JEFAM FINANCIAL SERVICES LTD

STRATEGIC BUSINESS PLAN (2010-

2014)

AUGUST 2010
Table of Contents

Pg.
List of Tables.................................................................................. 3
List of Figures................................................................................ 3
JEFAM FINANCIAL SERVICES
List of Summary Information...........................................................4
A. MESSAGE FROM CEO..................................................................4
LTD
B. EXECUTIVE SUMMARY................................................................5
Financial Projections................................................................................................ 10
STRATEGIC BUSINESS PLAN(2010 TO
1. General Country Overview........................................................14
2014)
Enabling Economic Factors..................................................................................... 14

January
Prudent Economic Policies 2010
and Development Strategies........................................16

Ghana Vision 2020............................................................................................... 16

Ghana Poverty Reduction Strategy (GPRS)..........................................................16

2. Environmental Scan And Company Audit....................................17

2.1The Macro-Environment Situation......................................................................17

2.1.1 The Political and Legal Environment...........................................................17

2.1.2 The Economic Environment........................................................................18

2.1.3 The Socio-Cultural Context.........................................................................19

2.1.4 Technological Advances.............................................................................. 22

2.2 The Micro-Environment Situation......................................................................22

2.2.1 Competition from Commercial Banks..........................................................22

2.2.2 Competition Posed By Rural Banks.............................................................24

2.2.3 The Rural Micro Finance Industry................................................................26

2.3 Analysis of JEFAMs Existing Markets.................................................................28

2.4 Analysis of JEFAMs Potential Markets...............................................................29

3. Introduction............................................................................34
3.5 Company Audit................................................................................................. 36

3.5.1 Governance & Management.......................................................................36

3.5.2 Marketing.................................................................................................... 36

3.5.3 Operations.................................................................................................. 36

3.5.4 Finance....................................................................................................... 37

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 3.5.5 Human Resources....................................................................................... 37

4. SWOT Analyses and Strategic Imperatives................................42

4.1 Market Opportunities........................................................................................ 42

4.2 Market Threats.................................................................................................. 43

4.3 Company Strengths.......................................................................................... 44

4.4 Company Weaknesses...................................................................................... 45

5. Facts behind the Figures..........................................................48

5.1 Operations........................................................................................................ 48

The company currently operates 3 branches which were opened on the following
dates:...................................................................................................................... 48

5.2 Financial Performance....................................................................................... 48

5.3 Financial Position............................................................................................... 50

5.4 Uses of Funds.........................................................................52

6. Appendix................................................................................. 53
6.1 INCOME STATEMENT (2008 2014)..................................................................53

6.2 BALANCE SHEET (2008 2014).....................................................................54

6.3 CASH FLOW STATEMENT (2008 2014).........................................................55

6.4 MARKETING PLAN.......................................................................................... 56

6.5 KEY ASSUMPTIONS BEHIND THE MODEL...........................................................58

List of Tables
Table 1: Summary of Political And Legal Environment For Microfinance In Ghana.....17

Table 2: Number of RCBs Depositors & Borrowers, 2001-2007...................................26

List of Figures
Figure 1: Total of Universal Banks' Branch Networks In Each Region.........................23

Figure 2: Trend of Loans/Advances By & Deposits To RCBs...........................................3

Figure 3: Illustration of competitive trend in micro-finance sector...............................3

Figure 4: JEFAM Organisational Structure...................................................................40

Figure 5 Highlights of Financial Performance (2008 - 2014).......................................49

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Figure 6 Narrow View of Highlights of Financial Performance (2008-2010-2).............50

Figure 7 Highlights of Financial Position (2008 - 2014)...............................................50

Figure 8 Narrow View of Highlights of Financial Position (2008 - 2010-2)...................51

List of Summary Information

Summary 1: Strategic Actions for JEFAM (2010-2014).................................................8

Summary 2: Ghana's Microfinance Sector Environment (Compared To Nigeria)........27

Summary 3: JEFAM's Board Of Directors and Management........................................38

Summary 4: JEFAM Products....................................................................................... 41

Summary 5: Market Risks and Strategic Imperatives.................................................46

A. MESSAGE FROM CEO

The dynamics of the current financial services sector in Ghana is exciting but
challenging. In particular, microfinance in Ghana has taken a dramatic turn.
4
While the sector now promises great rewards for JEFAM Financial Services Ltd
emergent and strong competitive forces in the sector means that greater
work has to be done to sustain the companys growth and market
penetration.

I am optimistic that our Business Plan will offer a clear roadmap for the future
of the Company. The two thematic areas that underlie our Plan for 2010 to
2014 are Sustainability and Re-capitalisation. The global microfinance agenda
is that Microfinance Institutions should pursue transformation to commercially
viable and sustainable formal financial institutions. I am happy that the entire
team at JEFAM Financial Services Ltd is keen to lead this agenda in the years
to come.

It is also noteworthy that the process leading up to the preparation of the final
Business Plan involved broad-based participation by all members of staff and
engagement with our existing and potential customers.

I look forward to exciting times ahead for the Company.

Francis Miezah
(Chief Executive Officer)

B. EXECUTIVE SUMMARY

Company Background

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 i. JEFAM Financial Services is registered as a limited liability company and was
incorporated under the Companies Code 1963 (Act 179) on the 29 th
February, 2008 with its major business objective being to provide
microcredit services. The company is also registered with the Ghana Police
Service and has a Moneylenders License.

ii. The company has five directors: Rashid Ackah, Francis Nyonra Miezah, Eric
Anthony, John Kennedy Ennin and Dorcas Efua Asaam. All the directors
have complimentary experiences that together ensure an efficient
management of the company. Their experiences range from finance,
banking, business, taxation and small scale business management.

iii. JEFAM currently operates in three specific geographic markets: Kasoa, Weija
SCC and Agona Swedru. The companys Head office is located at Weija SCC.
The Company has three main products: JEFAM Rural Credit is targeted at
cooperative associations and offers a hybrid between the solidarity and
village banking methodology. JEFAM Small Loan Credit is targeted at self-
employed borrowers using the personal guarantee method. JEFAM Start-up
credit is targeted at people who have finished their apprenticeships in
different trades.

iv. The company envisions becoming the preferred non-bank financial

institution delivering leading-edge services and value to all key
stakeholders in micro-level financial intermediation. Its mission is to
create and operate robust and profitable microfinance methods and
products that excite our target markets; methods and products that are
built on market understanding, product innovation, market leadership and
strong relationships with our key stakeholders. JEFAMs values are
encapsulated in the acronym MICRO: Managerial Leadership, Innovation,
Creativity, Responsiveness and Operational Excellence.

SWOT Issues

i. Opportunities exist in the Ghanaian market that provides a number of

strategic imperatives for JEFAM. Importantly, around 80% of the adult
population are unbanked due to low literacy rates, low outreach of
Universal Banks and poverty levels. Opportunities to reach out to women
groups exist as women operate 72% of non-farm businesses and 21.6% of
working females are engaged in trading. There are also opportunities in the
rural economy as 46% of all households in Ghana operate non-farm
enterprises and about 3.5 million households process crops or fish for sale
or for use by households. Additionally, a significant percentage of target
borrowers have negative perceptions about susu schemes and a greater
6
 confidence in formal financial institutions opening up greater opportunities
for Microfinance Institutions (MFIs) like JEFAM.

ii. These opportunities notwithstanding there are some threats in the

Ghanaian market. Unstable and high inflation rates and high BOG base
rates gives rise to high interest rates and potentially higher default rates.
Additionally, a liberalized financial system in Ghana and subsequent low
barriers to market entry has introduced an intensely competitive
environment; this leads to a situation where market penetration efforts for
individual companies like JEFAM have been low. Other threats such as low
earning potential, a weak credit referencing system and low innovation
diffusion bedevil the micro-finance sub-sector and would have to be
overcome to ensure greater profits for individual players.

iii. JEFAM is strong as an organisation in many areas: the company has

Directors and Management with relevant and significant experience and
expertise in the specific area of finance. Additionally, key partnerships with
Marketing and Legal Consultants providing specific and technical expertise
at low retainers will help JEFAM avoid the high costs of engaging blue chip
advisory outfits like the Big4 in the provision of these services. A lean and
robust organisational structure and clear governance structures have
translated to profits for JEFAM over the past two years of its existence.
Profits are also supported by competitive interest rates and high loan
recovery rates which currently stands at 97%.

iv. The few weaknesses that exist within JEFAM can easily be overcome.
Weaknesses such as the non-existence of funds for marketing activities and
low market outreach can be overcome in subsequent years by increasing
capitalisation and looking at relatively cheaper methods of promoting the
company such as Corporate Social Responsibility schemes. With time there
will also be a need to decentralise some specific functions and JEFAM
branches as a lot more qualified managers are hired.

