Microcredit management in Ghana: development of co-operative credit
unions among the Dagaaba
Gheneti, Y.
Citation
Gheneti, Y. (2007, June 27). Microcredit management in Ghana: development of co-operative
credit unions among the Dagaaba. Leiden Ethnosystems and Development Programme(LEAD), Department of Cultural Anthropology and Development Sociology, Faculty of Social
Sciences, Leiden University. Retrieved from https://hdl.handle.net/1887/12295
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MICROCREDIT MANAGEMENT IN GHANA:
Development of Co-operative Credit Unions among the
Dagaaba
Proefschrift
ter verkrijging van
de graad van Doctor aan de Universiteit Leiden,
op gezag van de Rector Magnificus prof.mr. P.F. van der Heijden, volgens besluit van het College voor Promoties
te verdedigen op woensdag 27 juni 2007 klokke 13.45 uur
door Yeshanew Gheneti geboren te Naqamte, Ethiopië
Promotiecommissie:
Promotor: Prof. Dr. L.J. Slikkerveer Referent: Dr. P.J.J. Konings Overige Leden: Prof. Dr. P.L. Geschiere Prof. Dr. R.M.A. Bedaux
Dr. T. Ta’a (Addis Ababa University)
This study was made possible thanks to the financial support from The Netherlands Foundation for the Advancement of Tropical Research (WOTRO).
MICROCREDIT MANAGEMENT IN GHANA:
Development of Co-operative Credit Unions among the Dagaaba
Yeshanew Gheneti
Faculty of Social Sciences
Department of Cultural Anthropology and Development Sociology
Leiden Ethnosystems and Development Programme (LEAD)
Leiden University, Leiden, The Netherlands
‘T h e I n t e r n a t i o n a l Y e a r o f M i c r o c r e d i t 2 0 0 5 u n d e r s c o r e s t h e i m p o r t a n c e o f m i c r o f i n a n c e a s a n i n t e g r a l p a r t o f o u r c o l l e c t i v e e f f o r t t o m e e t t h e M i l l e n n i u m D e v e l o p m e n t G o a l s . S u s t a i n a b l e a c c e s s t o m i c r o f i n a n c e h e l p s a l l e v i a t e p o v e r t y b y g e n e r a t i n g i n c o m e , c r e a t i n g j o b s , a l l o w i n g c h i l d r e n t o g o t o s c h o o l , e n a b l i n g f a m i l i e s t o o b t a i n h e a l t h c a r e , a n d e m p o w e r i n g p e o p l e t o m a k e t h e c h o i c e s t h a t b e s t s e r v e t h e i r n e e d s .’
K o f i A n n a n ,
S e c r e t a r y - G e n e r a l U n i t e d N a t i o n s N e w Y o r k , 2 9 D e c e m b e r 2 0 0 3 .
C o v e r p h o t o : O f f i c e p r e m i s e s o f t h e J i r a p a C o - o p e r a t i v e C r e d i t U n i o n , t h e f i r s t C r e d i t U n i o n i n G h a n a , a n d t w o f e m a l e B o a r d M e m b e r s d i s c u s s i n g m i c r o c r e d i t s e r v i c e s .
P r i n t e d b y C . D . P . , L e i d e n U n i v e r s i t y , L e i d e n , T h e N e t h e r l a n d s C o p y r i g h t © Y . G h e n e t i , 2 0 0 7 .
A l l r i g h t s r e s e r v e d . N o p a r t o f t h i s b o o k m a y b e r e p r o d u c e d i n a n y f o r m o r b y a n y m e a n s f o r w h a t e v e r r e a s o n s w i t h o u t p r i o r w r i t t e n p e r m i s s i o n f r o m t h e a u t h o r / c o p y r i g h t o w n e r e x c e p t i n t h e c a s e o f b r i e f q u o t a t i o n s e m b o d i e d i n c r i t i c a l a r t i c l e s a n d r e v i e w s.
Preface
Co-operative credit unions are one of the best-known and earliest forms of local institutions in Africa specialized in providing financial services to poor and low-income households. Already in the 1950s, the co-operative savings and credit union movement started operating in the rural parts of Northern Ghana, after which it gradually spread to other West African countries in the decades that followed. Credit unions have since expanded in number and size and today they can be found in almost all Sub-Saharan African countries.
Unlike commercial financial institutions, co-operative credit unions have easily been able to integrate themselves into the local socio-economic life and won the trust and sympathy of the local communities in many parts of Africa. In most cases, credit unions have been relatively effective in mobilizing local savings from members and using these resources to provide credit to members for a range of socio-economic purposes. Credit unions have thus contributed to economic progress, encompassing diverse sectors such as agriculture, petty trading, and cottage industries, and to an improvement in local social infrastructure, such as health and education. Especially in rural areas where conventional financial institutions are taking a long time to break through, co-operative savings and credit unions have been seen as effective institutions to promote local development and empower local communities.
