Day 8 Tamale Microfinance, Microinsurance, Susu

Day 8- Tamale Rural Banks, Microfinance, Savings, and Susus
Today was another great fact-finding day but it was also the most inspiring. I was very emotional at the end of the day when we met with the Baobab Thrift and Susu. I have seen a number of great activities that are going on to help alleviate poverty, but this one seemed to be the most sustainable and have the greatest impact. It was hard to keep our eyes dry. I met two great organizations, but the second organization,Baobab Savings and Susu which provides a savings and microcredit facility for women who have table-top market operations was one of the most inspiringof all the many activities I have observed, and I think has the greatest impact and most sustainable concept. If I had money, I would use it to help these kind of operations.I think that a lot of governments and NGO's are realizing this and supporting those activities.

I got some great video footage of the actual operation. (You can see this on You Tube at:

http://www.youtube.com/watch?v=ZCckKV_djb0

They made disbursements to the women today by chance (one of only three times each year) and we got to witness it. The photos on this blog show the women receiving their money. Instead of signatures they use thumb prints. You can see them placing their thumb prints on the papers to accept their money. I found the best Internet Cafe in Ghana, the Kalong Cafe just around the corner from the hotel. Very fast. I uploaded a video of market scene to Day 6. Added a bunch of photos and did two posts. Did some Internet surfing to find out what organizations are here in Tamale in case we have some time on Friday.

Day 8

First Meeting:Bonzali Rural Bank Ltd. Kumbungu
We met with Paul Atsu Fiawoo Deputry Director and Head of Credit and Mike Tizaaee managing director .
They provide loans to rural groups both agricultural and commercial. Mostly commercial (only 15 percent agricultural) because the risk is too high with that agric. sector. Their typical loan is 18 months. They charge a little over the prime rate. They can loan money at a lower rate if they get grants for specific sectors, like farmers. For example they got a grant from Community Bank Rural Development and the used this to offer loans to farmers at a lower percentage than market rate. The current project related to farmers and loans is resulting from a US AID Millenium Challenge grant. The Millennium Challenge development grant goes to the main bank overseeing the rural banks. They in turn make loans to the rural banks to provide loans to registered groups of farmers (small farmers who have an average of 5 acres). The Ag Extension officers identify the groups to give loans to. They are typically in areas where poverty is endemic. The grant also provides for development of business plans for those groups.

The Bonzali Bank also assesses the group. They give loans to existing customers who have savings accounts for at least six month. Another role of the extension officer is to train farmers to move from traditional subsistence farming to commercial farming. If they have a 100 percent repayment then they get the grant from the Millenium Challenge.This could eventually lower rates charged to farmers in the future.

What do they do with bad loans?. They usualy reschedule. Usually A 4 month extension. They work through the chiefs whenever they are organizing groups. The chief becomes the de facto "underwriter" in identifying the best risks.

Microinsurance Initiative
Bonzali is just now getting into microinsurance following some training by GTZ, a German Technical Organization , with ILO as partner (the organization that funded us for this trip) , introduced training for microinsurance for people who have loans with the banks. Paul has gone to Accra and went through training on microinsurance at Ghana Insurance College. His instructor was Michael McCord, President of Microinsurance Centre (in Wisconsin). Michael must have done a good job as Paul was very enthuiastic about the potential to do this. The two products they offered by rural bank, through State Insurance Company (SIC), was credit life insurance and invalidity (disability) insurance if person is hospitalized for more than one month.


They affirmed that people NEED to be educated about insurance. They also endorsed the idea of starting with Best Farmers, and then getting smaller farmers to buy in later. Thinks it would be a good idea to have a training facility up north. Consider University for Development Studies here in Tamale. Potential partner for student for student involvement.

Baobab Thrift and Susu
Called and then met with Managing Director Manisu Sulemona. He arranged an entire impromtu meeting with all of this team. He was really proud of what they had accomplished, and with good reason wanted to share. He introduced us to his team of nine workers (up from three a year ago) and head of Director of Microfinance Zakaria Abukasi Sadiq. Not only did they accommodate us with a meeting of all their employees, they opened up their books(quite literally) and showed us the progress the women have made over the year. They have photos of each of the women next to their accounts. They use thumb prints in lieu of signatures. They work with 85 Community Credit Associations. Each of these has 25 women.

