Day 11-Trip to Chief Abdulah's Farm

Overview:

I am running a couple of days behind on blogs as we have been travelling in some more remote areas. It is now Sunday afternoon and I am at a hotel in Kumasi catching up on my Friday and Saturday blogs. The Day 11 and 12 activities involved some serious four-wheeling and it took something out of us. But the many farmers and villagers who live in those remote areas get around on much less comfortable terms than in a 4x4 Landcruiser.

Day 11- Trip to the Chief’s Farm

Today we decided to take a look at the actual production of crops like cassava and yams. The trip was about 50 km outside of Tamale and it took us about 2 hours. The photo at the top shows the long road to the Chief's farm. It does seem to go on forever.

We went passed the fields where they were going to be growing maize and rice but the Chief was holding off on planting because the rains are coming about two-three weeks late this year.

He knows that, based on meteorological reports.

Unfortunately, a lot of farmers have already started based on traditional timetables. As mentioned in the previous blogs, this information is something that the chief tries to communicate to farmers who have loans with him, at their weekly meetings. I met some U.S. Dept. of Agriculture people who are trying to find ways to get the word out via mobile telephone (since most farmers would have that). That might be something to consider in underwriting for crop loss too if such a product were developed. The farmer needs to have access to the updated climate and weather information. (That would be a nice value-added for purchasing insurance too. Would help reduce losses and benefit the farmer.)

I included a photo of the cassava being grown and then the other photos is cassava being sold at the market. (This is a traditional crop and is not really considered a "cash crop". It takes about 15 months for cassava to reach maturity. Most of the other crops take a few months.)

Transportation is an issue on everything and one reason that farmers don’t get very good prices for their crop. Most farmers have no easy way to get them to market because the roads are so challenging. It seems like an improvement in infrastructure could make a huge difference in what farmers could get to the market without spoiling. (If a multi-peril crop insurance product were developed for smaller farmers), it would have to be designed and underwritten with that in mind

On the way to the village we saw some interesting contrasts. I included a photo below of a Muslim man adorned in flowing, brightly colored, full-length clothes on his motorbike in a thatched room village. (That scene was repeated many times.)

Motorbikes are used frequently by farmers in the north (as are bicycles).

Faithfully Submitted,

Jim

Day 10- Meeting with The Chief and the Ministry of Agric

Day- 10 Overview

I can't believe that I am actually caught up on my blogs today. I did two. One early this morning and one now. Two excellent meetings. The meeting with the Chief was another inspiring one. I am just humbled by the talent of the people here in providing developmental solutions. The Chief's shop is one that should be looked at and replicated. It rained today (YEA!!) the farmers really needed that, even though it was short and late. But it kept me in town and we weren't able to get out to the farms. But I got out this second blog instead, and got to eat some local cuisine. Guinea Fowl in Groundnut Soup (tasted a bit like a peanut sauce that was spicy). Was also able to find some more research I couldn't locate in the states. (Google sometimes needs a little more detail and I got that detail here.) If you didn't catch blog Day 9, check the archive. It was a good one.

:-)

I added a driving through town scene. Motorbikes are very prevalent here in the north, especially here in Tamale.

Day 10- Tamale Ministry of Agriculture
We met with the Ministry of Agriculture in Tamale. We met with the Northern Regional Director of Ministry of Food and Agriculture. After we described the project he then brought in his entire team of employees. I took that as a good sign. We asked him first about the percentages of people who actually do farming for a living (i have heard and seen different percentages). He said it varies by region. Could be as high as 70 percent in northern regions, but as low as 40 percent in some southern regions.
We described our mission and potential rainfall insurance product to see if there was a need. He said that there is a huge need for such a product because the issue is that the farmers can’t enough capital to make significant improvements because agriculture is so risky. The banks and microfinancial institutions can't have too a large a part of their portfolio in agriculture (which we learned from info. in previous blogs). He thinks that a product that would help reduce the variability of loss would give them more incentive to provide loans to farmers.