Strategic Choices

The overarching strategy of JEFAM over the next 5 years is to extend its
footprints through a market penetration strategy in attractive districts
across the southern and middle belt of Ghana whiles retaining and
attracting the best human resource with a sense of sustainability. In that
regard, the company would not engage business with any individual,
association(s) or corporation that has its operations excessively affecting
the environment. The detailed strategic choices are presented below:

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 i. The key goal of JEFAMs Strategic Business Plan is: to pursue market
leadership (microfinance) in all target markets in which JEFAM
operates.
To achieve this goal the following objectives have been outlined:
a. Achieve a minimum increase of 5% in market share in target markets
year-on-year
b. Achieve minimum profit growth of 5% year-on-year in each target
market
c. Increase deposits and loan uptake by a minimum of 5% in target
markets year-on-year
d. Increase JEFAM's capitalisation by 20% year-on-year
e. Achieve minimum loan repayment rates of 95% year on year.

ii. A second goal of the Strategic Business Plan is: to achieve operational
excellence in all target markets in which JEFAM operates.
To achieve this goal the following objectives have been outlined:
a. Expand operations by opening a minimum of 2 branch offices in new
local markets every year starting from year 2011
b. Establish an effective and efficient governance and management
system by year-end 2010 (which is about 90% complete)
c. Establish an effective and efficient monitoring and control system by
year-end 2010 (which has been completed)

iii. The third goal of the Strategic Business Plan is: to Recruit and retain
high-performing personnel in the sub-sector.
To achieve this goal the following objectives have been outlined:
a. Achieve 90% employee retention year-on-year
b. Achieve higher scores on employee satisfaction surveys year-on-year
c. Attract at least ten applications from experienced (5years or more)
credit officers & microfinance managers from the industry every year
starting from year 2011.

Summary 1: Strategic Actions for JEFAM (2010-2014)

GOALS STRATEGIC ACTIONS
1 To pursue market i. Pursue a low-cost leadership strategy by providing loans to target
leadership customers at competitive interest rates. Continue to revise method for
(microfinance) in all interest rate setting based on market risk and individual risk variables.
target communities ii. Undertake significant marketing campaigns and community engagement
in which JEFAM programmes to establish brand equity and credibility.
operates i. Cut down on operational costs through centralisation of administrative
tasks, dependence on employee field experience, more efficient methods
of monitoring and controls
iii. Undertake prudent management of loan portfolio and train staff on
credit risk appraisal techniques
iv. Undertake research on new product development and make
products/services more customer-centric than that of competitors e.g.
Innovative methods of securing and enforcing loan repayments beyond
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 collaterals
v. Increase market penetration and outreach by increasing mobile field
force and through direct marketing campaigns e.g. Distribution of Flyers to
women groups in churches.
vi. Continuously develop products targeted at specific segments instead of
generic groups e.g. Artisans, women , traders etc
vi. Stop reliance on collaterals and develop new but efficient ways of loan
monitoring.
vii. Actively pursue equity capital (private investors & venture capital)
within both the domestic and international market and from government
initiatives to support microfinance in Ghana
vii. Use website (www.jefam-ghana.com) as a channel to continuously
engage with donor agencies (UNDP, World Bank, IFC) and obtain funds for
on-lending to target groups.
ix. Produce thorough and well-packaged literature to support investment
drives e.g. Business plan reviews and audited financial statements.
x. Continuous engagement with clients e.g. Sending them text message
reminders a number of days before repayments.
xi. Field officers visiting the businesses of clients and using field
intelligence to detect and act on potential defaults

GOALS STRATEGIC ACTIONS

2. Achieve i. Undertake market development research to identify new and viable
operational geographic/ socio-demographic markets to pursue
excellence in all ii. Undertake due diligence regarding expansion capabilities, competitor
target markets in attacks, security and general cost of operations.
which JEFAM
operates iii. Develop Governance and Operational Policy Manual to be reviewed
yearly
iv. Develop a Credit Risk Policy Manual to be reviewed yearly
v. Develop a centralised and networked Financial Monitoring and Control
System with Documentation
vi. Develop and continuously review Field Monitoring Systems, with
Documentation
3. Recruit and retain
i. Maintain comparative or higher remuneration packages for different
high-performing
categories of employees and agents
personnel in the ii. Ensure Continuous Professional Development programmes for key staff
in/dustry every year.
iii. Provide opportunities for experienced employees to take up greater
challenges in new branches to reduce boredom and increase motivation
iv. Provide grievance resolution platforms for employees to share
suggestions and for complaints. E.g. Quarterly durbars
v. Advertise available positions on company's website and the dailies such
as Daily Graphic

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10
Financial Projections

Income Statement
Balance Sheet

12
Cash flow Statement

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14
 1. General Country Overview
As the first country in Sub-Saharan Africa to gain independence, Ghana has
historically been the portal to economic activity in the West African Sub-
Region. The country has enjoyed relative democratic freedom having
conducted four consecutive elections widely considered free and fair and
successfully changed ruling parties twice over the past 17 years.

Ghanas role in sub-regional economic integration, good governance, African

unity and economic reform led President Clinton to dub the nation the
Gateway to West Africa during a state visit in 1998. The country has since
lived up to this name, with further innovative responses to economic and
socio-political issues as shown below. The country has been and seems
poised to remain the recipient of significant streams of Foreign Direct
Investment (FDI) flows and investments.

Enabling Economic Factors

Ghana has enjoyed stable macroeconomic growth for the past five years
(2005-2009). Per capita income increased from US$450 in 2005 to US$1,480
in 2009. This has made it possible for business leaders and investors to make
informed decisions on how to govern their respective companies and the
adoption of the right policy direction.

Economists predict a reduction in inflation rates, and that a rate of 12% or

less is likely once the country becomes an oil producing economy in 2010.
Inflation in the country currently stands at 9.49% from 20% the same period
last year; which has seen the Central Bank continuously reduce prime rate by
450 basis points since the beginning of the year to reach 13.5% as an
incentive for commercial banks to react accordingly albeit the minimum
lending rate stands at 22%.

Ghanas tax rate has been stable at 25% for the past six years and is
expected to be reduced as the country improves upon industrial capacity.
There are tax rebates of about 7% for companies situating outside the capital
city Accra. We have maintained a 25% tax rate over the five year projection
period.

Interest rates have remained consistently higher in Ghana than in other

Western African Countries. As a matter of fact commercial lending rates
charged by commercial banks in Ghana are said to be highest in Africa and
second highest in the world (to Brazil). The Bank of Ghana is exploring means
to bring down the cost of borrowing in the country, including the possibility of
placing a legal cap on interest rates, a practice that has been employed in
other jurisdictions such as Nigeria. This is to ensure that many will benefit
from the fruits of effective financial intermediation.

The Agricultural sector now contributes more than any other sector of the
Ghanaian economy to Gross Domestic Product. In 2009, the Agricultural
Sector recorded a share of 34.9% of total GDP as against a share of 32.3% of

16
total GDP recorded by the Service Sector. However, during the year 2009, the
Service Sector grew at a faster rate (5.9%) than the Agricultural Sector
(5.1%). Growth in the Service Sector was as a result of increased growth in
the Financial Services subsector of the Service Sector.

Prudent Economic Policies and Development Strategies

Over the last couple of decades, Ghana has implemented a number of
institutional strategies and policies that have been aimed at poverty reduction
and the creation of wealth. This has seen poverty levels reduce from 51% of
the population in 1991-1992 to about 28.5% in 2007 (Ghana Living Standards
Survey-Report of the 5th Round).

Key among these strategies are:

Ghana Vision 2020

Originally titled the National Development Framework, Vision 2020 was
initiated in 1995 to serve as a 25 year plan dedicated to the improvement of
individual and social well being. Its main objective was to provide a consistent
framework for comprehensive development planning over the long-term with
the main goal of transforming Ghana from a poor, underdeveloped low-
income country into a vibrant, prosperous middle-income country within a
generation, by the year 2020.

Ghana Poverty Reduction Strategy (GPRS)

The GPRS was initiated in 2002 as result of a consultative process between
Government and Civil Society. It was developed to serve as a comprehensive
development policy framework in support of poverty reduction and outlined
five pillars (macroeconomic stability, production and employment, human
resource development, special programs for the vulnerable and excluded,
and, governance) on which Government based its strategy of poverty
reduction. The main goal of the GPRS was to enable Ghana reach middle
income status and a per capita income of at least $1000 by 2015.

