Microfinance and Microlending Sector in Ghana: Godwin Binlinla Presents WBI Micro-Credit Services

Interview with Godwin Binlinla, Founder and CEO of WBI Micro-Credit Services

What is your assessment of the microfinance and microlending sector in Ghana? What are the latest trends? What is the competitive environment?

Currently, even the general banking sector is encountering some challenges. With microfinance or micro-credit being close to those institutions, certainly it will also have some negative impact on us. However, there is a distinct difference between microfinance and micro-crediting which sometimes in our sector people find difficult to understand. Microfinance institutions in Ghana, or savings and loans, according to regulators, are permitted to take deposits, but micro-crediting institutions are not supposed to take deposits or funds from the public. But sometimes, people tend to miss the truth and think that microfinance and micro-crediting are the same. Microfinance and micro-credit are two different entities. The banking sector used to have something we call cheap deposit, but it has not existed as of late. The banking sector is not getting the required figures they need, so automatically it has affected the microfinance institutions. In Ghana now, we are finding it difficult for microfinances to run as vibrantly as they used to because they depend solely on the money taken from the public. But with micro-crediting, it is more like a pure entrepreneurial start up business. In micro-crediting, when you focus on just the investment portfolio, just increasing your numbers, just having huge volume, it is difficult to survive. It is a business that you need to grow. That is why taking investment from the public or deposits were not permitted. For example, now, we are doing assessments but not giving loans which is likely to create some challenges or problems for us. But, if you are running your system like we are, because of the challenges that the banking sector is currently facing, it is a good time for us to strike. People are not able to assess loans because of the rate and all the other things that the banks are not comfortable giving. And when you do go to the bank, you have to go through a series of procedures and acquiring even 500 cedis sometimes takes weeks or a month. This is the time for micro-credit, but it is a business that you need to build up. If you do not have what it takes to come into the sector or if you come in focusing on other means to raise funds, because of the default rate you are raising and you are giving which means you are doing two things at the same time and if you do not have the ability to manage it, you are likely to encounter a challenge. Often, people are not able to distinguish between investment and deposit. People put money into a micro-credit institution and even though it is not permitted, you end up finding yourself in that sector. It is difficult for you to grow because the so-called investment you might have taken from a person, they consider a deposit, then if they have a problem, they want to withdraw it. It is a business that you need to be able to grow in, but unfortunately, in our sector, the majority of the people come in with just the profit rate. This is where you give a good rate, but they do not necessarily look at the sustainability of it.

What are your competitive advantages? You are not the only micro-credit company in Ghana. What do you offer that is different from the others?

Our rate is between 5 to 7%, which in comparison, sometimes you see people giving 13, 14, 15%. The client is very appreciative because that aspect also has a lot of impact.

It is one of the areas that people normally did not take notice of until the banks were not willing to extend loans. We realized that the microfinances deal with small businesses. That is where they go to get their funds. But the small businesses are not in offices or the big areas, they are outside striving to make a living. In order to reach out to them, to even seek the deposit fund by them by the microfinances, you need to recruit people that will visit them from day to day. One of the things I realized was that the people that were being sent to the field to do this work were relegated. They were not given much attention. People in offices can be paid as much as 10 times what the person walking in sand, sweating, is. So, in order to be a unique entity when it comes to micro-crediting, I set up a unique system. We believe that money is not in offices, it is outside. If people are going outside, you have to make sure that you value them as much as the people sitting at a PC, that you give them the necessary tools, that you make transportation easier for them. We give special attention to our workforce, ensuring that people are being paid purely on their productivity instead of paying people based on their academic background. Sometimes the money that people received had not correlated to their productivity. I tried to match productivity against remuneration. If someone with a secondary school education performs more than a first-degree person, and the first-degree person gets paid twice as much, it indirectly discourages the first person. If they have the necessary ability to equally match up with the employee holding the degree, why are they not paid equally or more? I pay attention to my workers’ health. Here, when workers are sick, they go to the hospital, two of their children go to the hospital or their wife goes to the hospital, the company pays. We give them motorbikes to facilitate their field transportation which are fueled every week. These basic things are actually working. My competitors do not do this. They also do not give much attention to such workers. Because of that, the attrition rate in this job is high. People are employed and then they are gone. Some of them are in the process of giving loans or have given loans. If they resign, because they were dealing with their clients directly, you automatically end up having challenges in recovering that money. Here, we hardly encounter that because workers are being treated very well. Here, the offices are very quiet. The CEO and administration may step out, even my deputy is heading out for an interview right now. We have come to understand that money is not just in the offices or on papers, it is outside. For that reason, we must give the people that go outside the necessary premium, attention, and empower them to have that willingness to go there without necessarily thinking about going to an office to sit idle and wait for results that will never come. That is an area in which we have done very well. Currently, we have a total workforce of 118. Within a year, we rarely see even two of our employees resigning voluntarily. If we are not satisfied with your work, we will inquire and then let you go because we have set a standard that is very competitive. That makes us stand out against others. It also even compels our recovery rate to be as strong as it is because workers are given special attention, we empower them, they are well paid, everything has been done even better than what the government tells us to do and that makes us unique. It was a major challenge when it comes to the micro-crediting because other companies employ people and they see them as a non-entity that just goes outside and gets clients. Giving these people necessary attention has played to our advantage.

Why should clients come to you? What do you offer?