This was without a doubt the most inspiring or all of visits. We actually got to see the women get their money. We lucked out and came on payment distribution day. This was not a bank. It was a credit and susu (small savings and loan) that was established by two individuals. They work almost exclusively with women. They provide three things.
1. Facility (mechanism) for microsavings and susu accounts
2. Facility for microcredit
3. Education to women on financial literacy and health education

(Note: A susu account is a very interesting concept. But is prevalent throughout Ghana. I have not seen it in other countries. The way it works is that a group all throw money together at periodic time. They then choose one person to get all the proceeds. They then rotate to the next person until everyone gets a chance to get the payoff. I am not sure how the rotation is chosen, maybe randomly, but it seems to provide an incentive to pool funds. The person, usually a woman, can then do what she wants with the proceeds. Maybe start a bank account or buy goods to start her own tabletop operation.

Baobab brings everything to the village. Women set up their susu and thrift accounts in the village near their homes. Baobab sends out people to make the collections and make the disbursements in the village/neighborhood.

They make small loans to women ranging from Ghc300 to Ghc600 to women ($225 to $400). They charge . One percent of the loan goes back to the group that they can use for any purpose. However, they will often use the fund to pay for a member that is struggling and in risk of default. The way it works is that five women form a solidarity group. They then merge with four other solidarity groups to from a Community Credit Assoc. Loans are made to the group and are the responsibility of the group, and individuals members can receive up to Ghc600 ($400) each. If a member defaults then the other four in the group must make up the difference. (So this affects who you pick and who you keep in your group).

Currently they do not see a need for credit life insurance to protect them against risk of default. They don’t have defaults, so they don’t see a need for the product.

An observation made is the unintentional consequences. In fact, they are quite skeptical of the value because it could create a moral hazard. Women would get the impression that if they don’t repay their loan, some insurance fund will take care of it. They are concerned about this creating a counterproductive mindset.

They are currently seeking a Ghc90,000 investment to expand their operation.

We went out to the village to see how the money was distributed. Got some great photos and video of interview with Mr. Sadiq of the operation. I posted to YOU TUBE my interview with him. http://www.youtube.com/watch?v=FOcIdw61j1Q

At the weekly meetings of the group they have education on health issues. For example how to prevent diarrhea so that they don’t have to spend their money on drugs resulting from drinking bad water.

According to the director of the microfinance, although this is a women’s group enterprise the men also benefit and are accepting of the concept because at the end of the day, it provides more food, certainly more nutritious food to their family. The money also pays for school fees and other items like that. The men appreciate this revenue, eventhough it does make the women more equal in terms in family decisions.

Mr. Sadiq expressed his gratitude for us stopping by. He said it was very meaningful to recieve the affirmation that they were on the right path. He quoted an African proverb to me to explain:
The one who makes the road can not tell if it is crooked or straight. But only someone watching from afar can tell. They certainly appear to be making a straight road.

In short, it was a great day.
Faithfully submitted,
Jim Jones
Director-Katie School of Insurance
Illinois State University

Day 7 Techiman, Forikrom, Sunyani

Day 7- Understanding the Farmers
Today was another incredibly enlightening view. We met with small farmers who are the ones who are really suffering from some of the climate changes. We learned their concerns and what might work in terms of improving their risk management of crops. (And what they told us was something that foreign organizations working with farmers here really need to hear because some of them are doing great and others are actually counterproductive.) We also met with two NGO’s (one local and one from the U.K) who are working with the farmers at this level, and got their perspective too. Finally we met with a young Ghana college grad who is doing just some amazing work in small business development. His organization seems to have it right. We then drove to Tamale. Stopped at the Kimtaba Falls. See photo. As we got farther north we saw more thatched roof structures and mosques.