17
 2. Environmental Scan And Company Audit

2.1The Macro-Environment Situation

2.1.1 The Political and Legal Environment

Table 1: Summary of Political And Legal Environment For Microfinance In

Ghana1

FORMATION AND The Bank of Ghana (BoG, the central bank) is the sole regulator
OPERATION OF of banks and other financial institutions, as outlined in the Bank
REGULATED,
SPECIALISED
of Ghana Act 2002 and Banking Act 2004 (and its 2007
MFIS amendment). However, the Association of Rural Banks (ARB)
Apex Bank is also licensed to undertake limited supervisory
functions for rural banks. The Financial Institutions (Non-
Banking) Law of 1993 and the Non-Bank Financial Institution
(NBFI) Business Rules for Deposit-Taking Institutions 2000
impart regulatory and supervisory responsibilities to the BoG
over NBFIs, including savings and loan companies. Credit
unions are technically regulated by the Financial Institutions
Law 1993, but in practice they are regulated and supervised by
the Ghana Co-operative Credit Union Association and in
conjunction with the Department of Co-operatives. For rural
and community banks (RCBs), minimum capital requirements
are within reason GH150,000 (US$114,000) and banks are
free to set interest rates. Capital adequacy ratios are 8-10% of
assets for banks, RCBs and NBFIs. The Ghana Co-operative
Credit Union Association (CUA), an apex body and quasi-
regulator for credit co-operatives, caps interest rates by credit
unions that receive wholesale funds from the CUA. (CGAP
Regulation Centre Profiles; CGAP 2005 Paper; central bank
2008; personal interviews: June-July 2009)

FORMATION AND Institutions are regulated based on BoG designations. RCBs,

OPERATION OF savings and loans companies (S&Ls) and NBFIs that fall under
REGULATED,
SPECIALISED
the NBFI law are free to set up microfinance operations and are
MFIS regulated by the BoG. However, a new BoG policy greatly
increases minimum capital requirements for new NBFIs, and
current minimum capital requirements for transformation into
an S&L Company are also high. RCBs are required to submit
weekly liquidity reports, monthly balance sheets, quarterly
financial statements and annual audited financial statements.
Reporting requirements for S&Ls are similar to RCBs. In
practice, credit unions are regulated and supervised by the
CUA, in conjunction with the Department of Co-operatives.
Interest rate caps only apply to credit unions that receive
1
Source: Global Microscope On The Microfinance Business Environment, Economist
Intelligence Unit, 2009: http://www.eiu.com/site_info.asp?
info_name=Global_Microscope_2009&page=noads&rf=0#
 wholesale funds from the CUA. (CGAP 2005 paper; CGAP
profiles; central bank 2008; personal interviews: June-July
2009.)

FORMATION AND NGOs, community-based organisations, rotating savings and

OPERATION OF credit associations (ROSCAs) and accumulating savings and
NON-REGULATED
MFIS
credit associations (ASCAs) can provide microcredit services,
but these unregulated institutions are not permitted to mobilise
deposits. Most microfinance institutions (MFIs) listed on MIX
market are NGOs (11 of 16). However, informal savings agents
(Susu dealers) have a high penetration rate in Ghana and
provide savings services, often at negative interest rates, to
rural and urban clients. There is a significant amount of self-
regulation in the finance sector, with the CUA and the ARB Apex
Bank taking some regulatory responsibilities. The Ghana Co-
operative Susu Collectors Association (GCSCA) encourages
self-regulation among members. (CGAP series paper 2005;
personal interviews: June-July 2009.)

CREDIT The lack of good credit information has been a major obstacle,
REFERENCING and the BoG is currently planning to form a public registry,
including MFIs. There is one private credit bureau operating as
of June 2009 (XDS Data Ghana Limited), but this is relatively
new and banks are as yet unwilling to share data about clients.
Banks and financial institutions tend to provide negative
information only, as they fear poaching of their low-risk clients
by other banks. Ghana has a Credit Information Index score of
0.0 out of a maximum of 6 in World Bank, Doing Business,
which compares to a regional average of 1.4. Public and Private
registry coverage is 0.0% of the adult population. (Ghana
Business News online, June 6th 2009; World Bank, Doing
Business 2009; XDS website; personal interviews: June-July
2009.)

2.1.2 The Economic Environment2

i. Liberalization of financial policies in the late 1980s has enabled Rural
Microfinance Institutions (RMFIs) in Ghana to develop with relatively little
interference, but without a clearly articulated national strategy.
Nevertheless, continued high inflation and interest rates (particularly on
2
Source: www.mofep.org.gh
19
 Treasury Bills) has limited the incentive for commercial banks to reach out
to smaller, poorer clients (though enabling weak Rural and Community
Banks (RCBs) to improve their capital adequacy with highly restricted
lending).
ii. Furthermore, directed, subsidized loans under current government poverty
programs threaten to undermine loan performance and weaken the long-
run potential for developing sound, self-sustaining MFIs on a significant
scale. While Ghanas approach has yielded a wide range of MFIs and
products with the potential for substantial outreach to the poor and
sustainability based on savings mobilization, it has also permitted easy
entry of institutions with weak management and internal controls.
iii. Throughout the greater part of Ghanas economic history, weak fiscal
discipline (especially in election years), persistent double-digit inflation,
and the use of monetary policies to restrain liquidity resulted in relatively
high interest rates not only for commercial bank lending but also for T-bills
and Bank of Ghana bills and bonds. The consequence has been very little
incentive for banking institutions to lend, since they can make a good
return (over much lower deposit rates) simply by investing excess liquidity
in T-bills. Although the high reserve requirements (62% primary and
secondary) imposed on Rural Banks for example has sometimes been
blamed for the small amount of credit they provide, in fact they have
generally maintained more than the required amount of reserves.

2.1.3 The Socio-Cultural Context3

The extent of poverty and the importance of the rural sector to the economy
makes it pivotal for microfinance interventions. Poverty in Ghana, like in most
other sub-Saharan African countries, is predominantly a rural phenomenon.
Rural poverty is estimated to contribute approximately 90% to national
poverty. More than one-half of the population living in the rural Savannah
regions of Ghana continues to be extremely poor.

3
Source: Ghana Living Standards Survey (GLSS)5 Report, 2008
20
Poverty is highest among self-employed households cultivating agricultural
crops and has decreased only slightly compared to self-employed households
engaged in export-crop agriculture and wage employees in the public and
private sectors. In spite of these, agriculture, which is mainly rural-based and
the core of the Ghanaian economy, remains the principal sector for the
development and growth of the economy.

2.1.3 a. Employment Statistics4

Ghanaian males have a slightly higher economic activity rate (54.9%) than
their female counterparts (53.4%). The activity rates for males exceed those
for females in all age groups except in the 15 to 24. Overall, the economic
activity rate in rural areas is higher (58.6%) than that of urban areas (47.3%).
For each age group, the activity rates for both males and females are higher
in rural areas than in urban areas.

The employment statistics of the currently employed indicate that 55 percent

of the adults are own account workers, 20 percent are contributing family
workers while 18 percent are employees. In urban areas, employees (34.8%)
constitute the second largest category after own account workers (47.2%),

4
Source: GLSS5 Report, 2008
21
whereas in rural areas, contributing family workers (27.5%) are the second
most populous group after own account workers (59.4%).

The majority of the working population is employed in agricultural activities

(55.8%), followed by trading (15.2%) and then manufacturing (10.9%).
Whereas 21.6 percent of the working females are engaged in trading, only 8.4
percent of their male counterparts are traders.

2.1.3 b. Household Agriculture Statistics5

About 3.4 million households in Ghana own or operate a farm or keep
livestock. More than half of households (1.8 million), which cultivate crops hire
labour for their operations. The two most important crops, in terms of sales,
are maize and cocoa. About 3.5 million households process crops or fish for

5
GLSS 5, 2008
22
sale or for use by households with women having about 87 percent share of
responsibility in this activity.

2.1.3 c. Non-Farm Enterprises Statistics6

Approximately three million two hundred thousand households representing
46 percent of all households in Ghana operate non-farm enterprises with
women operating 72 percent of these businesses. Some 52 percent of the
households operating non-farm enterprises are found in urban localities.
Almost half (49.5%) of all businesses involve trading, and most of the rest are
into some kind of manufacturing. The main sources of capital for non-farm
enterprises are household savings (60%) and assistance from relatives or
friends (20%). It is worthy to note that more skilled than unskilled persons are
currently engaged in non-farm enterprises.

2.1.3 d. Credit and Savings Statistics7

Research shows that more than 27 percent of all households owe money or
goods to other persons, institutions or businesses and only 6 percent are able
to pay fully a loan in the preceding 12 months. The extent of indebtedness, as
measured by the proportion of households taking out loans, is lower in urban
areas (24.1 %) than in rural areas (29.8 %). Over half of household loans
come from relatives, friends and neighbours. Traders form the second most
important source of loans for households followed by state banks. Most of
these loans contracted without any guarantee are meant for household
businesses.

Just a third of all households in Ghana have savings accounts. Two-fifth of

urban households operates savings accounts as against only 22 percent of
their rural counterparts. More males (60%) have savings accounts than
females (40%) and this is the case for all localities.

6
GLSS 5, 2008
7
GLSS 5, 2008
23
2.1.4 Technological Advances
The emergence of mobile money services in Ghana (e.g. MTN Mobile Money,
txt-n-pay) provides interesting opportunities for the financial services sector
and microfinance institutions. However, lower rates of innovation diffusion in
Ghana will mean that adoption of innovative and technology-powered
products will experience low penetration.