In the last few years the important role of microfinance in the development process has steadily been gaining global recognition. In celebrating 2005 as the International Year of Microcredit, the United Nations has recently drawn a remarkable attention to the crucial relevance of access to financial services, notably credit and savings, for achieving the Millennium Development Goals (MDGs) as well as to the crucial importance of the presence of sustainable microfinance institutions that can provide these financial services on a continuing basis. Credit Unions can play a more effective role in achieving desired development goals when they have an appropriate institutional structure and management that fits into the specific local socio-economic and cultural environment. Moreover the ability of microfinance institutions to integrate locally available as well as newly acquired skills and know-how into their organizational management, promotes not only the outreach and effective mobilization of savings, but also extends its credit access to a larger part of the community.
This study with its focus on the development and management of local co-operative savings and credit unions has been inspired by the researcher's own rural family background which was characterized by its close ties with local co-operatives activities. It further builds on years of engagement with the broad field of development studies and practical working experience with local institutions and organisations in East and West Africa. The integrated management approach to local development which provides the basic theoretical framework for this study, has grown out of participation in the series of Sub-Saharan Africa seminars, and research on indigenous knowledge and development in Africa carried out under the auspices of LEAD-programme. This approach was further refined not only during subsequent field surveys but also through extended discussions with students of Anthropology and Development Sociology at the Leiden University during the researcher’s annual lectures on “Local Institutions and Sustainable Development in Sub-Saharan Africa”.
Acknowledgements
An interdisciplinary and community-based study such as this one would not have been possible without the assistance, close co-operation and participation of numerous community members, development and academic institutions, scholars and colleagues, friends and family members to whom I am highly indebted and would like to extend my sincere and heartfelt gratitude.
To begin with, I am very thankful to the Department of Cultural Anthropology and Development Sociology, Faculty of Social Sciences, Leiden University which accepted my research proposal. My gratitude goes as well to NWO/WOTRO which funded the initial phase of this research and the CNWS, which provided the necessary infrastructure.
Without the help of these institutions it would not have been possible to start this research program. The Leiden Ethnosystems And Development (LEAD) program gave me an opportunity to be systematically acquainted with Indigenous Knowledge – often abbreviated as IK - methods and approaches. As a LEAD member I benefited from the continuous discussions with colleagues and from access to research documents. Hence, my thanks goes to all the members of the LEAD program.
In Ghana, I benefited from the collaboration and co-operation with the University of Ghana and its Africa Study Center. I had full access to reference libraries and had the opportunity to have regular discussions with Ghanaian scholars, especially with Professor Songsore, Professor K. Ninsin and Dr. K. Arhin, and many others. I extend my thanks to all of them for the valuable and constructive exchanges and comments.
Both the Department of Co-operatives and Credit Union Association (CUA) in Accra gave me access to their archives and an open environment to learn more about successes and constraints of the co-operative movement in Ghana. I would like to extend my sincere thanks to these organizations and their staff members. A special word of appreciation goes to Mr. Zatho, the former General Manager of CUA, and Mr. James Dasah, the former Chairman of CUA who facilitated and supported my travels and visits to the Upper West Regional Chapter and the primary societies.
The CUA Chapter office in Wa has fully co-operated with my research work and gave me all the necessary support to reach the respective credit unions. I had the privilege to work in their Office and refer to organizational documents, for which I am highly indebted to all the employees. In particular, my thanks go to Mr. Romanus Ayel, the former Field Officer of the Chapter office, who helped me to find my way around the Upper West Region and organized meetings with respective credit unions. I also would like to extend my thanks to his entire family, who considered me as part of their family and always cared for me. I really enjoyed having family meals with them, their hospitality, social affection and jokes. I would also like to extend my thanks to the staff of the Upper West Regional and District Co-operative Offices who have been friendly and supportive, with special thanks to Mr. Somiah, the Regional Co-operative Officer and Mr. Kamo, District Co-operative Worker.
In Jirapa, the entire staff of the credit union gave me their full support and co- operation. I was always welcome to work with them and stay at their guest house, observe the credit union’s day-to-day activities and participate in their meetings. I am really thankful to all of them, but would particularly like to mention the former Manager
Mr. Henry, the Treasurer Ms. Diana and the late Mr. Hippo. Further more, I would like to pay tribute to the well-recognized and respected local Elders, the late Mr. Maurice and Mr.