Meeting at Forikum.
Around 7:30 a.m. we met in a small village where Peace Corps volunteer Greg Yeich lives and works as a an environment worker helping farmers with their crops. We learned that they are dealing with some changes in the when the rainy seasons. I now understand that at this point the issue seems to be, less the change in the amount of rainfall, but the timing of the rain. This is vexing the farmers because if they plant too soon, on their traditional time tables, and the rains come late, their crops fail. (That is an incredibly important variable in designing a rainfall-indexed insurance product). The crops they grow in this area are maize (corn), cassava, yams, and some onions and tomatoes. Most of what these farmers (who own 2-10 acres) grow is eaten by them. Some surplus (when they have a surplus) goes to market. There is a push by government to try to get subsistence farmers to grow crops for sale as well. Greg showed us some recently introduced new alternative agricultural income that had proven to successful. Examples include bee-keeping (wildly successful), cashews, mushrooms, and dry season vegetable gardens, plus some livestock farming (cows, goats,chickens).The gardens where Greg had his crops was one of the few that was fenced in.(To keep the goats out). He used bamboo materials to construct it and you can see that in the photos. This enables him to farm close to his house. Many of the local farmers plant a ways out of town because if they plant close to town the goats eat their crops. The local farmers may actually not be able to afford the nails needed to construct the fences. We found out that the cost for farmers to get loans to buy their inputs (seeds, fertilizers, etc) has around a 30 percent interest rate. That is prime rate here for all loans.

The farmers are concerned about taking out loans from banks because if they have a loss and don’t pay they can be taken to court, and even end up in prison. Some of the banks have flexible time schedules that would allow a farmer to repay later if they have a loss. But according to the group we talk to, one bank, reported run by a well-known American non-profit organization was very inflexible. They took the farmers to court immediately and so the farmers had to leave the area or face criminal prosecution. (Also, another way that some lenders deal with delinquent loans is through local nanas (chiefs) rather than the court system. I was glad to hear that one American organization, Heifer International, was very well-respected and their efforts seem to do a lot for farmers. (They provide a cow, chicken, goat, bee, etc. with the stipulation that the farmer passes along the offspring to another farmer. This seems to work very well according to the group I spoke with.)

The Forikrom Farmers Group
The Forikrom village is about 5 families of 5000 people (Yes, there are about 1000 in each extended family). The Forkikrom Farmers Group I met with was a group of twenty farmers (men and women) and was formed in 1992 as an effort to replant trees near a river. (The local farmers had planted too close to the stream, and lost the shade provided by the trees. The stream dried up. So they mobilized and replanted trees, and the stream once again returned to its regular flow. Since they had formed together they decided that it was a good idea to continue as a group and looked for other activities to do. About this time a retired South African military officer, who everyone just calls Mr. Rankin, was on a church mission trip for his church. He taught the local people how they could grow different crops in the dry season, with different techniques. They just needed to grow them near the river (or do some rain water irrigation) and so he trained this group and they went out and trained others. This is still occurring to this day and his legacy lives on. The only challenge to this is that it is very capital intensive. It costs about $500 for an acre to grow onions, carrots, tomatoes, cabbages. That will pay off in more than $1000 in income, but coming up with the $500 is a real challenge for most farmers at this level.

One of the things that Greg has been working with the group on is alternative crops like cashews trees (which will produce in a couple of years), mushrooms, and bee keeping (which takes very little capital and is really taking off). The beekeeping ended up leading to a form of insurance. The way it works is that each of the twenty farmers will contribute one jar of honey to the group. They then sell this and but the money in a bank. They expect that the following year one or two of the farmers will have crop losses. When that occurs the group gives the money to these farmers who suffered the loss. That works really well. What is interesting is that because this new alternative income is kind of viewed as “surplus” they are willing to make that contribution. However, the other groups who have not yet adopted the new alternative crops seem less willing to voluntarily set aside part of their traditional crops, like maize, for “insurance” purposes. They see the need to hold on to this. They just don’t seem to view it the same way. However, some of the Nanas (chiefs) have this “insurance” system in place and require each member to contribute some maize to the village at harvest, to be saved in the event that there is a crop loss. This practice seems to vary by village, so I am meeting with some local Nanas to find out how common this “traditional” form of risk retention group is. It actually offers a great educational opportunity if it is not that common. And it might be a good time to introduce the concept as they introduce these new alternative incomes (which are still viewed as surplus) and more likely to be directed to a new form of group “insurance”.

The Nanas are really the ones to start with. They need to approve the idea and in talking with people they are the front line defacto "underwriters" as they will help direct rurual banks to the best farmers groups to give loans to, and quite possible the best groups to insure (as that becomes a possibility).