24
2.2 The Micro-Environment Situation

2.2.1 Competition from Commercial Banks8

As at December 2009 the number of Universal Banks in Ghana stood at 26, a
considerable upshot from the lower numbers of the late 1990s. However, the
commercial (or universal) banking terrain has not changed dramatically with
about four major banks, Barclays, GCB, Stanchart and SG- SSB jointly
accounting for over 60% of the total banking sector assets and deposits(BOG
Report, 2008). As at 2008 year-end only two banks, Barclays and Ghana
Commercial Bank, have more than a hundred branches nationwide and 17
banks have less than 20 branches each across the country, showing glaring
disparities in outreach strategies of the universal banks.

Despite the renewed interest in the banking sector and the overall
competitiveness of the financial services sector some urban areas and most
rural areas continue to remain underserved by commercial banks, a situation
that offers some opportunity to Micro Finance Institutions. For example, there
are only 5 commercial banks which have a presence in Upper East and Upper
West Regions: Barclays, NIB, ADB, GCB and SG-SB. These banks, plus four
others (each with only one branch bank), are the only commercial banks in
the Northern Region. As indicated in Figure 1, the total number of banks
branches in these three regions (34) is lesser than the number of total banks
branches in the Eastern Region alone (38) and less than 13% of the total
banks branches in Greater Accra alone (264).

Figure 1: Total of Universal Banks' Branch Networks In Each Region

8
A list of all banking and non-bank financial institutions as at Sept. 2009 is available at:
www.bog.gov.gh
25
Bank of Ghana (May 2008)

This situation will not change in the medium to long-term given the
considerable hurdle to overcome in generating the level of commercial
activity in most of the underserved areas; and the kind of activity that will
necessitate the required geographical spread by the commercial banks. This,
coupled with the growing demand for microcredit even in urban centres,
points to the fact that market development and penetration of commercial
banks will be based substantially on linkages with lower-level/ microfinance
institutions such as FNGOs, Susu Groups etc rather as opposed to actual
presence or participation in these areas.

The current microfinance interest of the commercial banks is being driven by

both local-local and local-international partnerships. However, it is yet to be
established how successful each model will be. For example, HFC Bank and
CHF International registered Boafo Microfinance Services Ltd. as a non-
financial subsidiary of the Bank in Dec 2006. Boafo addresses a market niche
by providing housing and enterprise microfinance loans to households living
and working in informal settlements in towns where HFC Bank operates. Boafo
offers loans as small as 500 Ghana Cedis up to 20,000Ghana Cedis per
person.

EB-ACCION Savings & Loan is a microfinance partnership between ACCION

and Ecobank, and has a license to undertake microfinance operations in
Ghana. As at 2008 year-end over forty-three EB-ACCION staff have been

26
trained to deliver microcredit, savings and micro-insurance products in Accra,
helping small merchants, manufacturers and other micro-entrepreneurs to
develop their businesses.

Barclays Micro banking also attempts to offer a holistic microfinance approach

which revolves around its key microfinance product Micro banking Dwetiri
Account; a specialized banking service that involves capital for on-lending
and facilities savings deposits for institutions. This has been designed in
collaboration with the Ghana Cooperative susu Collectors Association
(GCSCA) for susu collectors.

2.2.2 Competition Posed By Rural Banks

While the number of rural banks have lingered under 130 since 2004 (120 in
2004 and 128 in 2009), an analyses of Deposits and Borrowing from the RCBs
show consistent growth over the past years.

Figure 2: Trend of Loans/Advances By & Deposits To RCBs

Source: BOG, 2009

Originally, Rural and Community Banks (RCBs) made standard commercial

loans to individuals or groups, often related to agriculture. While term lending
may have been justified by the agricultural planting cycle or investment in a
productive asset, it tended to result in portfolio performance problems, as
27
borrowers had difficulty making balloon payments and RCBs had weak
capacity to follow up and enforce repayment.

Over the past years, however, a number of the more progressive RCBs have
drawn on emerging microfinance techniques to introduce new programs for
saving and credit, often in association with NGOs that could provide the
expertise in implementing the approach. Loans of this type are generally
short-term (4-6 months) with weekly repayment, averaging around $50-75
but ranging up to several hundred dollars, with compulsory up-front savings of
20% that is retained as security against the loan, complementing group or
individual guarantees as the other principal form of security (source:
GHAMFIN 2001).

Some RCBs also have tried to develop linkages with Susu collectors (source:
GHAMFIN 2001) or have served community-based organizations (CBOs)
associated with donor programs. RCBs may also use NGOs to perform
ancillary services; for example, Nsoatreman Rural Bank paid a 2% commission
to an NGO that helped identify, mobilize and educate rural groups on
accessing credit through an IFAD program, as well as to assist in loan
monitoring and recovery. To facilitate savings collection, some RCBs (such as
Akwapem and Lower Pra) have also introduced Mobile Banking, whereby
officers visit rural markets on certain days to collect savings and provide loans
(whether to groups or individuals with guarantors).

Table 2: Number of RCBs Depositors & Borrowers, 2001-2007

NO. OF DEPOSITORS % OF NO. OF BORROWERS % OF FEMALE
FEMALE
YEAR
Male Female DEPOSITOR Male Female BORROWERS
S
621, 508, 8 55
2001 124 192 45 3,595 ,730 40
2002 692,744 494,622 42 91,843 56,428 38
2003 890,518 566,469 39 116,831 77,973 40
2004 1,023,632 697,099 41 122,926 98,892 45
2005 1,124,907 991,521 47 172,809 120,690 41
2006 1,354,404 1,138,600 46 217,496 140,596 39
1,148,
2007 1,522,252 366 43 348,195 241966 41

28
2.2.3 The Rural Micro Finance Industry
The number of clients reached by Rural Microfinance Institutions (RMFIs)
(apart from susu collectors) rose from 1.3 million in 2001 to 1.5 million in
2003 (9.5% average annual growth) and then accelerated to reach 3.2 million
in 2006 (24% annual growth; of which 2.5 million in RCBs), and deposit
mobilization grew even faster. RMFIs now have more outlets than the
commercial banking system and reach an estimated 15% of the total
population approximately half as many as are served by commercial banks.

Figure 3: Illustration of competitive trend in micro-finance

sector

Summary 2: Ghana's Microfinance Sector Environment (Compared To

Nigeria)9

REGULATORY
OVERALL SCORE FRAMEWORK

9
Data compiled by Economist Intelligence Unit, 2009: http://www.eiu.com/site_info.asp?
info_name=Global_Microscope_2009&page=noads&rf=0
29
 Institutional
INVESTMENT CLIMATE development

Ghana Nigeria
OVERALL SCORE 60.9 39.4
Regulatory framework 75.0 56.3
Regulation of microcredit operations 3.0 2.0
Formation and operation of regulated, specialised
MFIs 3.0 3.0
Formation and operation of non-regulated MFIs 4.0 3.0
Regulatory and examination capacity 2.0 1.0
Investment Climate 54.4 34.2
Political stability 2.4 2.0
Capital market development 2.0 1.2
Judicial system 1.7 0.0
Accounting standards 2.0 1.0
Governance standards 2.0 2.0
MFI transparency 3.0 2.0
Institutional development 50.0 25.0
Range of MFI Services 3.0 1.0
Credit bureaus 1.0 1.0
Level of competition 2.0 1.0

MFI clients as % of population 0.845 0.292

10
2.3 Analysis of JEFAMs Existing Markets
Geographically, JEFAMs existing markets are Kasoa and Weija SCC. There are
four main Microfinance Institutions in the two markets (see Summary 2
following). A survey was carried out in these markets to assess target
borrowers attitudes and behaviour with respect to banking and borrowing as
well as assess market opportunities and threats. Target borrowers were
defined as artisans, tradesmen, traders and other entrepreneurs starting up
small businesses in industries such as fashion designing, hairdressing,

10
Findings based on a survey carried out in December 2009 by the Bureau of Market & Social
Research in Kasoa and Weija SCC and involving 200 respondents.
30
textiles, fitting or welding workshops etc. Penetration of micro-credit services
to these target groups is estimated to be less than 25%. The following
findings were also made:

i. There is generally a banking culture among target customers in the

existing markets with almost 90% of respondents having current
accounts with formal banks and more than a quarter of respondents
having savings account. There was a split of 60% respondents
banking with Universal Banks and 40% banking with Savings & Loan
companies and/or Rural Banks. 40% of total respondents had some
exposure to Microfinance Institutions (MFIs). 10% of respondents did
not have bank accounts at all and were only engaged in susu
schemes.

ii. However, less than 30% of respondents had ever borrowed money
from their respective financial institutions. Respondents who had
ever borrowed from their respective institutions had a good
recollection of interest rates charged, meaning they were in positions
to assess whether interest rates of various financial institutions were
competitive or not. 98% of those who had obtained loans from their
respective institutions said that it had been a fairly easy process to
obtain the loan and loan processing had not taken too long a time.

iii. Respondents were reported as earning GHC200 a month on the

average and as saving less than GHC50 a month. However, attitude
towards banking was good and 95% of respondents said they
wouldnt have difficulties running a current account or maintaining a
savings account if they signed up for them.

iv. There is a general dislike and fear of susu schemes in the two
markets; close to 95% of respondents interviewed said they fear to
be defrauded and about 45% claim they had already had bad
experiences with susu schemes. On the contrary, a significant
number of respondents (95%) had confidence in the formal banks
and would bank with them.

v. 84% of respondents who were doing susu schemes said they would
not feel comfortable guaranteeing loans within a group scheme even
if it was made up of family members and close friends. Close to 10%
said they had already had negative experiences with guaranteeing
loans in group schemes.

