Recommendations to Board

1
Recommendations to Board Management of Sinapi
Aba Trust

• Based on the Results of the Client Impact and
  Satisfaction Assessment -
• About 830 interviewed in
• January-February 2002

2
Recommendations of analysts based on findings
from clients, non clients and ex clients

• Sections of this report
• 1. Changes to consider in the current products
• 2. Changes to consider regarding orientation of
  loan officers
• 3. New products that should be considered in
  order to accomplish SATs goals

3
Clients complain of fees which makes interest
rate effectively higher

• Processing fee of 3 of the loan is the fee that
  draws most complaints from mature and ex clients.
• This is on top of flat interest charged. Some
  competitors charging interest on declining
  balance.

• There is not much complaint with training fee of
  2000 cedis. However, input of outside resource
  persons not highly valued.
• The application fee of 3000 cedis seems
  reasonable to many.

4
SAT Compulsory Savings is really a collateral
held by the group

• Clients view their deposit of 10 of the loan
  amount as collateral rather than real savings.
  Compulsory savings can be seized by SAT.
• Even though dues (or voluntary savings) cannot
  be seized and can be withdrawn, there is some
  indication that they are not placing their excess
  liquidity with SAT but rather are doing so with
  susu, informal credit union or keeping in the
  house.
• The image of savings will need to be transformed
  when SAT becomes a formal institution. Compulsory
  saving should be renamed.

5
Reorient Group Facilitation

• Many ex clients leaving due to problems with the
  group
• Members may not be freely choosing their groups
  or leaders. Need to reemphasize the self
  selection policy.
• A new policy is needed that leaders need to be
  rotated every two loan terms. Every year need to
  train new leaders.
• Need to have regular half yearly meeting of the
  leaders of the SG in a region to collect their
  recommendations and do training.
• Review if loan officer is playing functions that
  should be done by the group.

6
Group formation needs to be reviewed

• TB ranges from 15 to 40 persons. New clients are
  not allowed to join after the second cycle. In
  other programs, there are some advantages of
  allowing new clients to come into groups with
  older clients in third cycle.
• In some villages, there are new clients that are
  not able to enter SAT as there is not enough for
  a new group. So SAT needs to find a way to help
  prospective clients to form new groups of at
  least 15.

7
Slow loan disbursement is a big problem for
clients businesses

• Despite the fact that the loan group has fully
  repaid, loan officers say that checks are not
  issued due to lack of availability of funds in
  Head Office.
• Some groups are waiting up to 3 months for new
  loans. This wait destroys groups and has a
  negative impact on clients businesses.
• Management needs to assure medium term financing
  from outside (deposits borrowing from outside
  agencies donors)
• In Ghana, 60 of liquidity is in the informal
  sector so deposits are a good idea.
• When regulated, the ability to borrow from other
  institutions will be supervised and limited by
  Bank of Ghana.

8
Review repayment schedule term

• One of the biggest reasons that ex clients are
  leaving is disagreement with repayment schedule
  and term. This also is in the dislikes of mature
  clients. Clients want more than average SG loan
  term is 8 months (ranges from 6 to 12 mos.).
• Currently in TB, repayment is weekly (and some
  biweekly but it is only double the payment every
  two weeks.) Current SG policy says repayment is
  monthly but in practice it is weekly, bi-weekly,
  and monthly. Some clients feel that it is
  difficult to wait and pay large amount. There
  needs to be a policy for easily repaying on a
  more regular basis. This could be done easily
  when clients have a savings account that they can
  deposit into.

9
Tension between helping the clients business and
getting fees

• Clients want longer loan term so that there is a
  lower payment amount so that they can retain more
  working capital longer and grow their business
  more.
• They complain that SAT is decapitalizing their
  business with too high installments and making
  them wait long periods to get new loans.

• SAT is of two minds
• SAT wants shorter terms in order to get more
  processing and application fees. Yet it is also
  costing SAT more to issue new loans because of
  inefficient process of reloans.
• Meanwhile SAT wants its clients to progress out
  of poverty but is providing too short of a loan
  term to fully help them.

