MICROCAPITAL STORY: Ghana’s HFC Bank, Boafo Microfinance and SSNIT Collaborate to Expand Microfinance Services in Ghana

An agreement was signed between the Social Security and National Insurance Trust (SSNIT) Informal Sector Fund, HFC Bank Ghana Limited, and Boafo Microfinance Services Limited to encourage the administration of credit to informal sector entrepreneurs who are contributors of SSNIT. Each of the collaborators will play an active role in the agreement, the purpose of which is to strengthen the economic security of people in the informal sectors, through the growth of businesses and occupational pension funds, in order to assist in the guarantee of economically stable households. The agreement has been conveyed by Director of the SSNIT informal sector fund, Dr. Francis Sapara-Grant, as an indication of “the need to harness the efforts of complementary institutions in the promotion of the welfare of the elderly and the eradication of destitution from the country” and a demonstration “that the business of providing social protection to the Ghanaian worker has assumed a different dimension through this creative and innovative approach”.

Under the agreement, a member of the Informal Sector Fund will be permitted to use their account balance, or their new Occupational Scheme Accounts, to secure a loan from Baofo Microfinance. Dr. Sapara-Grant explained that these accounts were the result of the collaborative effort between the SSNIT, HFC and Boafo to create a credit scheme for members of the SSNIT Informal Sector Fund that is in line with the design of the informal sector scheme but further details of these accounts were not disclosed. Members of the fund are permitted to make periodic withdrawals from the scheme, while 50 percent of the person’s contribution would be used as a retirement account for the individual members. The total membership of SSNIT’s Informal Sector totals over 20 thousand throughout four branches, and contributions to its Informal Sector total over GH¢ 1.8 million (USD 1.5 million). Dr. Sapara-Grant promised to increase the fund’s members to two million in the short term to enable more people to benefit from the scheme.

The SSNIT will recruit members from the informal sector, open occupational scheme accounts (OSAs) for them and ensure that they maintain contributions to their respective accounts. The SSNIT will also provide loan capital to Boafo Microfinance where possible. Boafo will create loan products for members of the SSNIT Informal Fund and evaluate “their capacity to borrow, originate and service loans” as well as further mobilize contributions through loan repayment. HFC Bank will provide loan capital, provide a banking network for contributions, as well as use its branches to facilitate the disbursement of loans, repayment of loans, and collection of contributions from members. Boafo Microfinance Services will use two of its existing loan products for the scheme. The Busy Bee loan is aimed at microenterprises and averages between USD 1 and 3 thousand. Clients can pay a fee to have Boafo staff collect loan payments on a daily basis. The Home Improvement Loans are housing loans, to be used specifically for buying land, building a structure, improving fittings, adding utilities or finishing a home.

The Social Security and National Insurance Trust (SSNIT) is a statutory public trust established in 1972 to administer the National Social Security Scheme. Its mission is to provide innovative income replacement schemes to Ghanaian workers and their dependents in the event of old age, permanent disability or death. The Trust is currently the largest non-bank financial institution in the country and has a registered membership of approximately one million with over 58 thousand pensioners who currently collect their monthly pension from SSNIT. The two major objectives for its investments are to maintain a long term optimum fund ratio and to make investments which are development oriented, including contribution to economic development and to “galvanize” investment in the informal sector.

HFC Bank Ghana limited was licensed in 2003 to provide banking services to its valued customers. It evolved from a mortgage finance institution with mortgage financing as its core business. Its principal activities include mortgage financing, commercial banking and investment banking services. At the end of 2007 its total assets stood at GH¢ 160 million (USD 137 million). HFC Bank currently has fifteen branches and offices throughout Ghana, but predicts that by the end of 2009 they will expand to cover all regions of Ghana.

Boafo Microfinance Services Limited is a microfinance institution established in 2007 by HFC Bank Ghana Limited and CHF International. It was created to address a market niche by providing housing and enterprise microfinance loans to households living and working in three informal settlements in Ghana. Funding for Boafo was initially provided by HFC Bank, CHF International, Global Development Alliance (GDA) of the United States Agency for International Development (USAID) and the United Nations Slum Upgrading Facility (SUF). In August 2007, four months after its establishment, Boafo had an outstanding loan portfolio of USD 1.1 million with 450 borrowers. CHF International intends to grow to have a loan portfolio of USD 4 million by 2010, including USD 1 million in housing loans. Although there is no recent information available on the progress of Boafo, HFC and CHF International had intended for Boafo to act as a pilot that could be replicated in other West African countries after an unspecified number of years.

By Lori Curtis, Research Assistant

Additional Reading:

Daily Guide: “Credit Scheme for SSNIT Informal Sector Members

Ghanaian Chronicle: “SSNIT Informal Sector Fund signs tripartite agreement

Social Security and National Insurance Trust: “Home” “At a Glance” “Investments” “Informal Sector

HFC Bank: “Home” “About Us” “Annual Report for Year Ended Dec 2007

MicroCapital Story: “CHF International and Ghana’s HFC Bank Creation, Boafo Microfinance Services Ltd, Begins Microcredit Loans

CHF International: “Ghana: Boafo Microfinance Services Ltd.

USAID: “Home” “Global Development Alliance

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