31
2.4 Analysis of JEFAMs Potential Markets11
As the core of the strategic plan to extend its footprints to other attractive
districts in the southern and middle belt of the country, Directors of JEFAM
also engaged its Marketing Consultant to research the prospects of some
selected district capitals. Below is a brief about the economy and
demographics of those areas found attractive:

Agona Swedru

Agona Swedru is the capital of the Agona West Municipal District. This district
can be found in the Eastern side of the Central region of Ghana. It has a
population of 160,000. The location of this district makes it a commercial
center of the entire Central Region and a nodal point from which roads radiate
to the rich cocoa growing country side. The area has a working population of
about 48%.

Agriculture is the primary occupation of the people of this area followed by

whole sale and retail trading, hotels and small scale manufacturing
enterprises. Crops that are cultivated in the area include cocoa, citrus, oil
palm, maize and an assortment of vegetables and upon harvest, these crops
are supplied to major markets nearby. Mining of sand and granite for the
production of quarry stone and other construction materials also occurs in the
area.

The Agona Swedru area is home to a number of 3 star hotels and second
cycle institutions. The area is also well served by major trunk roads and
health facilities. There a number of financial institutions in the area namely
Agona Rural Bank, Nyakrom Rural Bank, Akyempim Rural Bank, and East
Gomoa Rural Bank.

Asamankese

Asamankese is the capital of the Akyem district, located in the Eastern Region
of Ghana. The area has a population of about 200,000 with about 57.5% of
this number falling within the potential labour force. The main sources of
household incomes in the area are crop farming, live stock farming, fisheries,
trading, manufacturing, food processing and remittances.

Asamankese is the center of most of the Eastern Regions economic and

commercial activities. There are two markets in the area which trade in both
food stuffs from all over the districts hinter land and beyond and
manufactured goods like textiles, plastic wares and clothing. In this area there
are also large tracts of diamond and gold rich lands waiting to be exploited.

11
Findings based on a survey carried out in December 2009 by the Bureau of Market & Social
Research in the aforementioned districts
32
Asamankese has three main banks namely the Ghana Commercial Bank
(Asamankese Branch), South Akim Rural Bank and the Akim Bosome Rural
Bank.

Assin Fosu

Assin Fosu is an area in the Assin North Municipal Dictrict of the Central
Region of Ghana. The area has a population of about 120,000 and has an
annual population growth rate of 2.9% which is higher than Ghanas
population growth rate of 2.1%. Vibrant economic activities and relatively
fertile farm lands which support the cultivation of diverse food and cash crops
serve as an attraction contributing to high in-migration which in turn
contributes to the high population growth rates.

The major occupation in the area is Agriculture which employs about 69.4% of
the labor force. About 52 % of those engaged in other occupations still take
up Agriculture as a minor occupation. The second highest occupation is
Commerce. It employs about 19.1 per cent of the working population. This
indicates a very strong commercial set up in the district. Timber, mining and
quarrying are also performed on a large scale in the area.

There are four major banks in the area namely Ghana Commercial Bank,
Agricultural Development Bank, Assinman Rural Bank and Akoti Rural Bank.
These banks offer advice, mobilise savings and credit to small scale
entrepreneurs.

Nkawkaw

Nkawkaw is the capital of the Kwahu West Municipal District of the Eastern
Region of Ghana. The area has a population of about 250,000 with an average
household size of 4.6. The area has about 57.5% of its population falling
within the potential labour force (15-64)

The predominant occupations in the area are agriculture, trade and

commerce, artisanal labour and public service. The main sources of household
income in the area are business trading, crop farming, livestock farming,
fisheries, family workers salaries, manufacturing, food processing and
remittances.

Universal banking institutions in the area are Ghana Commercial Bank and
Agricultural Rural Development Bank. There are also a number of Rural Banks
namely Mponua Rural Bank, Kwahu Rural Bank and Odwen Anomah Rural
Bank.
33
Nsawam

Nsawam is the District Capital of the Akuapim South Municipal District and is
located just 23 km from Accra, the national capital. Demographical data on
the area is difficult to come by. However it is estimated that the area has a
population of about 32,950.

Agricultural activities in the area centre mainly on non-traditional crops, such

as pineapples, pepper, garden eggs and sunflower, which are cultivated
mainly for export.

Pineapple, the leading crop produced in the area accounts for some 60% of
total national pineapple export earnings. The district also produces about 55%
of the total quantity of pawpaw exported out of the country.

There are a lot of industrial activities going on in the area. These cover a
diversified range, from pharmaceuticals and fruit processing involving the use
of high technology equipment, to artefacts and other craftworks which are
produced using just a few tools.

Currently, several businesses are profitably engaged in the production of

items ranging from timber boards, paper products and beverages, through
food products and mineral water, to drugs, disinfectants, polish and quarry
products.

One of the areas greatest competitive advantages is its proximity to Accra

itself. Thus, investors can combine the advantages of setting up
establishments outside a main municipality (such as tax incentives, and
cheaper production costs), with the advantages of being within easy reach of
the countrys largest metropolis, such as large size consumer market, access
to regulatory authorities and proximity to Ghanas largest seaport. There are 3
main financial institutions in the area namely Ghana Commercial Bank,
Barclays Bank and the Akuapem Rural bank.

34
 Summary 3: Competitor Intelligence in JEFAMs Existing Markets (1)
SEFAKORNAM FINANCIAL ADOM MICRO SERVICES UNIQUE ADOM
SERVICES SHEPHERD MICROFINANCE
CONDITIONS OF LOAN
TARGET CLIENTS Traders (Petty traders) food Traders, small businesses, Petty Traders Traders, Drivers,
processing, services, salary commerce, no salary workers Craftsmen,
workers Agriculture,
Salaried Workers
COLLATERAL/GUARANTEES Personal guarantor (salary slip, Personal guarantor (valid ID, Group Guarantee Car for Driver,
valid ID, visiting and double utility bill, tenancy Land Title
checking on the guarantor agreement, double check on Documents, Cash
residential place and work place. guarantors place of work and Deposit,
Group guarantee (5-10) clients. residential place. Cash down Guarantors
Cash down collateral (compulsory collateral (3 month
savings =3 months =90%) compulsory savings 100-900)
DURATION OF LOAN 1-12 Months 4-6 Months 6 months 1-6months
REPAYMENT FREQUENCY Monthly Weekly Daily and Weekly. Daily and weekly
GHC5 per day
ACCESS REQUIREMENTS Join susu scheme, contributions 3 month contribution. No Proof of Business Compulsory
to susu for 3 months. Any fixed daily contribution (any and residential savings for 3
amount can be paid for 3 amount can be paid for 3 location months
months. Amount received by months)
field executives is entered in the
clients passbook and receipt
issued
LOAN SIZE Minimum loan Gh200. No Minimum loan Gh100. No GHC200 for first GHC 100 -
maximum. Average loan amount maximum. Gh100-900 for 4 time GHC20,000
(3* total 3 months contribution) months. Gh900 and beyond
6mths.
PRICE
INTEREST RATE 6% per month 8% 3% 8%
SALE OF LOAN APPLICATION Gh10 Gh10 GHC 5 per form GHC 10 per form
FORM
PROCESSING FEE 2% NO Nil nil
MONITORING FEE borne by Sefakornam borne by Adom borne by borne by company

35
 company
INSURANCE Secured Nil Nil nil
COMPULSORY SAVINGS 3 months - 90% 3 months
Source: Primary Research By Bureau of Market & Social Research Ltd

Summary 4: Competitor Intelligence in JEFAMs Existing Markets (2)

SEFAKORNAM FINANCIAL ADOM MICRO SERVICES UNIQUE SHEPHERD ADOM
SERVICES MICROFINANCE
PROMOTION
MARKETING Direct sales Direct sales Direct sales Direct Sales
INFORMATION
ADVERTISING Staff, clients, signpost Staff, Clients, Signpost Staff and Sign Post Staff and Sign
Post
LOCATION Kasoa off new market road Kasoa opp. Union Rural 8 branches only one 4 branches: Tema,
right after 1st National Bank Bank operational now in Kasoa, Ashiaman,
Kasoa Mankesim
CORPORATE IMAGE Good Good Not Good Very Good
DO THEY PROVIDE CLEAR Yes, at the time of Yes, at the time of Information given at information is
REPAYMENTS SCHEDULES disbursement disbursement the time of given at the time
disbursement of disbursement
DO THEY PROVIDE A Yes YES No Yes
CLEAR COPY OF LOAN
AGREEMENT
PEOPLE
HELP DESK / CUSTOMER Front desk but also Front desk, but also Yes, but officers follows Supported by
supported by field supported by field up after two days officers
executives executives
CONTRACT HOURS Daily and weekly daily and weekly Daily and Weekly. Daily and weekly

APPLICATION TO 3 weeks after submitting 2 weeks 2 weeks processing, 2 1 month

DISBURSEMENT TIME weeks for

36
 disbursement

Source: Primary Research by Bureau of Market & Social Research Ltd.

