MBA Blog: Microfinance gets a boost in Ghana
Tuesday 04 December 2012
While traveling the busy stretch of Southern Ghana between Cape Coast and Accra, the radio was tuned to 99.7, an English language news station. The topic on air was, of all things, Spanish football. While discussing the Malaga team, a guest uttered: “Sometimes the power of the illusion of the dream is stronger than the reality of the dream.”
How true, in things more than football.
This month, a group of finance-minded students, alumni, and faculty from IE Business School boarded a plane from Madrid to Accra, ready to make a difference. The trip was part of the School’s Financieros sin Fronteras (FsF) program, which endeavors to improve microfinancing in Ghana through the promotion of entrepreneurship and eradication of poverty. Translate “Financieros sin Fronteras” into “Financiers without Borders” and the message is clear.
Why Ghana? The country’s plentiful resources (for example, cocoa, gold, oil), it’s positioning as an example of democracy for the rest of Africa, and the general energy and entrepreneurial spirit of the Ghanaian people makes it an ideal environment for growth through microfinancing.
However, it could be catching on more quickly. For the past two years, FsF has been analyzing various non-governmental organizations (NGOs) in Ghana and while microfinance is a proven tool for promoting economic development, the sector still falls short in the region.
Much of this has to do with education. Many small business owners see an opening in a market, but have neither the money nor the tools to make a business sustainable. Furthermore, many microfinance institutions in Ghana need help developing their own businesses before tackling the education of their clients.
Enter FsF. On this latest trip to Ghana, students and alumni from various Master in Finance programs at IE met with a Financial NGO (FNGO) based in Cape Coast Ghana, called ASA Initiative. This meeting came after about 10 weeks of preparation and is the keystone of the students’ final project. They spent two days at ASA headquarters speaking with staff – including CEO Veronica Kitti and COO Charles Morrison – about ASA’s business strategy, accounting, data management, governance board, and client outreach practices. The goal: to help understand the inner workings of ASA and to provide feedback that would help it run more smoothly and effectively as an institution.
ASA then introduced the group to a sample of their clients around Ghana. This meant driving to Assin Fosso to meet the woman who started the Sheriff Stationary & General Goods roadside store, to Fonku Dunkwa to speak with cocoa farmers about their latest crop, and on to Twifo Praso, where the owner of a school textbooks shop started his business so that he could help his three children get the education he never did.
The students met these business owners (the majority of whom are women) in their stores and asked a series of simple but telling questions: Do you know what microfinance is? How often and in what installments do you repay the loan? Do you know why you are borrowing in a group rather than on your own? What is your interest rate? Have you ever taken out a loan before?
The conversations have many pauses. Often, the owner must take a break to make a sale. Other times, there is a communication breakdown; either the owner does not know much English and calls over her son or daughter to translate from Twi (the language of Ghana), or the students – immersed in a Master of Finance program – must find jargon-free language to ask about her business and the loan. Sometimes, the store owner simply doesn’t know the answer to the question.
The majority of these borrowers receive very small loans from ASA, and repay them with a favorable interest rate somewhere between 20-60 per cent in monthly installments of 10-20 cedis (around £7.)
Run parallel with the student project, FsF educates microfinance institutions at the executive level in Ghana. Roughly 75 executives and board members of local FNGOs gathered in Kasoa, a town just outside of Accra, for two jam-packed days of sessions. Three tracks were offered: Governance, Financial Management, and Financial Modeling taught by IE finance professors Maria Lopez-Escorial, Marco Trombetta, and Carlos Tapia respectively.
Now, these executives are no business school students, so just as the finance students had to find new ways of gathering information from ASA clients, the professors made sure to make the lessons as practical as possible so that the participants engaged and shared their stories with one another.
The students and faculty participating in the FsF trips, which occur twice a year, are not only helping the communities of Ghana, they are enabling the microfinance institutions to make a greater impact themselves. A small but steady drop of knowledge can – and will – have major ripples.
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