Gandi, who shared with me their broad and deep knowledge of the history and culture of the Dagaaba and the development of local credit unions. I owe them a great debt. May they rest in peace. My thanks further go to Mr. Michel, a local school teacher and key informant, who from the beginning up until the end of the field studies provided me with critical and substantial inputs on the Dagaaba people, their culture and their credit unions. In Nandom, Ko and Hamile, I was fully supported by the credit union staff and members. My special thanks go to Ms. Akolema, Ms. Merry, Ms. Ernestina, and Mr.
Waka, the Chairman of the Upper West Regional Chapter of the CUA. I have also benefited enormously from the constant meetings and discussions I had with Mr.
Dongiyiri.
My brothers Abbaa Seena and Abbaa Dalacha my sisters Borino, Haadha Yaadata, Mekelit and Mihret and all my Oromo friends continuously encouraged and motivated me to carry forward my studies and contribute to the development of communities in Africa.
To them, I would like to say “fayyaa ta’aa”. Numerous other friends have in one way or another encouraged and supported me. Though I cannot list all of them, I would like to mention a few of them here: Alfreda, Marcia, Marjolein, Marie-Jose, Judith, Peter, Diana, Heleen, Haile, Ernest, Job, Joost, Liesbeth, Adano, Mwasi, Musuto, Mwangi, Gchiah. I owe a special word of thanks to the Minderbroeders Jonas in Arnhem, a Franciscan Religious Community, with whom I lived and who always surrounded me with care and concern for my development, social and moral wellbeing. My special thanks also goes to Mrs. Rosemary, who helped me with language editing and provided valuable feedback and advice.
Last, but very far from least, I would like to mention my beloved family members Henriette, Leensa, Banti and Marta, who have always been a source of inspiration and energy. Without their understanding and full support, I would not have been able to come this far and complete this study.
This thesis is dedicated to the memory of my late Parents, Ganati Gamada and Ćaaltu Guutaa, who taught me to stand up for what was just and to my children Banti and Leensa, who have always been the source of inspiration and strength while writing this thesis.
Microcredit Management in Ghana:
Abstract
"This thesis focuses on the historical development, the organizational management and the role of credit unions among the Dagaaba in the Upper West Region of Ghana. Co-operative credit unions are well-established financial institutions, with a capacity to mobilize local savings and provide microcredit services to which poor and the low-income people can get access. This study analyses the main factors, namely the local socio-economic dynamics and institutions, and external influences, notably from the Roman Catholic Mission, the Government and NGOs, all of which contributed to laying a foundation for the establishment of the first credit union in Jirapa in 1955 and the subsequent extension to other parts of Ghana. The study also reveals that, through decades of constant interactions between various local and external stakeholders, credit unions have developed an integrated management system which forms a synergy of diverse organizational procedures and practices which also incorporates the local organizational knowledge. This integrated management system has undoubtedly facilitated the active participation of members in the credit unions and also has contributed to the resolution of such recurrent credit union problems as loan delinquency. At an individual level, access to savings and micro-credit facilities has improved the socio-economic conditions of most of the members to a certain extent and more generally credit unions have also contributed to local community development."
xi
Contents
Preface v
Acknowledgements vi
List of Maps xvi
List of Figures xvi
List of Tables xvi
Chapter I Introduction
11.1 Background 1
1.1.1 Savings and Credit Unions 1
1.1.2 Organizational Management 4
1.2 Focus of the Study 8
1.2.1 General Aim 9
1.2.2 Specific Objectives 10
1.2.3 Research Questions 11
1.2.4 Expected Implications for Local Institutions 12
1.3 Study Area and Methodology 13
1.3.1 Study Area 13
1.3.2 Research Strategy 14
1.4 Structure of the Book 14
Notes 17
Chapter II Theoretical Framework
19 2.1 Development of Co-operatives and Credit Unions 19 2.1.1 Co-operative Credit Unions and Rural Development 23 2.1.2 Organizational Structure and Management 28 2.1.3 Socio-Cultural Dimensions of Management 35 2.2 Indigenous Knowledge Systems and Local Institutions 372.2.1 Globalisation and Localisation 42