10
Incentive policy for loan officers under
consideration

• Need regular performance criteria. Should include
  quality, volume of loans, amount of portfolio,
  dropout rate, revenue generated by the loan
  officer, and report writing.
• Should focus on portfolio at risk to keep arrears
  under control.
• Should include some longer term considerations as
  well.

11
Make sure that loan officers are not expelling
pregnant clients who can pay

• SAT expels some clients once they are in advanced
  pregnancy. The policy is to assess if women can
  continue to run business. Women have other
  persons who can keep the business running during
  pregnancy (older children relatives) just as
  they do during trekking.
• There is indication that some loan officers need
  better orientation to the policy.

12
Adapt current product to the needs of other
economic sectors

• A random sample of SAT clients, incoming clients
  and ex clients found an overwhelming majority in
  trade. It also found complaints that the current
  product was not appropriate for other sectors.
• Needs to adapt better to the needs of those in
  service sector.
• Adapt to those providing value added to
  production.
• Product needs longer term and small interest for
  animal raising or agriculture.

13
Create a new group product to allow purchase of
assets

• Group loan clients do not appear to be
  accumulating significant business or household
  assets during several years.
• After an average of 34 months and 5 loans in the
  program, only 42 of clients improved their
  household assets or poverty level.
• Half are still operating off of table tops.
  Little investment in business infrastructure.
• In interviews, there seems to be little business
  asset accumulation.
• People are borrowing and repaying but not moving
  out of poverty.

14
New group product to purchase assets (second
slide)

• One of the key strategies for a poor person to
  get out of poverty is to accumulate assets both
  business and household. SAT does not allow TB or
  SG clients to invest in assets, even if they are
  for business. Clients are expelled from the
  program for doing so.
• Create a new loan product for clients in latter
  cycles of TB to allow sufficient loan term to buy
  assets especially for business equipment.
• Do not limit the asset purchase to just business
  assets. Some household assets also can be useful
  to use as collateral for a future business loan.

15
Clients need larger individual loans but SG not
providing necessary assets to do so

• SAT plans that mature clients should be able to
  move to individual loans after 8th cycle.
• Mature clients report that they would like
  individual loans but cannot access, largely for
  lack of guarantor or sufficient assets. So
  staying in SG and receiving much less than
  business needs.
• SAT needs to help clients to accumulate assets
  during the 8 cycles so as to facilitate their
  move into individual borrowing.

16
Start housing repair minor construction loans

• Housing represents shelter, security of tenure in
  a community, and a key asset which a person can
  borrow against.
• SATs clients are not rapidly improving their
  homes with the business income. After two or more
  years in the program, they still have the same
  housing construction as incoming clients.
• SATs mature clients are not improving their
  ownership of housing. Same as incoming clients.
• Clients need a new loan product with a longer
  term and lower interest. This new product also
  will help them get ready for the individual
  borrowing.

17
SAT should encourage appropriate technological
advances in enterprise to increase productivity

• Another way to get out of poverty is to increase
  productivity production, which requires
  improved technology, hiring others and
  management.
• There is little evidence that SAT is helping the
  clients to improve either productivity or
  production.
• Some clients interviewed who have acquired a food
  grinder (for example) are generating good income
  in contrast to their neighbors who grind less by
  hand. Using loans for this type of productivity
  advance should be encouraged.

18
Help clients to invest in their childrens future
earnings

• Mature clients are investing now in their
  childrens future. It is a good long term
  strategy for moving their family out of poverty.
  Long after the microenterprise has stopped, the
  better educated child will provide for the
  family.
• Clients are using their loan money, and not just
  their profits, to pay for education. This is
  because they need a lump sum. SAT is providing
  high interest and short term loans that clients
  is using for long term purpose.
• SAT should launch an education loan product that
  has a longer term and lower interest rate.

19
Consider consumer loans for mature group loan
clients

• It is clear that the SAT clients are using their
  loans for a variety of lump sum household needs.
  The longer they are in the program the more they
  are using the loan for consumption purposes.
• Carefully consider consumer loans for those who
  have reached solidarity group status. It is
  tricky to figure out how to allow this without
  abuse. Some programs use an internal account that
  the group is supervising that allows for quick
  consumer loans such as paying for funeral costs.