We then drove about an hour to meet with Nana Adams executive Director of local NGO and Greg’s supervisor and Julliette Lampo Director of Concern International. They both said that there is a huge need for some type of insurance to help farmers. They concurred with some of the suggestions made by the crop experts at our brainstorming session at KNUST about how to roll out such a product and who should be target market.

Understanding Small Business Development in Ghana

After that meeting we met with an amazingly impressive young man Kwaw Adams, (son of Nana Adams) who had just graduated from college and was working with helping small businesses develop. He walked us through an extensive process of how they chose business sectors to concentrate on in a particular location (i.e Poultry-egg production, ceramics, and hospitality) and how they went about selecting those sectors. Very well thought out. Then they advertise for businesses to help get started. They then go through an extensive process of screening, doing a SWOT analysis, doing business development plan, arranging capital with local banks (and they have a way of even choosing the banks to work with), and then providing educational training to make sure the entrepreneurs thrive. In their first pilot group of 2007 they chose 28 businesses. 25 are still operating, and because they do working capital analysis, he knows that those are doing well. This is supported by the foundation for an American company doing mining in Ghana, and they focus on communities where there are mines, but this model could work anywhere.I took about 10 pages of notes on that. I will tell you one major lesson for development. It all hinges on good record and bookkeeping with the small businesses. Without that foundation. It is not sustainable. Can't get bank loans, can't diagnose business problems etc. without good records. We asked if he saw a need for insurance. He said absolutely. First pension and health insurance. This is offered through the government. Cost is about $10 a year. The businesses need to develop a bit more, but that is something he plans to talk with them about and would like to meet insurers willing to work with his businesses. He started a second group of 28 this year.Interestingly, he noted that there was a credit default risk product that was started by some church called Economica Church Loan Fund. They require farmers to put up some additional money for default risk insurance. But if they pay their loan off on time, they get the money back. That seemed to work according to Kwaw. Will be interested in hearing if any other institutions do this.

Well,we pulled into Tamale at night. It was really HOT as everyone had warned. HOT Tamale. It is actually pronounced Tom-ah-Lay. Funny, when we pulled into the hotel their was a group of students (11 of them) from Michigan doing study abroad. Health Education. The lobby of the Mariam was full of Americans. Not what I expected to see when I pulled into a hotel in northern Ghana. Will try to post some photos later today.

Faithfully submitted,
Jim

Day 6 Trip from Accra to Techiman

Day 6- Trip to Techiman
I am blogging from hotel in Tamale, because I didn't get into Techiman in time to go to Internet Cafe. It is a bit slow here at hotel so will have to go to town to post photos, probably.

Anyway, here is Day 6 Blog (My original post had Day 5. I am losing track of days now). Please check out the video of market scene I uploaded from Internet Cafe once I got to Tamale.

Today we drove (instead of flying) to Techiman (7 hours of driving) to meet with Peace Crops Volunteer, Greg Yeich, working with local farmers, NGO’s and Care Universal. The idea is to spend the night in Techiman, then get up early and meet with Greg and the others. It was a Sunday, so the traffic was very light in the morning. Almost everyone here, at least in the Ashanti region where we were travelling, goes to church on Sunday. We stopped at what they call a Rest Stop and had lunch. The picture included is from that stop. Our driver, is in the middle. He is the one wearing a tie. We are the slobs.

At the rest stop, I had a dish called Foo Foo, made from Cassava and mixed with plantains or yams depending on the region and then served with soup or gravy). Same as when I was in the Peace Corps in Gabon, except that here they put the Foo Foo right into the soup where in Gabon they served it on a separate plate and you dipped it or poured the gravy over it. The locals were amused that I was eating Foo Foo, and laughed again when I finished and told them Mdasi (Thank You).
From there we passed a few markets, (see photos). I also took a photo of the traffic to give you a sense for that. I am glad that I had a driver and he was driving a rental.
Next we visited the Palace of Asantehene, the King of the Ashanti’s. They are a very powerful tribe in Ghana. We went to the museum of the Ashanti King, which was the original palace built by the British, after they burned the old one down 30 years earlier (it’s a long colonial story) . Anyway, it was a great cultural experience. The Ashanti King has a lot of political power and is an advisor to President of Ghana. He still wields a lot of influence. To his credit he has used is notoriety to go around to his subordinates the local chiefs, and others, and seek contributions for an education fund to send need students to school.
After that it was on to Techiman. We got in late so I couldn’t get to the Internet Café in time. Just had dinner and got ready for a 7 a.m. meeting tomorrow.
Faithfully submitted,
Jim