37
 3. Introduction

3.1 Company Profile

i. JEFAM Financial Services is registered as a limited liability company and
was incorporated under the Companies Code 1963 (Act 179) on the 29 th
February, 2008 with its major business objective being to provide
microcredit services.
ii. The company is also registered with the Ghana Police Service and has a
Moneylenders License.
iii. The company has five directors: Rashid Ackah, Francis Nyonra Miezah,
Eric Anthony, John Kennedy Ennin and Dorcas Efua Asaam. Rashid
Ackah has a wealth of experience in business management and bullion
trade business. Mr Francis Miezah is Chief Executive Officer of the
company and has over eleven years of Development and Universal
Banking experience. He has worked in banking operations and
microcredit with the Agricultural Development Bank and
Intercontinental Bank. John Kennedy Ennin is a private business man
who has extensive experience in small scale business operations Dorcas
Asaam has nine years of banking experience, and has specific
experience in credit administration, customer care, banking operations
and cash management. Eric Anthony is an accounting and tax expert
and has significant experience in taxation and is currently a senior
officer at the Internal Revenue Services. He advises many SMEs in the
areas of accounting and taxation.
iv. The company currently operates in two specific geographic markets:
Kasoa and Weija SCC. The companys head office is located at Weija
SCC.
v. The Company has three main products: JEFAM Rural Credit is targeted at
cooperative associations and offers a hybrid between the solidarity and
village banking methodology. JEFAM Small Loan Credit is targeted at
self-employed borrowers using the personal guarantee method. JEFAM
Start-up credit is targeted at people who have finished their
apprenticeships in different trades.

3.2 Our Vision

We envision becoming the preferred non-bank financial institution delivering
leading-edge services and value to all key stakeholders in micro-level financial
intermediation.

3.3 Our Mission

38
Our mission is to create and operate robust and profitable microfinance
methods and products that excite our target markets; methods and products
that are built on market understanding, product innovation, market leadership
and strong relationships with our key stakeholders.

3.4 Our Values

Our values are encapsulated in the acronym MICRO:
Managerial Leadership
Innovation
Creativity
Responsiveness
Operational Excellence

39
3.5 Company Audit

3.5.1 Governance & Management

i. Two board members have over 9years banking experience extensively in
credit administration. Two other members have finance and accounting
knowledge, one with over 11 years tax administration, two with several
years of entrepreneurial experience and one with Forex management
experience.
ii. However, Board Members do not have major influence in Ghanas financial
regulation albeit some degree of diversity exists in what each Director
brings to the Board.
iii.Clear governance structure and systems outlined in Company Policy
Document. There is observable evidence that these structures and
systems are strictly followed.

3.5.2 Marketing
i. Products: JEFAMs current products have been developed through
engagement with its target market and loan acquisition process is
relatively faster and easier than competing offers. Average loan processing
time is seven days.
ii. Pricing: JEFAMs interest rates are relatively lower compared to that of
other micro-credit interest rates in its target locations and have a ceiling of
6% per month.
iii.Promotion: JEFAM has not undertaken major advertising of its product,
services or the organisation.
iv.Place: JEFAMs current outreach is currently limited, as it currently
operates only in Kasoa, Weija SCC and Agona Swedru.
v. Research: JEFAM retains the services of a Marketing Consulting/Research
Firm, Bureau of Market & Social Research Ltd (www.marketresearch-
ghana.com) that undertakes its product development research and

40
 evaluates its marketing performance on a quarterly basis; unlike with
other NBFIs, marketing research drives JEFAMs strategies and tactics.

3.5.3 Operations
i. JEFAM has low operational costs, utilising an operations model that
requires few field officers to reach out to a large target market. All field
officers have bicycles to enhance mobility at a lower cost. The ratio of
Field Officers to Clients is 1:100 and the ratio of Credit Officers to Field
Officers is 1:4.
ii. JEFAMs Swedru Office boasts of its large market base as compared to
other branch locations with 4 Credit Officers fully at post although market
penetration has been challenging due to limited funds.
iii. JEFAM has an average loan recovery rate of ninety-six percent (96%) and
makes about GHC50,000 worth of loans each month to an average
number of 150 people.

3.5.4 Finance
i. JEFAM has operated profitably for the past two years (see P&L for 2008
and 2009 financial performance).
ii. Current capitalisation limited only to equity financing and debt financing
(from family and friends); subsequently has low capitalisation that limits
extent of market outreach.

3.5.5 Human Resources

i. JEFAM currently employs field officers who are relatively more qualified as
compared to that of competitors. Minimum educational qualification is
Diploma Level.
ii. Employee attrition is extremely low as employee remuneration and
rewards exceeds what is available in the market. There was no voluntary
attrition in the 2009 year.
iii. Field officer numbers are low and there is little exploitation of Mobile
Banking approach.

41
 Summary 3: JEFAM's Board Of Directors and Management
Director/Expert Professional Experience Qualifications
ise
Rashid A. Ackah From 2001 to 2003 he worked as assistant University of Zurich:
Board Chairman Financial Accountant for Ecosens AG and BSc in Economics
(Financial Expert) Allswiss AG in Zurich. In 2003 he worked as an .
Administrator And Translator for the Swiss
Federal Office for Refugees (BFF).
In 2004 he took up the helms of gold
merchandising company, R.D. Ackahs &
Partners Ltd, in Ghana and initiated the
companys trading in the international market.
He became substantive Managing Director of
R.D. Ackahs & Partners Ltd in 2005. Today R.
D. Ackahs & Partners Ltd. is one of the leading
bullion traders in the small / medium scale
mining sector in Ghana, trading the bullion gold
on the Swiss market.

Francis Nyonra He joined the Agricultural development Bank University of Ghana: BA in

Miezah (ADB) in 1997 as a credit officer and later rose Economic and Statistics,
Director and CEO through the ranks to become a credit analyst, 1996.
(Banker and Finance then Operations Manager and later a branch
Expert) manager. During the same period he also University of Westminster
worked as a project coordinator for the London: MA International
International Fund for Agricultural Development Finance, 2004
(IFAD) and Project officer for the National Board
for Small scale industries (NBSSI). Rothschild Executive
After a 1-year study leave he rejoined ADB as a Business School, Ghana:
Branch Manager in 2004 before moving on to Executive Certificate In
Intercontinental Bank of Ghana, as a Senior Strategic Management,
Manager in charge of the Banks Domestic 2009
Operations in 2006. In July 2007 he joined the
Students Loan Trust Fund in an Executive
Management position in charge of operations
42
 and research.