At a small level he didn’t see a need for a rainfall insurance product. For those farmers the preferred risk management tool is crop diversification. However, some of the farmers that are growing mono crop cash crops (like rice) might be interested. They are usually more sophisticated. Might be rolled out to informal group of farmers. Might also be a need for farmers who have livestock.

There are informal “insurance” mechanisms. They gave an example of a project sponsored by (Millenium Development Authority) (MiDA) where they provided input and then the farmers agreed to contribute one bag of maize for every acre they have. This goes to a common fund to help pay for group members who suffer a loss.

They suggested other partners that might be interested such a product be Assoc. of Church Development Project and the Stambick(sp?) Bank (S.A. Bank). Maybe companies who rely on cocoa producers too?

Consequences of crop loss

This is a question we have posed to everyone. Here are his thoughts.
Depends on the severity what the consequences are:
Example:

Severe
· Girls runaway from home.
· Families pack up and travel.

Intermediate
· Will sell their labor to other farmers at below market rate.
· If all else fails the sell off animals in the following order, goods (chickens and guinea fowl), then goats, then sheep, then cattle. If you see farmers selling cattle for food it indicates that it is catastrophic for the farmer. (There is probably an economic index in their somewhere).

We presented two options of insurance. The Rainfall Insurance Product for more sophisticated buyer who understands the trigger and who it works. Then possibly a different product for small farmers (which I went into some detail to explain) and they thought that both sounded like they would be accepted in the market once.

We then met a group of Indian consultants from OLAM
OLAM Nigeria Lmtd.

They are looking to bring Rice production services to Ghana. They partner with banks, NGOs, and US AID. They won a U.N. World Bank Business Award. One of his concerns about Ghana is the lack of crop insurance. Unlike in Nigeria where they have crop insurance. The insurance is multirisk. It is for only registered coops in Nigeria. It is 5% premium. For $600 of inputs for rice the premium would be $30. But the farmer only pays 2% of the 5%. Or in this example $12. The state and federal pay the rest of the premium because they benefit from the farmers getting insurance.
The multiperil risk is rainfall (drought and flood), birds, pests, and disease. Although the general manager suggested that rainfall (drought or flood) is really the most important part of the product.

According to the Managing Director of OLAM, last year the insurance paid out $180,000 for 50,000 acres. This is the Nigerian Agricultural Insurance is part of Nigerian Government and was in conjunction with US AID. The payout this year was $220,000. Will have to check out what that is in terms of the premium they collected.

Meeting the Chief
Met with Nana (Chief) Yusif Abdulai. He is the Managing Director of the Northern Rural Development Bank an Association of Financial NGO’s. They do Microfinance ++. They have been around since 1997. The + includes education on financial literacy, health (HIV/AIDS,maternal health, Malaria,), technical crop assistance for farmers associations. They have 4500 men and women who have Susu accounts. They make loans strictly to women ranging from GHc100 ($75)to GHc 1000. Like most vendor loans we have seen, theirs are four month loans. This was the longest running and most well-organized of all that we have met so far. Really well designed and executed.
They loan to vendors, farm producers and processors, hair dressers,etc. Their process is to form solidarity groups into associations. Then they require education (financial literacy, record keeping, health, etc) of 6 weeks before they give the loan . This education helps the women succeed in their businesses and thus be more reliable creditors. All loans are given to an association of women. An association is comprised of 30 women with five solidarity groups. The way it works is that the solidarity group first guarantees the loans for each of its members and then if the group can’t pay all the loan, the association must step in to pay. (They do have a contingency in case there is an association default risk. They measure success not only in terms of repayment but also in terms of women who grow their business to the point that they can get a bank loan and then become a part of the formal financial sector.