Day 5- Cape Coast- Slave Castle Tour, Global Mamas Batik Making Tour

Day 5- Saturday at Cape Coast

We took advantage of the little time we had at the hotel we stayed at, the Coconut Grove and walked around. I bought an interesting bracelet there it is very popular design. It is called GYE NYAME and it means Accept God (I am editing this post with the correct interpretation. It is "EXCEPT GOD" meaning all other things fail Except God, God is supreme and overcomes all situations) I heard it phonetically and got the interpretation a bit off the first time. ) I used the same design when we went out to do Batik making.

You can see it on the wooden design in the photo on the batik design tool too.

The people here are very religious. I am not sure the percentages but there are a Christian churches on every street corner it seems like. Just about every denomination. And a number of mosques do. Lots of Islamic people as well. They get along well and seem very tolerant of each others faiths. Here are photos from Coconut Grove, Making Batiks, and Cape Coast Slave Castle.

We met with the women who make Batiks for Global Mamas. This is the organization that does internships for students. Batik means to design with wax. They start off by putting a wax design on a cloth. Then you take the cloth and you mix in the dyes with two important chemicals. The one chemical opens up the cloth fibers and the other makes the dye adhere to the fiber. Without those the cloth dye would fade out. After that you dye the cloth and lay it out on the grass to let it soak into the fiber. Then you take out all the excess dye and then another process where the wax is removed. Then you cook the cloth. Let dry and then you have your batik. We actually tried doing the wax part. Well, let's just say we wouldn't make it as Batik makers.

Both the women in the photos provide their Batiks to Global Mamas in the Cape Coast for export to the U.S. and were extremely grateful, and loyal, to Global Mamas for the market. Georgina is actually a teacher at Wesley Girls School and teaches how to make different traditional clothes.

While the cloth was drying we went back into town to Cape Coast Castle. It is one of three castles in Ghana. It was designed by the British specifically for the purpose of slave trade. It was really emotional. The guy took us to the places where the slaves were kept and showed us how they were locked up and dispatched. Really unbelievable what people can do to each other.

After that we headed back, got our Batiks and headed back to Accra for the night.

Sunday we are headed for Techiman. Out contact there is Greg Yeich is our contact there. In one of numerous serendipitous events surrounding this whole grant and trip to Ghana, he was sitting at a table next to me in D.C. I overheard him say something about Ghana and interrupted him and explained my interest in the weather indexed insurance for farmers. Turns out he was on break from Peace Corps experience in Ghana and he works with farmers. So we are now meeting with the NGO's and farmers that he works with. Pretty cool.

From this point forward the blogging will become a bit more challenging. But I will try to keep up.

Bye,

Jim

Day 4- Trip to KNUST and Cape Coast

Day 4-Road Trip to Kumasi and KNUST We had such a long day that I am running a day behind on blogging. We left Accra at 5 a.m. to go to Kumasi which is about 4 hours away. We made our meetings there and then drove to Cape Coast. We didn’t get into the hotel until about .8:30 p.m. (By the way, Cape Coast is where President Obama is coming in July.) It is the former capital of what was once called the Gold Coast during Colonial times. It was worth the drive though. Horace and I ate dinner and listened to the ocean waves crashing in. I woke up the next day and walked outside to this incredible view. Please see photos.
http://picasaweb.google.com/africanjones2go/AfricaPics#

At dinner we ran into a group of students from the University of Georgia who are in Ghana on a study abroad/internship experience. We talked with their coordinators and they had some great ideas for setting up something similar with ISU. They have been doing it in Ghana for 10 years and have had great experiences with students from all disciplines. Okay, well here goes my official blog:

We had a driver take us from Accra, the capititol, to Kumasi where we planned to meet agriculture faculty at the Kwame Ncrumbah University of Science and Technology (KNUST) in Kumasi. http://www.knust.edu.gh/