Dorcas Efua She joined the Ghana Commercial Bank as a 2006-2009 University of
Asaam Clerk in 2002 and later rose through the ranks Ghana Business
Director to become Branch Head of Customer Service School(UGBS):
(Banking Unit. She then moved on to the Loans and BSc in Business
Experience) Operations Department in charge of micro- Administration Major:
credit and personal loans. She later rose to Marketing
become the Branch Head of Micro-financing
Unit and SME Banking at GCB. 2003-2005: Chartered
Institute of Bankers,
Intermediate Level
Eric Anthony In 1999, Mr. Anthony joined the Internal University of Ghana: BA in
Director Revenue Service as an Assistant Inspector Of Geography, 1996
(Tax and Accounting Taxes and progressed to become Inspector of
Expert) Taxes in charge of Regional Monitoring. He is Ghana Institute of
currently with the Large Taxpayer Unit under Management and Public
the Revenue Agencies Governing Board as Administration:
Senior Tax Official with the Audit Division. Mr Postgraduate Diploma in
Anthony also joined the Western Tax & Taxation, 2001.
Management Consult as Managing Partner
(part-time) until 2007 when he became the Sikkim Manupal Univ., India,
Partner In Charge Of Taxation till date. Ghana Campus: MBA
Presently, Mr. Anthony doubles as a private tax Finance 2009 to date
consultant.
Member, Chartered
Institute of Taxation(Ghana)
and Institute of Chartered
Accountants(Ghana)
John Kennedy Mr. Ennin has worked as a Private Businessman Mr. Ennin has informal
Ennin for over 25 years. He has worked basically with training in Business and
Director rural traders, farmers, transport owners and Transport management. He
(Private Business artisans. He has been involved in all these has working knowledge in
Man) trades at different point in his business carrier. the English language.
Currently he supplies merchandise to people
involved in trade and commerce. He brings to
the Board better understanding of the
companys clients especially those involved in
trading and transport business
Edward Ebisah Prior to joining JEFAM, Edward worked for two University of Ghana Legon
Finance & years as the Finance & Administration Manager BA Geography
Administration of Crown Petroleum. Before that, he served for
Manager one year as a Senior Tax Consultant with Kwame Nkrumah University
Western Tax and Management Consult. Before of Science and Technology
he joined Western Tax and Management MBA, Accounting Option
Consult, Edward had served for one year as a
Senior Tax Official with the Internal Revenue Ghana Institute of
Service. Management and Public
Administration
Diploma in Tax
Administration,
Accounting and Taxation

Chartered Institute of
Taxation (Ghana), Final Level

Gloria Amankwah Gloria began her career as an Assistant District Kwame Nkrumah University
Credit & Marketing Planner in 2005 where she was involved in of Science and Technology
Manager policy planning and policy performance B.Sc. Planning Policy
43
evaluation. In 2006 she joined Opportunity Option
International Savings and Loans as a Loans
officer. During her term here she was involved
in client training, loan disbursement and
recovery. In 2008, while with Opportunity
Savings and Loans, she achieved promotion to
the position of Loans Supervisor, a position she
held till she joined JEFAM

Figure 4: JEFAM Organisational Structure

Board of Directors

Internal Auditor

Chief Executive Officer

44
Credit Manager
Finance & Admin Manager

BRANCH
OFFICE

Branch Manager
BRANCH OFFICES:

KASOA
WEIJA SCC
AGONA SWEDRU
Credit Officer Clients Service Officer

Field Officer

1 Audit Officer at post >>>

Qualified Audit Manager to be hired

in 2011

Summary 4: JEFAM Products

Information On JEFAM Small Loan(JSL) Product

Target Clients: Market traders, mini retail shops, food vendors and rural service
providers
Purpose: Working Capital Loan
Gender Distribution 90% women, 10% men
Ratio
Loan Amount GH100 - GH1,000
Interest Rate 4-6% per month
Term of loan 4-12 months
Collateral 1. Personal Guarantee and/or 2. Pledge of Stocks and/or 3. Pledge of
household items
Conditions for Loan Daily savings for 31 days
Method of Loan Daily savings
Repayment
Information On JEFAM Rural Credit Program
Target Clients: Agro-processors in rural communities, rural traders in farm produce
and food vendors in rural communities;

45
 Purpose: Working capital
Gender Distribution 80% women, 20% men
Ratio
Loan Amount first cycle:GH50; Second cycle:GH100; Third Cycle:GH150;
Fourth cycle: GH200
Interest Rate 5%
Term of loan First Cycle:16 weeks; Second cycle: 20 weeks; Third cycle:24 weeks;
Fourth cycle: 6-9mths
Collateral Group Guarantee and personal guarantee
Conditions for Loan 20% contribution of loan amount.
Method of Loan Weekly repayments
Repayment
Total number of visits Weekly Group meetings
to customers

Information On JEFAM Start-up Credit (NEW PRODUCT 2010 LAUNCH)

Target Clients: Hairdressers/beauticians and Seamstress/ Fashion designers
Purpose: Help them set up shop, buy sewing machines, dryers etc
Gender Distribution 95% women, 5% men
Ratio
Loan Amount Approx. GHC1,500
Interest Rate 5%
Term of loan 6-24 months
Collateral None Required
Conditions for Loan Client to contribute 20% of cost of project. Client owns shop only
after full payment
Method of Loan Weekly repayments. Work and pay
Repayment
Number of Clients NEW PRODUCT INFORMATION NOT AVAILABLE
Total Loan Disbursed NEW PRODUCT INFORMATION NOT AVAILABLE

4. SWOT Analyses and Strategic Imperatives

4.1 Market Strategies For Exploiting Market

Opportunities
i Over 80% of the
population are un-
banked
Opportunities
This poses an opportunity for MFIs like JEFAM,
which can use lower operational costs as basis for
developing profitable micro-finance products that
are more suited to the socio-cultural contexts of
the majority of Ghanaians.

46
ii 46% of all households Opportunity to develop micro-credit products for
in Ghana operate non- self-employed groups engaged in small and
farm enterprises medium scale businesses (and with lower credit
risk profiles) must be exploited.
iii Women operate 72% of An existing strategy is to have a greater
non-farm businesses percentage of borrowers being women as they
have higher repayment rates and pose lower
credit risk. Products can be developed specifically
for women entrepreneurs in rural and semi-urban
areas.
iv. 21.6% of working Significant markets exist for developing micro-
females are engaged in credit for female traders requiring assistance with
trading working capital.
v. About 3.5 million A bigger market exists for lending to households
households process and entrepreneurs engaged in agri-business.
crops or fish for sale or Specific and robust products have to be
for use by households developed to take advantage of this market while
avoiding the risk traditionally associated with that
sector
vi. A significant This will ensure that gradually susu schemes will
percentage of target cease to erode market share of more formal
borrowers have microfinance institutions. To capitalise on this
negative perceptions opportunity JEFAM should carry out CSR activities
about susu schemes to engender community engagement and
and a greater credibility. JEFAM must work on its physical
confidence in formal evidence(office look) modelled around that of
financial institutions formal banks to achieve significant market
confidence.
vii Competitive pressure More formal financial institutions have greater
. from Savings & Loan obligations to shareholders and are subsequently
Companies and Rural slower and less flexible in decision-making. JEFAM
Banks can capitalise on its current flexible structure to
achieve faster strategy implementation.
vii Emergence of mobile Using Mobile Phones, JEFAM can develop
i. money services in independent collection points, therefore cash in /
Ghana (e.g. MTN cash points using the Human ATM models across
Mobile Money, txt-n- areas of operations and in concentrated
pay) commercial areas without a need to have a brick
and mortar presence. Increase the market
penetration by serving the currently un-banked
population through their Mobile and Network
coverage to bring services to them at a
significantly lower cost and less paper work.

47
4.2 Market Threats
i. Unstable and high
inflation rates and high
BOG base rates
Strategies To Overcome Market Threats
There is a need to develop operational models
that will further reduce the cost of lending (e.g.
monitoring and control) and make up for the
cost introduced by lower inflation.

Additionally, more innovative methods of credit

risk appraisal have to be developed to ensure that
more creditworthy applicants have reduced
interest rates.

ii. A liberalized financial There is a need to increase outreach to untapped

system and markets, achieve fast penetration in these
subsequent low markets and obtain economies of scale as a way
barriers to market of increasing barriers to market entry for other
entry in Ghana has MFIs.
introduced an intensely
competitive
environment

iii. Subsidized loans under A key strategy is to obtain funds from

current government Government and Development Partners Poverty
poverty programs Programmes at lower or no interest for on-lending
threaten to undermine to borrowers.
loan performance of
MFIs

iv. General earnings and There is a need to provide some form of business
discretionary income of development services to target entrepreneurs to
potential target enable them turn over capital quickly and more
borrowers are low effectively. This is also linked to the issue of low
literacy levels and there is a need to link potential
borrowers to adult learning initiatives in various
communities to help them understand their
market and acquire basic skills required to run
businesses effectively.

v. Credit Reference More robust and innovative methods have to be

Systems still in developed with regards to assessing credit risk of
developing stages individual applicants; alternatively creative
methods for ensuring repayments must be
pursued. Effective loan monitoring must also be
pursued to counter this threat.

vi. Innovation diffusion in Technology-driven services e.g. loan repayment

rural Ghana is very low by mobile money etc must only be launched after
extensive market research and testing to make
sure adoption would be fairly fast to justify
investment.
48
4.3 Company Strengths Strategies To Consolidate On JEFAMs
Strengths
i. Two board members Directors have experience and training that can be
have over 9 years directly useful to microfinance operations. The
banking experience emergent strategy is to tap into the cumulative
extensively in credit experience and expertise as a cheaper alternative
administration. Two to recruitment of full-time permanent managerial
other members have staff.
finance and accounting
knowledge, one with
over 11years tax
administration, two with
several years of
entrepreneurial
experience.