One of the innovations that the Northern Rural Bank has undertaken is to provide a storage facility for farmers to store their crops immediately after harvest because the price they can get at harvest is very low in comparison (about Ghc18 for a bag of maize to a price of Ghc60 if they hold on to it for a few months.) They give the farmer an advance on their loan which represents the market rate at harvest time. (This would be all the many farmers would get). However by storing the grain until mid season when the prices go up more than four times they can just use that difference to pay off the loan. The Chief learned this from Boulder Microfinance Institute Workshop he attended in Italy.

They see a need for an insurance product for property loss (fire and theft) for their market vendors. It needs to be set up well, designed in terms they understand, and then provided with a great deal of education. We discussed what that might look like and he like the design.

The education that they provide is for financial literacy, health (malaria, diarrhea, HIV/AID).

However, they have one hugely value-added for their farmers, something we have heard before a need for (We heard that need expressed here at our meeting in Sunyani.) but until now, have not heard of a financial institution providing- That is weather information. They give weather information to farmers during their weekly meetings. This helps their farmers to plant at the right time. We heard that from several people one problem farmers have is that they don’t get the tv or radio weather forecasts. So they are planting based on previous timetables, which may not apply under current climatic conditions.

They have a history of working with volunteers and study abroad students.(Max of three at one time). The typical stint is for 2-3 weeks. The students stay with host families in Tamale.They then go out and do the training at the Susu meetings. He said that they can provide the content (although they do have materials from Microfinance Opportunities (a D.C. organization I visited a year ago) but they said the advantage the students have is that they draw a crowd and people listen. Given the topics that they would like to have covered it might be good to have a multidisciplinary mixed team of Agriculture,Nursing, and Business students even if they provide content for the training materials.

Here are some phrase words I have picked up that may help you navigate around:
Greeting in morning (da-si-ba) Response: n.naa
Afternoon greeting (n.tiray) Response n.naa
Evening greeting (annuwula) Response n.naa
How are you? (Kawula) Response Alaafay (or al-off-ee) I’m doing fine
Thank you (em-Poo-Hair)

Faithfully submitted,
Jim Jones
Director-Katie School of Insurance
Illinois State University

Day 9- Freelancing it in Tamale

Day 9 Overview
We are running a little ahead of schedule and so we did a little freelancing and met with people not on our itinerary. In doing so, we got some great additional insights and made some valuable contacts. Last night when we were debriefing in the restaurant (which is what we do each day), Horace pointed out that it was like the United Nations branch office here at Mariam. There was a table from from India, China, Denmark, U.K, and us (and one large group that was a combo of many countries. In overhearing the conversations they are talking about their research ideas on education, women’s empowerment, health care, or their investment ideas. Lots of people evidently see opportunities in Ghana.

Today we met with a microfinance institution, an NGO doing education in the rural villages, and the U.S-Ghana Millennium Development Authority here in Tamale.

I was glad to see a comment on one of the posts, related to farming techniques that might be able to be adopted here. I will ask the Ministry of Agriculture when we meet with them today, what techniques are being used.

Finally, to our great surprise, there is a consortium of three Ivy League Schools that have formed an NGO, and are reportedly offering rainfall insurance product to local farmers. When we first got to Tamale, I met a Danish woman who is working on her thesis, and she said she saw a group offering that. I thought for sure she was mistaken since none of the officials, including the insurance commissioner, knew about this. Evidently, they are offering this rainfall insurance policy as a “field experiment” and do the sales, underwriting, (and I presume claims) themselves. So it is not an official product yet. More about that later. Here is the Day 9 blog:

Day 9- Tamale –Freelancing It
MASLOC
Our first meeting was with MASLOC Microfinance and Loan Center. This is a government run operation that provides micro credit and small loans to groups and individuals. (They defined a micro credit loan as less than GHc1000 ($750) and a small loan as Ghc1100 to GHc2500. One of things that they do (which we have heard from other rural banks and is where the American NGO I mentioned in previous blog had erred) is to have flexible payment schedules for farmers, recognizing that farmers, unlike market vendors, get income at longer intervals. They have loans that can be extended up to two years. They have nineteen administrative districts. Over 65 percent of the people in the district are farmers. The interest rate for micro creditis only 10 percent. The small loan is offered at prime rate (currently 21.5%).
Mesloc provides loans for both groups and individuals. They didn’t really see a need for credit life insurance because if a person dies the other members pay. )Groups can be 5-25 individuals. Interestingly, with respect to individual loans they still don’t see a need because they require another person to act as guarantor. They actually underwrite the guarantor looking at bank statements, doing a background check, etc. (They did agree that in this arrangement there would be a need for life insurance for creditor from the guarantor’s perspective (who has an insurable interest in life of creditor).

The question that they asked us, which is ABSOLUTELY critical was who would be the policyholder for a rainfall insurance policy?

I explained that we had kicked this question around with everyone we met as we travelled through Ghana. We went through the customers such as Rural Banks, a group of microfinance centers (like themselves), best farmer association, APEX or ADB, perhaps processors for crops, maybe even companies like ADM or Nescafe whose suppliers may be affected by rainfall. They agreed, and said that they did not think that small, peasant farmers would be good customers of this product for several reasons. We had heard that sentiment expressed throughout Ghana as well.
Also, like everyone else we have met, they see a HUGE need for education and gave these ideas:
1. Best farming practices (I went through example of Peace Corps in Forikrom, and showed them photos and they thought that was exactly what was needed (they liked the photos of your gardens Greg!) They see a need for those demo farms to help farmers mitigate their risks throught crop diversification. The Ghana Ag extension office doesn’t have the resources to go out and do all the training so they see need for that kind of training.
2. Financial literacy and insurance education. Insurance concepts are not known or understood. (They suggested radio ads during prime time when farmers are listening as one means for education)
3. Training of the trainers. (So they would be very interested in having ISU students act as trainers on bookkeeping, basic insurance principles, etc.)
So in short they strongly support the initiative of rainfall insurance product, to the appropriate customers. See photo of team members.

IBIS
Because of the need for education in the villages we decided to stop and talk with a local company well-respected for it’s education of people in villages, especially those who are illiterate. IBIS is a Danish NGO focusing on educating poor people, especially children, on literacy, empowerment of women. We met with Zakaria their executive director. I asked him what the consequences were when there was a crop failure. He gave an example of 2007 where the rains came very late. There was drought when the farmers first planted, then some farmers planted again, and still lost all their crops. For those who planted a third time, they got flooded out. So the whole year was shot. This led to families to not eat well, and to not sending kids to junior high and high school. Here are costs that they must pay:
1. Costs for transportation (most rural villagers do not live near junior highs and must pay for transportation, plus something for lunch since they kept come home to eat,
2. PTA fees,
3. Girls’s hygiene products,
4. Uniform costs (All students wear uniforms).
5. The other big cost is opportunity cost of losing labor. There are some jobs that are seen as only jobs for kids. ((i.e a 45 year old man is more likely to enroll a son or daughter to shepherd cows and goats, than to do it himself. And this keeps them out of school.

One of the concerns is moral hazard. He thinks (as others have) that payments need to be made in kind not cash. We went through an extensive discussion on how one might have insurance for something like school fees in the event of a crop failure and how that product might be designed and rolled out. (like having conditions of child attending school regularly). We need to take a look at results of an effort done by Catholic Relief Services. They paid families to keep girls in school. And based benefit in-kind (food) on the girls attendance record . So a farmer’s allotment of funds was based on kid’s attendance. He thought that was successful. Maybe something like this could be developed for micoinsurance.

The big question was asked, “Could farmers afford to pay an insurance premium?”. The answer was yes, if they saw the value and the payment could be made in crops, not cash. He gave an example of sharing that currently occurs. If one farmer, in good standing, suffers a loss the rest contribute. BUT they don’t contribute money for school fees. Another example is that a village contributes to a local teacher by making contribution to a local teacher.