Kumasi is located in the Ashanti region near the middle of the interior of Ghana. KNUST has an agriculture department there with about 35 faculty members including some who are researching climate change and its effect on crops in Ghana. We thought that they would be excellent research partners on any project related to weather-indexed insurance for crops. We met with the crop science experts, as well as the department chair and five other faculty members. We ended up in about a 90 minute brain-storming session that really churned out some great ideas about variables we should consider in collecting data, what organizations would be interested in purchasing this kind of product, and how to develop it over time. We all ended very excited about the prospects of working together. One low-hanging fruit is just sharing data. They have crop data from the 1960 to 1990 but had not been able to get funding to purchase the electronic data since that time. We purchased and collected the data for the past 12 years. So this in and of itself would be a great reason to partner with them. And I was really impressed with their insight and their questions. They have some great ideas for data analysis too. We are going to have some missing data but I have confidence our actuarial colleagues back at ISU can help deal with that. (Right Krzys? :-).Dr. Quansah did I nice job of facilitating the meeting. We will be working with him and his chair, to get an MOA between the two universities. Aslihan, they are particularly interesting in working with you and potentially other in our Ag. department. They currently have an MOA with Rutgers studying traditional medicines and the way they are grown.

After our meeting we went to the Kumasi market. See photo of mask maker I bought something from. The market is the largest in West Africa with over 10,000 vendors. Unfortunately, there was a fire there the day before. Remarkably this is a rare occurrence and fortunately it didn’t spread that far before it was put out. Maybe there is a need for microinsurance there? I was surprised to find a microinsurer at the Cape Coast when we got there. Need to find out more about that. Most of the day was travel time. So just read and mainly slept and watched the countryside. A long day.Bye,Jim

Day Three Accra

Day 3 Accra

Today was really encouraging, even inspiring. We met with people who are doing some tremendous work here in Ghana, and really making a difference in the lives of people here. They all seemed genuinely concerned for helping lift others out of poverty. In general, that seems to be a theme throughout Ghana and perhaps why it is more successful than other countries, they really seem to believe that each person is his brother’s keeper.

Global Mamas
Our first visit was with Executive Director of Women in Progress and Co-Founder of Global Mamas. http://www.globalmamas.org/Global Mamas is a Fair Trade organization established by two former Peace Corps volunteers here in Ghana. They mainly export to the U.S. One of them works here and the other in Minneapolis. They work with hundreds of women locally who make some really beautiful handcraft items. Hope to show you that as I will be travelling to Cape Coast to see them doing Batiks when we visit the slave castles Saturday. They export these goods to 400 organizations in the states . They also have retail location in Accra and Cape Coast but they work with women from all over Ghana. There is model is based on them (personally) providing all the capital upfront for the women. (No success getting grants from the U.S despite years of growing success. They see a need for their women to get financial education especially about savings and insurance, because these women now provide for their families, and extended families, who are highly dependent on their income, they have virtually no life insurance. They would be excellent candidates for microinsurance. They have been doing internships/volunteer experiences for several years. They have a complete framework in place where they employ student interns and volunteers and match them with business opportunities. Two students from Indiana University are working on marketing, and website design for some of the women who supply global mamas with goods. They are working on marketing Fair Trade as the intern/volunteer. They see the potential for a program on financial literacy and insurance being added to their existing lessons they conduct on bookkeeping for the women.


Insurance Commissioner's Office
Next we went to the National Insurance Commissioner’s OfficeWe met with THE actuary for National Insurance Commissioner. (He was formerly an electrical engineer but passed all his actuarial exams self-study here in Ghana in four years. Very impressive person, and there are many like him. Currently all the company actuaries are external. They want to set up an exchange program with us. One student actually is a math major and MBA teaching currently who wants to come to ISU. --Hey, Krzys we need to get SOA or CAS to donate textbooks to for the to study. Currently they have to share them all over. And they have nice facilities where they could run review sessions.)

We learned that there were about 40 insurance companies. Microinsurance has been approved for about four years now. They review the rates and forms and even marketing materials. The fastest growing market is funeral expenses coverage because the cost to host a funeral can cost thousands of dollars. They is very popular but the penetration of life insurance is only 2 to 6 percent (depending on who you ask). Motor insurance is required in Ghana.
Met with researcher there who thought the weather indexed idea was good start. They would like to see it expand to other perils like loss from pests . (They would like a formal MOA to continue discussions and would like us to meet with the insurance commissioner. )

Insurance Company Visits
Next we met with Star Life Insurance Company COO. They have done microinsurance for market vendors for about one year. They have a very interesting sales system. It is sold literally marketplace to street vendors by agents. They advertise by having trucks drive by using megaphones to market vendors. They walk through t he market and collect at the various stalls.