2.2.2 Process of Development Intervention 44 2.2.3 Local Organizational Knowledge and Management 48 2.2.4 Local Organizational Knowledge and Credit Unions 49 2.3 Credit Unions and Sustainable Development 54 2.3.1 Credit Unions and Development Agencies 55 2.3.2 Hybridisation of Credit Unions’ Management 55 2.3.3 Bottom-up Approach, Participation and Empowerment 56 2.3.4 Credit Unions, Self-Reliance and Sustainable Development 58 2.4 Analytical Structure and Research Methods 59
2.4.1 Conceptual Model of the Study 59
2.4.2 Research Methods and Data Collection 62 2.4.3 Methodological Challenges and Constraints 65
Notes 68
xii
Chapter III Development and Local Institutions in Ghana
71 3.1 Ghana's Pre-Independence Development Process 713.1.1 Pre-Colonial Period 72
3.1.2 Colonial Rule 73
3.2 Independence and the Post-Colonial State 75 3.2.1 Independence and the Formation of the Republic of Ghana 75 3.2.2 After the Fall of the Nkrumah Government 76 3.3 Development Policy, Decentralisation and Local Institutions 78 3.3.1 PNDC and the Structural Adjustment Programmes 79 3.3.2 NDC and the Extension of Decentralisation 80 3.3.3 District Assemblies and Local Institutions 82
Notes 85
Chapter IV National Co-operative Movement in Ghana
87 4.1 Co-operatives in Pre-Colonial Ghana 874.1.1 Indigenous Forms of Co-operatives 87
4.1.2 Indigenous Co-operatives and Mutual Help Organizations 88 4.2 Co-operatives during The Colonial Period 88
4.2.1 Co-operatives under Colonial Rule 88
4.2.2 Continuity of Local Co-operatives 89
4.2.3 Co-operative Ordinance and Policies 89 4. 3 Co-operatives and Related Policies after Independence 90 4.3.1 Challenges Faced By Co-operatives in Reaching the Poor 91
4.3.2 Co-operative Societies Decree 92
4.3.3 The Current State of Ghanaian Co-operatives 92 4.4 Co-operatives and the Emergence of Credit Unions 93 4.4.1 Registration of CUA by the Department of Co-operatives 93 4.4.2 Interactions and Developments within Local Co-operatives 93
Notes 95
Chapter V The Co-operative Credit Unions’ Association (CUA)
97 5.1 Co-operatives and Local Financial Intermediaries in Ghana 97 5.1.1 Susu-Societies and Private Money Lenders 98 5.1.2 Ghanaian Thrift and Loan Societies 99 5.2 Development of Co-operative Credit Unions in Ghana 995.2.1 Rural Community-Based Credit Unions 100
5.2.2 The Lesotho Conference of Apex Credit Union Organizations 100 5.2.3 The Tamale Meeting and the Formation of CUA 101 5.3 CUA’s Management and Governance Structure 102 5.3.1 The Management of Co-operative Credit Unions’ Association 102 5.3.2 The Biennial Meetings of Co-operative Credit Unions’ Association 102 5.3.3 The Governing Body of Co-operative Credit Unions’ Association 104 5.3.4 The General Manager of Co-operative Credit Unions Association 105 5.4 Development Planning and Policy of CUA 109 5.4.1 The CUA Development Plan (1993–1997) 109
xiii
5.4.2 The CUA Corporate Plan (1995–1998) 111
5.5 The Role of CUA in the Credit Union Movement 111
5.5.1 Co-ordination and Provision of Services 111 5.5.2 Maintenance of External Relations 112 5.6 The Current State of CUA 112
5.6.1 Continuity and Change of CUA 113 5.6.2 Recent Challenges to CUA 113
5.6.3 Towards Transformation and Self-Sufficiency 114 Notes 116
Chapter VI The Dagaaba Community of Ghana
1196.1
Overview of the People and their Culture 1196.1.1 Dagaaba Homeland 120
6.1.2 Local Rituals and Customs 121
6.1.3 Agriculture and Land Tenure System 122
6.2 Origin, Settlement and Social Structures 123 6.2.1 Historical Process of Settlement 123 6.2.2 The Separation from the Dagomba State 124
6.3 The Road to Socio-Economic Development 128 6.3.1 Colonial Policy and “Underdevelopment” 129 6.3.2 Post-Colonial Rural Development Policies 130 6.3.3 Local Institutions and Financial Intermediaries 132 6.3.4 Continuity and Change in Community Development 133
Notes 135
Chapter VII
Local Institutions of the Dagaaba
137 7.1 Pre-Colonial Institutions and Processes 1377.1.1 Tendaama, Chiefs and Elders 138
7.1.2 Importance of Yir and Teng 140
7.1.3 Institutions and Decision-Making Systems 142 7.2 Institutional Changes under Colonial Rule 143 7.2.1 Under British Direct Rule 144 7.2.2 Migration of Local Labourers 144
7.2.3 Indirect British Rule and the Decline of the Tendaama 146 7.3 External Influences: The Roman Catholic Mission 148 7.3.1 Provision of Health Care and Education Services 149
7.3.2 Promotion of Co-operative Credit Unions 150
7.4 Post-Colonial State and Local Institutions 150
