This blog post comes to us from Brian Doe, WPF Regional Director for Africa and the Middle East.
In April 2017, WPF signed a contract with a new microfinance partner in greater Accra called ID Ghana. To gain insight into the bustling Makola market in Accra, it may be helpful to read this 2015 article in the New Yorker profiling Ghanaian business owners. The entrepreneurs featured in the article were asked to speak about the limitations of existing micro-credit services in the market and to describe, in their own words, what very small businesses need to grow and thrive that current social financial services aren’t offering. The piece was penned in response to research also published in 2015 about the limitations of microfinance in creating a transformational impact on clients’ lives.
Whole Planet Foundation, as a supporter of business credit services to entry-level and very small enterprises, follows this discussion closely. In our monitoring and discovery visits, we prioritize and attempt to identify innovative service providers who are reacting to industry best practices and community needs with the goal of financing very poor entrepreneurs with greater impact.
ID Ghana works with many entrepreneurs similar to those working in (or procuring goods from) Accra’s Makola market and surrounding communities. During my visit to ID Ghana in February in preparation for a request to add them to WPF’s funding portfolio, these were some of the pro-poor innovations that impressed our team:
- ID Ghana organizes their clients into groups as a platform for training, transparency and information-sharing but ultimately treats each borrower as an individual. With this method, each individual is subject to his or her own in-depth financial analysis and calculation of ability to repay without any additional guarantor or group guarantee required.
Client and group leader Esther manages a loan meeting with an ID Ghana loan officer.
- ID Ghana uses the Ghanaian state health insurance card as its main form of identification for its clients and they assist all borrowers in enrolling in the state health insurance plan, renewing plans as needed. ID Ghana also pays half of their clients’ annual dues for three years to ensure the fees are not overly burdensome while new borrowers build and grow their businesses. Insurance in case of health emergencies and, as the New Yorker profile indicates, the lack of other safeguards against unexpected shocks are seen as major gaps in the existing microfinance sector.
- ID Ghana employs a local social worker at each branch to assist with clients and applicants facing severe personal challenges that need to be resolved in order to prevent problems with their businesses and loan repayments. In addition to mentoring and referrals, ID Ghana social workers can refer particularly poor clients for a special interest-free business loan called a “Kickstart Loan” designed to help economically active but very poor entrepreneurs.
ID Ghana social worker facilitates a training program about discussing and detecting cervical cancer.
- ID Ghana has tied regular savings over the course of the business loan process as a requirement to participation. Savings offers further financial flexibility and access to money when needed by clients, thus preventing the need to apply for costly emergency loans from commercial creditors.
- Other innovations include integrating mobile technology into their operations to help encourage savings and data collection during loan group meetings, as seen in the photograph below.
Whole Planet Foundation will continue to follow ID Ghana’s progress in scaling their services to Accra’s poor entrepreneurs. They currently support about 9,300 men and women with business loans in greater Accra and are looking to increase that to 15,000 over the next three years.
Esther, a client of ID Ghana, stands in front of her small shop. She once financed her shop with 3 month loans at a 13% per month interest rate, but ID Ghana offers 6 month loans at 3% per month interest.
ID Ghana plans to use WPF’s $300,000 to reach 1,415 entrepreneurs over the course of the 3-year grant. The first tranche of funds will be disbursed to ID Ghana by the end of April 2017.