The interesting innovation is that they have partner with a bank to do a mobile bank. These are like portableATM’s where the market women deposit their earnings in mobile bank, and pay their insurance premium at same time. Sells to greater Accra Agents who were collecting the premium are all recent college grads. (One key is to have collection that is somewhat flexible like allowing the women to make payments at different times as long as they make the entire payment within a given time period whether it is collected weekly, even daily). (What might the future hold? Other potential agents besides street market agents, are training people like taxi drivers, dressmakers, and fishermen. People who have a lot of interaction with others.) Again the issue that there is little understanding in population about the value of insurance, especially life insurance was made. One thought is to have the industry join forces through a joint marketing effort. There is already a Ghana Insurance Association and a Life Ins. Association that could be the vehicle for this. Perhaps radio dramas? At any rate he sees consumer education as critical.

Next we met with CEO of GLICO. Glico is top life insurance provider and has been working with Care International on microinsurance for about 5 years. He stopped all meetings and brought in his entire team to meet with us. They are listened to us and expressed some interest in the weather-indexed insurance product idea. We later talked with Cynthia who handled the microinsurance program. One of the people we met had been an Assoc. prof. of economics at Virginia Tech. He moved here 10 years ago, and suggested that we should contact IBIS in Tamale a Dutch NGO. GLICO requested we send them a formal letter outlining how we might work together.

We then met with State Insurance Company Life, the oldest and largest company, and spoke with their Head of Life Marketing. He gave us a lot of information about microinsurance in Ghana. They have offered life insurance to “informal” r underserved, market for about 4 years. They actually send agents into the market and collect DAILY to the plan. The most preferred life product is one that has an investment component to it, because after a period of time the insured can then take use that to take out a small loan against the policy to grow business.
After awhile the insured will then be interested in larger loans. But to take out larger loans SIC partnered with banks. (The challenge is that the traditional banks don’t really want to mess with hassle of smaller accounts.) They collect money in groups of ten. SIC insures the entire group. Premium is collected from group but the claim payment is made to individual member. They work with ACCION, Opportunity International for distribution in order to defray distribution costs. Advertisement is trucks with speakers and next they plan radio ads. He also confirmed that there is very low market penetration and sees the need for industry-wide consumer education. Says Radio ads must be in local languages. Sees potential in a weather-indexed product. Would like to meet again on June 9th.

APEX Bank

Finally we met with Apex , the banking entity that is over all rural banks, and spoke with the Head of Research . They have 600 rural banks. They are also working with concept of microloans to portfolio and using group lending model. They provide education to the rural banks.
They were KEENLY interested in the weather insurance product. They are very excited by this and see this product is potentially very valuable. Protecting against default from the farmers that they make the loans to is something they want to be able to do. In fact they were so interested in the concept, that he had flown to India on World Bank grant and met with people from Malawi to explore crop insurance models. They would like an index for north for too little rain and in the south and north for too much rain. They want to meet with us again before we leave. They see a need for risk mitigation techniques like irrigation more than just insurance. They said Ghana should be doing more grain crops. Said we need to contact SPEED Ghana. SPEED has given loans for rural bank in Tamale. http://www.speedghana.org/index.php?opt=subcontent&Menid=4&Itemid=7
We travel to Kumasi tomorrow to meet at the University of Science and Technology with their department of agriculture. Should have some good photos as we will be travelling by car.Bye,Jim

Off to Kumasi at 5 a.m. then to Cape Coast by night

Accra Day 2

Photos at http://picasaweb.google.com/africanjones2go/AfricaPics#

We began today with a trip out to the University of Ghana to meet the professor we have been working with in collecting rainfall and crop data. Photos of the University of Ghana and us our meeting on a patio at a campus restaurant (under an umbrella). The campus is huge!! They actually have taxis that just take people around campus.