7.4.1 Changing Status of Chiefs 151
7.4.2 Government Policies towards Local Institutions 153 7.5 Decentralisation, District Councils and Local Co-operatives 154 Notes 158
Chapter VIII Co-operative Credit Unions among the Dagaaba
159 8.1 Early Development of Credit Unions in the Dagaaba Area 159 8.1.1 Socio-Economic Development and the Cowry Currency 160 8.1.2 Monetary Economy and Local Financial Services 161 8.2 Traditional and Modern Financial Institutions 162 8.2.1 Customary Ways of Saving and Lending Money 163xiv
8.2.2 Conventional Financial Institutions and their Limitations 167 8.3 Establishment and Extension of Credit Unions 168 8.3.1 Co-operation and Support from the Catholic Missionaries 170 8.3.2 Objectives of the Dagaaba Credit Unions 171 8.3.3 Various Stages in the Formation of the Credit Unions 172 8.4 Development and Expansion of the Credit Union 176 8.4.1 The Establishment of Pioneer Credit Unions 176 8.4.2 Credit Unions Popularity and Development 177 8.4.3 Factors that Contributed to the Growth of Credit Unions 178 8.5 Credit Union Setbacks and Counter-Measures 180
8.5.1 Liquidity and Management Problems 181
8.5.2 Practical Measures Undertaken to Resolve Problems 186 8.6 Transformations and the Rise of New Forms of Credit Unions 188 8.6.1 Continuity and Change among the Dagaaba Credit Unions 188
8.6.2 Analysis of Selected Credit Unions 189
Notes 198
Chapter IX Credit Union’s Organization and Management
199 9.1 Organizational Structure and Responsibilities 1999.1.1 Membership and the General Meetings 200
9.1.2 Board of Directors and Committees 202
9.2 Office of the Credit Unions and their Functions 204 9.2.1 Relationship between Managers and Committees 205 9.2.2 Interactions between Committees and Members 205 9.3 Policy, Planning and Decision-Making Processes 207 9.3.1 Bye-Laws as a Guideline for Policy and Planning 208 9.3.2 The Credit Unions’ Code of Ethics 210 9.3.3 Directives and Services Rendered by CUA 211 9.4 Challenges and Constraints of Credit Unions 212 9.4.1 Methods used to Resolve the Credit Union Problems 213 9.4.2 Use of Local Organizational Knowledge in Management 216 9.5 Changes and Continuity in Credit Union Management 219
9.5.1 Group Membership of Credit Unions 219
9.5.2 Common-Bond and Open Membership 221
9.5.3 From Voluntary Management to Professional Employment 221 9.5.4 Shifts from a Three-Tier to Two-Tier Organizational Structure 223 9.6 The Role of Credit Unions in Development 223 9.6.1 The Credit Unions Role in Local Development 223 9.6.2 Management of Credit Unions and Development 234
Notes 236
Chapter X Discussion, Conclusion and Implications
23910.1 Discussion of Results 239
10.2 Conclusion 245
10.3 Theoretical Implications 261
10.4 Practical Implications 263
xv
Appendix
I Modal Bye-Laws and Articles of Credit Unions 269
II CUA Affiliated Regional Chapters 281
III WOCCU Relations With National and Continental Credit Unions 282
Abbreviations and Acronyms
283Bibliography
285Summary
315Samenvatting
323Curriculum Vitae
330Abstract
"This thesis focuses on the historical development, the organizational management and the role of credit unions among the Dagaaba in the Upper West Region of Ghana. Co-operative credit unions are well-established financial institutions, with a capacity to mobilize local savings and provide microcredit services to which poor and the low-income people can get access. This study analyses the main factors, namely the local socio-economic dynamics and institutions, and external influences, notably from the Roman Catholic Mission, the Government and NGOs, all of which contributed to laying a foundation for the establishment of the first credit union in Jirapa in 1955 and the subsequent extension to other parts of Ghana. The study also reveals that, through decades of constant interactions between various local and external stakeholders, credit unions have developed an integrated management system which forms a synergy of diverse organizational procedures and practices which also incorporates the local organizational knowledge. This integrated management system has undoubtedly facilitated the active participation of members in the credit unions and also has contributed to the resolution of such recurrent credit union problems as loan delinquency. At individual and household levels, access to savings and micro-credit facilities has improved the socio-economic conditions of most of the members to a certain extent and more generally credit unions have also contributed to local community development."