When we came here, naturally, I started the business not necessarily on the side of money. I worked in Korle Bu for 10 years but I am a statistician by profession. While I was there, I would see people requesting loans and they would not get them. It got to where I decided if someone wants a loan, why don’t I rescue them? I was able to save my salary. When a colleague needed something, instead of going through banks, I loaned money to them with interest and it was very good for them. That was how the business ended up starting and finally, I had to resign to focus fully on it. When we started, the majority of the micro-crediting institutions were working on either a daily or weekly basis. For example, if I give a 1,000 Ghana cedi loan to you, you have to pay the money with interest on a daily or at maximum weekly basis. This was a challenge, especially for women. If you take a loan for 1,000 and go to buy tomatoes, sell early, and make a weekly profit of 1,001, instead of reinvesting the money, you have to start repaying. One thing I quickly did was to give them some kind of freedom to pay at least on a monthly basis so the person would be able to utilize their money and at the end of the month it would not be a challenge to repay. A lot of our competitors have a problem on that side because if you wait for the end of the month, the defaulting rate would be too high. So, they would rather compel them to pay daily or weekly. I gave a monthly rate to give them time and also to educate them to reinvest their money. If you go to market today and you make profit today, reinvest it. After reinvesting it five or six times, paying the principal and even some of the interest at the end of the month will be easy. When I came in, apart from the banking sector which was giving loans paid on a monthly basis or the microfinance paid on a monthly basis, with micro-credit, if a person took out 1,000, every day they paid 50 or 60 cedis, 300 on a weekly basis. That was what I studied and I realized I needed to extend to a monthly basis. That makes us unique. It can happen that a person has taken out the loan and over the whole week nothing good has happened, but they still have to pay. Automatically, their ability to pay all or even pay the interest becomes a problem. But we came in and realized that the market women were happy with us because they take their money and they have the whole month. The tomato seller can go to the market with their money until the 24th and she does not need to worry. In the other arena, every day, officers are on your back. We also look at the interest rate. For example, people were given very exorbitant interest rates. I once went to a place where people were given as high as 30% interest rate per month which would never be feasible. The challenge some people did not look at was, for example, if you were given 100 cedis at 40% interest, they will pay. When the person takes those cedis, they can go to the roadside and buy a grass cutter and take it to market and sell it for 150 cedis. Even if you ask him to pay 30%, it is 30 cedis and he will use the money for four weeks. We disperse 2.8 to 3 million a month. There is no way you can survive.

How much is your rate?

Our rate is between 5 to 7%, which in comparison, sometimes you see people giving 13, 14, 15%. The client is very appreciative because that aspect also has a lot of impact. For example, if you go to a bank for a loan, before they even start giving the rate, it has to be high, which sometimes you cannot blame them for. No matter what rate you give, the client will take it, but can they really pay you back?

What is the impact of your operation towards the small companies, traders, businesses and families?

We do a lot of social interventions. We do not just take the profit and run. From January to date, we have spent almost 140,000 Ghana cedis on social intervention such as renovating police stations, giving to the needy, sponsoring education, etc. Based on the policies that we put in place, it cushions the client. That is why we still have a very strong recovery rate. In a situation where the clients are not doing well, paying you becomes a problem. That is why the majority of micro-credit institutions are collapsing or barely surviving. No matter the interest rate you give, people will take it, but the question is will it be to their benefit and if they fail, you automatically also fail. Every month from the 24th when we start our recovery to the 30th that we are processing to disperse for the month, within that 6 to 7 days, we do 90% recovery. Then, the remaining 10% are those that will battle from that period to the 1st. Today, we still have such a high recovery rate. That tells you that our clients are doing very well. There are still instances where you have a few challenges. People will give money to people that the normal banking sector or the financial institutions would not be willing to give money to because even their ability to pay would be questioned which we do not do. We take that risk and go down to their level. For example, somebody who is just selling something less than 50 cedis and gets a 1,000 loan today, it enables them. Sometimes in the process, some clients come one or two times and they do not come in again, meaning that having been with us for a while, they have been able to make some difference, and for that reason they are not interested in the loan anymore. Based on the performance we have had so far and our experience and our relationship with the client, we have seen that indirectly, we are making a lot of impact on them which they themselves attest to and it manifests in our recovery rate.

What do you want to achieve in the medium term, two to three years’ time? What is your vision?

Our core values are passion, integrity, sincerity, and leadership. We try as much as we can. A business that ends on the founder is a failed business. Within three years of operating officially, we were able to put up this edifice as our head office to show that we seriously mean business. At that time, our employee rate was around 70 and currently we are around 118. We just recruited two people today. This tells you the kind of impact we are making. We want to make sure that we put up systems that go beyond us. The office we are interviewing in now is an office I have to leave. We put up this facility to tell the future of the business. We are not just focusing on what we achieve today. For example, creating jobs is one of the areas that the government has not looked in to. Ours is an area that has a lot of avenues to generate employment. My team is very young. On average, my workers range between 20 to 26. It tells you the caliber of people we are using. As a leader, all that I am doing is developing a system that will carry the business beyond our generation. For that reason, we are not looking at immediate gains. At WBI Micro-Credit Services, we have what you call a founder, we do not have an owner. For every employee, as soon as we hand you an appointment letter, you are the owner of the company. I do not own the business, I founded the business. Every employee is the owner of the business. Because of that, we allow creativity, we allow input, and I give every worker here opportunity to deliver without hindrances. We have been able to bring people here and develop them. You can see that the future is very bright.

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