As we talked, I realized how fortunate we had been in choosing to work with her. I located her through an actuarial grad student from Ghana. She had been her math professor in her undergraduate studies. (Thanks Genevieve!!).

As she went through the data with us, she told us the story of how it was collected, where the data came from, and how reliable each data set was. (Turns out that there are different types of rainfall collection stations (synoptic, climate, agro-meteorological, and simple rainfall stations and data integrity depends on which one it comes from. ) She has written a book on data collection and was explaining how things have changed in that so much more of the information is available in electronic data form now rather than just recorded in books. This was certainly a currently at this transitional stage is a story unto itself. At this point we arguably have the most comprehensive and data set available in Ghana.

I think it is promising that given the electronic data now available, and how the data could become easily accessible in the future with a few enhancements in the system (such as adding new, faster computers at certain collection points and formalizing the data collection protocol) a market could develop as investors could rely on the ability of the system to provide quick feedback on the data in order to determine the appropriate level of indemnification. In addition to a private contract, Ghana has a developing stock market that might also be able to provide some capital. Will look into that later.

For the rest of the day, a business developer in Ghana, who happens to be the father of yet another actuarial student at ISU that works with me (yes the odds of that are quite fantastic), took us around in his air-conditioned car. (Thanks for setting this up Mukthar!!!). Our first stop was with an executive at Bank of Ghana who talked to us about rural banks. The bank of Ghana provides loans to these banks that in turn make loans to the various communities throughout Ghana. A typical rural bank might be comprised of about 2500 loans. This would be broken down into around 100 groups, with about 25 members in each group. The group usually has some common interest such as farming, or handcrafts, or small stores. The average amount of a loan is 200 CETIs ($150). Most of the people receiving loans are women. Each of the 25 members selects their executive, secretary, and treasurer. The group meets once a week to collect their payments (principal and interest) and they usually handle the situations where some person falls behind. The Ghana bank then collects the loans payments from each of the groups weekly. Although the default rate on loans is very low, the bank is interested in the concept of having some kind of an indexed-based product to provide protection to rural banks, especially in the north where the rainfall is a bit more variable. They set up a meeting with us for tomorrow to meet with the APEX organization that has loans from many banks like Bank of Ghana loans, including some from the government itself. The postcard view of downtown Accra with the impressive, ship-shaped building and the ocean in the background was taken from the bank. The building in the picture is their performing arts theater. I left one of our nice ceramic coasters with the rendering of the ISU College of Business building on it. It was a perfect gift as it could be used as a paperweight too. They still have fans and open windows there, so they have lots of paperweights.

Our next stop was at the Social Security National Insurance Trust (SSNIT) where we met with an actuary who had gone to school at Ball State. is like the SSA in the U.S. He explained that 18 percent of the income of workers is set aside for retirement benefits, disability (which they call invalidity) benefits, and survivor benefits. What was most interesting is that they have recently set up an “Informal Pension System” that permits small, self employed people to contribute to the system and receive benefits. The way it works is that some employees of SSNIT go around and educate the people in the local markets about the program. The government places such an importance on these people enrolling them in the system that it pays a commission for enrolling people in the Informal Pension System. It struck me that this distribution system (which currently only exists in major cities) could be used for private life insurance too. The problem in the past was how do you distribute micro insurance? The administrative costs are too high. I will be talking to companies about this option later in the week. I met the mom Genevieve’s mom who works at SSNIT. (Your Mom says “Hi” Genevieve :-)). SSNIT is an organization that would be a good place for ISU actuarial students to work and do a study abroad/internship. It would be a great experience and valuable for everyone.

We met briefly with SIC, the largest and oldest insurance company. The CEO had to go to
another meeting so we had to reschedule that for the next day. I was impressed by how much it looked like a regional mutual company you might see in the U.S. It had nice friendly people, dressed in business suits (they actually dress much more formally than we do in the U.S. especially in air-conditioned buildings like this). I guess that is the British influence. They had their mission statements, vision statements, and photos of “Best Worker” on the wall. I could definitely see our students doing summer internships in a place like that. Will meet with them again tomorrow.
The talk among local people is the impending arrival of President Obama. He will be here June 10th. The World Cup Finals. The really big news was the Champions League Finals between Manchester United and Barcelona. Lots of people in the restaurant tonight watching the game.
Bye for now.
Jim