One issue they we asked about was cost of funerals in the north. He said that a lot of farmers defer funerals until they get to harvest. We had heard that the guests make a contribtion. Turns out the contribution is only about Ghc1, which doesn’t cover cost of funeral. (Example have to feed and lodge out of town relatives in town for funeral). Most funerals up north are attended by 100 people.

In short there is a huge communal spirit. So this could be a good foundation for teaching of insurance.
How to teach insurance
He did say education needs to be 1) pictorial (because of illiteracy), 2) must have active participation of student and 3) based on concepts they already know, like sharing of losses currently done in villages. The change might be getting them to think of contributing to shared group before a loss rather than after a loss.

Millennium Development Authority.

While we were visiting with IBIS , we saw a sign for Millennium Development Authority (Part of US AID). I remember from a meeting with Ed Mason a couple of years ago, with US AID, that they awarded grants through in-country operations. So that became another stop. Good thing too as it is true that the local authority is the one that gives thumbs up or down. So it was nice to talk with them too. So I talked with them about the rainfall insurance product for banks and microfinance institutions, and possibility of a crop risk sharing program for small farmers. They thought this was a GREAT idea. They called up a local agricultural director who we met with and he agreed. We will be meeting with Ministry of Agriculture in the morning.

They like the idea and they also work with the rural banks on their projects. They reiterated something that I have heard from several different sources. – This only succeeds if there is education. I gave him examples of how it could be rolled out (which was based on previous information received from those working directly with farmers) and they liked it and seemed to think it could work. They said that one issue that is different than the traditional for of group retention, is that with pure insurance, you pay money and only those with a loss get anything.

This IS VERY foreign concept, and would be met with mistrust. So I proposed another model and that woud be a hybrid product (with more details than I want to cover in a blog) and they liked that.
They gave us great contacts on another person, an Indian businessman, who does hedging on market pricing fluctuations of crops.

Rainfall Insurance Mystery Company
We then learned of another organization who is supposedly offering a rainfall insurance product to small farmers. Nobody had many details. But that they have an office in town. Turns out that it is an American NGO that was formed by a consortium of three Ivy League universities. They have an office here and in Accra. We found that they too have set up a blog except unlike this blog there is not a way to post a comment or email the researchers in charge. But evidently the product is based on rainfall from a product developed in Mali. They are evidently running the company as a field experiment. Selling, underwriting, and (hopefully) paying claims.

If you have been following this blog and the comments made from previous contacts you would probably offer the following questions:

• 
  How do explain rainfall insurance (with it’s inherent basis risk) to illiterate farmers who don't understand basic insurance principles ? (I think I have worked through in my head how to present insurance or at least risk retention groups pictorially but rainfall insurance would be challenging. I am interested in seeing how that was accomplished.
• 
  I like the idea of doing some simulations (especially with larger sophisticated buyers) and a pilot product, but explaining that something is a field experiment and not an actual product, would also be challenging and I am eager to see how that was accomplished.
  I think that it is great that there are other organizations interested in a financial solution to this vexing problem, as it is really important to the country.
• What are the unintended consequences of starting with such a product? Could you kick the underinsured when they are down? Do they get the wrong impression of insurance overall if this is their first experience and it doesn't pay out?

There are a number of academic papers on rainfall insurance. Pros and cons. I just read one while surfing here at the Kalong, entitled Rainfall insurance and vulnerability: Economic Principles and Cautionary Notes by Jonathan Morduch at New York University.

http://www.nyu.edu/projects/morduch/documents/rainfall%20insurance.PDF

I liked it as a summary overview in practitioner language stating some of the challenges and unintended consequences. My personal view at this point( is that it potentially good for sophisticated buyers like banks, but I am skeptical of the roll out at the rural farmer level. )

Tomorrow we will meet with the Ministry of Agriculture and Ag extension services in the Northern region.

Faithfully submitted,
Jim Jones
Director- Katie School of Insurance
Illinois State University

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