

Alison Hall: Individual farmers looking for seeds to plant, approach Victoria Seeds, a seed retailer in Uganda, who combines the request of dozens of farmers and sends the details to us. We transfer the required money to the bank account of the consolidated group of farmers (Seed Farmers), who use the

money to purchase seeds, say, 20 kg of soybean seeds, from Victoria Seeds.

Once the crop is harvested, Victoria Seeds, bound by an earlier agreement, buys back the seed crop and deducts the monetary value of the seeds, which is recycled in the system to support other farmers. (In other words, the microloan is returned when the monetary value of seeds is deducted).

Fehmeen: What makes Seeds for Development stand out from the rest of the microfinance institutions (MFIs)?

Alison Hall: Microfinance institutions often charge interest rates that are outrageously high and hide under ‘onion skins’, so you have to peel away the layers to find out exactly how much they charge. Numerous people give their money to charities in good faith thinking all their donations go to the people they want to help, but when their money go via MFIs, very little of that donated amount actually lands in the hands of the people they want to help.

This is one of the reasons I set up Seeds for Development; all our donations go directly to the farmers we want to help – no interest, no risk and 100% repayment so far!

Fehmeen: Could you elaborate how you eliminate risk?

Alison Hall: The farmers carry no risk because we agree with them that if the crop fails due to flood, drought, disease, war or ultimately their death, then the ‘microloan’ is forgiven. Even though we do not expect to get the money back ourselves (because it was all raised from charitable donations) we make sure the farmers believe that this is not charity.

Fehmeen: How does Seeds for Development cover expenses if all donated funds are forward to farmers?

Alison Hall: We pay for them ourselves because we all have day jobs. The costs we face are limited to travel, web-hosting, domain name registration, and the ‘Just Giving’ online donation tool fee (we get the bank to waive bank transfer charges), so you can see our expenses are pretty non-existent at the moment. However, as we grow this will have to change and I am looking to see if we can get support in the form of grants to cover these expenses. All of our ‘individual’ donations go directly to the farmers and we want to keep it that way!

Video: Olwal Farmers Group – Seeds for Development

Fehmeen: The activities of Seeds for Development are limited to helping farmers in a third world country; are there any specific reasons for your choice of helping farmers only?

Alison Hall: I believe the word ‘farmer’ is misleading as it can conjure up an image of affluence. In fact farmers are the poorest people of the land and they have the greatest difficulties in securing credit. Agriculture is widely accepted as key to poverty alleviation and we want to help the poorest, most challenged people farm their way out of poverty.

Plus, most of our clients are refugees who were displaced because of the twenty-year civil war that plagued Uganda from 1986 to 2006, and caused 2 million people to flee their homes and live in IDP camps. When Seeds for Development was setup, more than 500,000 people were still living in these camps.

We are trying to help people leave these camps and go home to rebuild their lives through microfinance. This is very challenging for them because many of them have known nothing but war, have no education and no older generation to pass on knowledge. Their land has not been touched for 20 years they often have no house to go home to, and have no food security.

Since most of them are starting from scratch, we also provide funds to help them purchase other basic agricultural inputs, such as forked hoes, hand hoes, wellingtons, weeding sprays, drying tarpaulin, fungicide, etc. to cultivate their micro crops.

Fehmeen: Your results are commendable – a 100% repayment rate, even in microfinance, is remarkable. What factors would you attribute to that: commitment of workers, good credit discipline, strict client selection criteria, or complementary training of clients?

Alison Hall: Thank you! Yes, the selection process is very strict. Victoria Seeds select the farmers groups for us to work with, educates and trains the farmers on seed production and closely monitors their progress throughout the growing season.

Most importantly, our farmers are totally committed to getting themselves out of poverty and know that they have to farm their way out. They have an astonishing attitude!

I meet the farmers as an equal partner – we shake hands and look each other in the eye. They give me their word that they will be honest, trustworthy and hardworking and the group committee signs an agreement. I then go and meet them again to see how they are getting on, etc.

A really motivating factor for the farmers is that when they pay back the loan, we transfer the money back to the group to use as ‘rolling credit’. This was a temporary arrangement because we didn’t have the infrastructure to take the money back and reallocate to other farmers. However, it is so successful that we will leave it this way and build on it.

Fehmeen: How many loans have you advanced so far? Could you share a few figures about your growth prospects and success?

Alison Hall: We have advanced 4 loans to 3 groups so far (here are their details):

Group 1 has received two micro crop loans, totaling £3,500, and thanks to the rolling-credit facility, these farmers have been borrowing seeds against it for 4 seasons now. The idea caught on fairly quickly because the repayment rate was perfect and the group size rose from 80 to 200 at one point, before settling at around 100.

Group 2 (70 farmers) and 3 (60 farmers) received much larger micro crop loans (over £4,500 each) because they belonged to the war-torn Northern Uganda. Despite this, they too have scored a 100% repayment rate, and we’ve recently forwarded funds to a third group in the North.

In addition to this, we also paid for 60 of the farmers to have a daylong training in organic farming because we felt it was vital to invest in furthering their education and building their knowledge.

Fehmeen: What is the way way forward for Seeds for Development?

Alison Hall: We currently have enough funds to support 2 more groups of around 40 to 50 farmers in each with significant (£4,000) micro crop loans this year. Our goal is to raise around £10,000 per year, which will allow us to support 2 new groups per year. However, we overachieved this by 50% last year, so we were able to take on an additional 2 groups this year.

We need to have some more formal structure in place to ensure that we can build on our success and grow in a sustainable way; for example, we will need to invest in management systems to track, monitor and develop the ‘rolling credit’ model efficiently.

But beyond that, I have lots of dreams and ideas for Seeds for Development!

—

(Just in case you’re wondering, there are no minimum donation amounts for Seeds for Development; in fact, some people donate as little as £1 at a time).

Here is a cool internship opportunity in Africa:

Description
On this project you will be working with a local Non-Government Organisation (NGO) in Dakar dedicated to providing micro-credit services to the local community. You will be predominantly working with a local community bank, set up by women for women, allowing them to setup their own enterprises.

Highlights

• You will assist in the day to day activities of the community bank. These activities could include
• Helping arrange new loans
• Assisting in writing new business proposals
• Helping arrange logistical requirements
• Giving basic accounting / business lessons to groups of women
• Helping out in local nursery (which frees up the women’s time to allow them to work)
• Helping out in the local Bio-agricultural garden

To read more about this internship visit GoAbroad.com

Lumana Credit is conducting a holiday fundraiser – details below:

WHAT: Lumana Credit is working to raise funds to expand its microfinance program in Ghana. Give the gift of a micro loan on behalf of a friend, family member, or colleague, and they will receive a traditional, personalized Ghanaian Kente card expressing their gift of hope given to a woman in need.

WHEN: Tuesday, December 1st to Friday, January 1st 2010.

WHERE: Make your donation online at www.lumana.org

WHY: Lumana Credit provides loans and education to rural villages in Ghana with an impact that extends beyond the holiday season. Be a part of a movement to help lift people out of poverty through microcredit.

COST: Cards start at $20 and can be purchased for any denomination above that.

$20 may not go very far here in the US, but it’s quite a bit of money in Ghana. For example:

• $20—Provide a 10-day business training course to a class of 20 entrepreneurs.
• $50—Train and employ one local school teacher to teach business training courses in the community for two months.
• $100—Provide a 6-month loan for a woman to invest in her business. Each time the loan is repaid it will be passed on to another woman in need.

Hope you choose to give the gift that keeps on giving this holiday season!

[via Joel Carlman on Kiva Stories from the Field]