ii. JEFAM retains the Consulting Firm will audit JEFAMs marketing
services of a Marketing performance at a fair retainer; JEFAM will benefit
Consulting/ Research by having the expertise and the objective
Firm that undertakes its assessment of its performance at a low cost.
product development Consolidating on this strength will provide an edge
research and evaluates over competing MFIs who do not give priority to
its marketing marketing audit and market/consumer research.
performance on a
quarterly basis
iii. Clear governance JEFAM key advantage from this strength is the
structure and systems assurance of planning, expenditure and
outlined in Company implementation control. This can be translated
Policy Document. into more efficient operations.

iv. JEFAMs current products In the longer term, this advantage can be
are developed through translated into a broader strategy of achieving
engagement with its market leadership, greater market penetration and
target market and loan higher profitability as opposed to competitors.
acquisition process is
relatively faster and
easier than competing
offers
v. JEFAMs interest rates Lower interest rates that lead to a low-cost
are relatively lower advantage for borrowers will ensure higher
49
 compared to that of
other micro-credit
interest rates in its
target locations
vi. JEFAM has operated
profitably for the past
two years
vii JEFAM has an effective
i. management
information system with
branches locally
networked and loan
management systems
integrated into the
general ledger
ix. High Loan Recovery Rate
4.4 Company Weaknesses
i. Current capitalisation
limited only to equity
financing; subsequently
has low capitalisation
that limits extent of
market outreach.
ii. JEFAM did not undertake
any above-the-line and
below-the-line of its
product, services or the
organisation in the past
year.
iii. JEFAMs current outreach JEFAM would need to diversify into other viable
is currently limited, as it
currently operates only
in Kasoa, Weija SCC and
Agona Swedru. JEFAM
has not fully utilized the
Mobile Banking
approach to enhance its
outreach.
barriers to market entry by new entrants and also
ensure that competitive pressure from formal
institutions is minimised.
JEFAM can consolidate on its learning and
refinement of profitable microfinance models to
achieve greater market performance and
competitive advantage.
JEFAM can build on this strength to ensure greater
operational effectiveness and efficiency translating
into a leaner organisation, better monitoring and
better records management.
Establish a loyalty rewards scheme that ensures
that customers who do not default on loan
schemes are provided with greater incentives to
re-borrow.
Strategies To Overcome JEFAMs Weaknesses
JEFAM can pursue funds available from
Government and Development Partners Poverty
Reduction Programmes which can be lent-on to
end-borrowers. A key strategy is to develop a
website that will offer JEFAM a global presence and
attract funding and investment from varying
sources.
While the current outreach for JEFAM does not
justify heavy expenditure in above-the-line
advertising there is justification for greater
investment in below-the-line advertising (mobile
van, flyers, banners in key locations
geographical markets to offset competitive
pressure in current markets and ensure greater
penetration and overall market share across
Ghana. A rollout into virgin markets would ensure
first-to-market advantages and greater economies
of scale for JEFAM in the long term.
50
 Summary 5: Market Risks and Strategic Imperatives
Risk Effect JEFAMs Strategies to Counter
the Risks

1. Lack of credit MFIs unable to track Undertake thorough hard and

referencing system location of soft methods of credit risk
defaulting clients assessment. E.g. interviewing
and to determine people who know applicants within
extent of debt community and assessing credit-
burden with other worthiness by multiple methods.
financial institutions
Work closely with Apex Institutions
and other financial institutions
within communities on the creation
and sharing of database on
borrowers.

2. 2. Lack of Higher levels of Carry out CSR project in target

business mismanagement communities on various areas of
/management skills and low profits for business development and skills
on the part of
entrepreneurs acquisition. Continuous monitoring
entrepreneurs
leading to higher of clients to identify areas where
default rates borrowers need support with their
businesses.

3. High dependency This increases Carry out thorough assessment of

ratio (number of financial burden on borrowers background, including
people who depend borrowers and leads number of dependants etc and
on borrowers for
to higher default declining loans or reducing loan
51
 livelihood) rates size accordingly.

4. Nascent/weak Inadequate and Develop other legal methods of

commercial law tenuous commercial enforcing payments from defaulting
system in Ghana court processes for borrowers outside the court
enforcing payments system.
from defaulting
borrowers

5. Poor cultural High default rates Default triggers in place to monitor

attitude towards leading to slow unpaid instalments. Employ
loan repayments growth systems that support immediate
follow-up on missed payments

Thorough follow-ups done before

Increase operational
loan is disbursed
cost from loan
recovery measures Continuous and consistent
visitation to clients. Daily
monitoring is done for the Small
High bad debt loan product and weekly
provision monitoring for all other products

Penalty charge for default on

instalment implemented.

6. High Cost of serving Increased Increase outreach by serving more

clientele. Many operational cost and clients
small loans should reduced profitability Set the appropriate pricing/Interest
be given to many rate to make up for the risk
clients to get the
required revenue. Introduce efficient service delivery
systems

Effective cost control measures in

place

52
 5. Facts behind the Figures
The financial projections provided in this document depict the market
penetration strategy to be adopted by the Directors of JEFAM for the next 5
years ending 2014. The annual figures of the financial model can be seen in
the appendix; however a detailed model (showing monthly, quarterly and
annual financials for the 5 year period) can be accessed through the attached
Microsoft excel sheet attached to this information memorandum.

5.1 Operations
The company currently operates 3 branches which were opened on the
following dates:
Kasoaa Branch 1st February 2008

Weija SCC Branch 1st April 2009

Swedru Branch 1st February 2010

From a branch network of 3, the company is looking to achieve a total branch

network of 10 by the end of 2014 by establishing branches in aforementioned
district capitals starting from May 2011. This plan would be facilitated by the
debt finance currently being pursued by the company.

Currently, monthly disbursement stands at GHC50,000 but would increase by

a minimum of 25% upon the introduction of a branch. By the end of 2014, the
company would be self sufficient and in a position to disburse more than a
GHC1M per month at a projected provision for bad debt of 5%.

Currently the proportion of women to men is 92% to 8% for Jefam Small Loan
product and 95% women to 5% men for Jefam Rural Credit. As a policy, JEFAM
would not want male population for any of its products to exceed 10%.

Over the period, the company would stick to its repayment terms as per its
aforementioned product portfolio outlined and would vigorously pursue the
Jefam Start-up Loan product also from May 2011.

Other products like the Jefam Business Loan12 which has been abandoned due
to insufficient funds would also be pursued from the second half of 2011.

12
The Jefam Business Loan is one of the most attractive loan products to be developed by
JEFAM which seek to serve various Merchants a little bit above the micro scale of business.
This loan product which influenced much of 2008 profits has been abandoned due to lack of
funds and the need to serve a wider clientele base.
53
5.2 Financial Performance
The key drivers to the revenue projections are the amount of funds disbursed
per period, repayment rate charged, interest rate incurred and operational
expenditure incurred in a period.

Net profits in the 2009 declined as the JEFAM discontinued its Business Loan
product due to insufficient funds and the need to reach out to a number of
clients.

The first half of 2010, saw the company plunge into a loss position of
GHC27,511 from 2 profitable years. This is because the company decided to
expand its footprints into a very attractive area, Swedru and had to borrow
from its lenders to make up for additional staff, infrastructure and overhead
cost. JEFAM however expects this position to decline to a projected loss
position of GHC6,959. The company is expected to payback GHC40,000 of the
funds borrowed from the expansion phase by the end of the year and the rest
paid by the first half of 2011. The interest rate on this facility is at 33% per
annum.

Over the 5 year period, net interest income is growing at a compound annual
growth rate (CAGR) of 157.92% from GHC91,648 in 2010 to GHC10,456,594 in
2014. This is as a result of an average 40% margin on the cost of borrowed
funds earmarked for disbursement over the period.

Operational expenditure over the 5 year period averages 33% of net interest
income which results in an average net income margin of 109% over the 5
year period from a projected negative position of -GHC36,584 in 2010 to
GHC9,971,007 in 2014.

54
Figure 5 Highlights of Financial Performance (2008 - 2014)

Figure 6 Narrow View of Highlights of Financial Performance (2008-2010-2)

5.3 Financial Position

JEFAM is looking at financing the larger part of its expansion project with debt
finances as its business model is able and viable to support it. The company is

55
committed to settle all debt obligations; both local and foreign by the end of
2012.

It is however going to disburse loans as per its standing guidelines whiles

maintaining a competitive position with regards to interest rate charged on
loans disbursed. Excess funds would be invested in short-term tradable
securities to permit the company to be liquid at all times throughout this 5
year period.

Figure 7 Highlights of Financial Position (2008 - 2014)

Figure 8 Narrow View of Highlights of Financial Position (2008 -

2010-2)

56
 5.4 Uses of Funds

For the next 5 years, JEFAM seeks a debt facility of about GHC933,177 as it
strongly believes its business model is well positioned to payback this funding
by the end of 2014 as depicted in the financial model appended to this
document.

Market development through the expansion of branch network with a sense

for sustainability is the overall strategy of the company for the next 5 years.
By the end of year 2014, the company expects branch network to reach a
total number of 10 from its current number of 3. In that regard, JEFAMs
Directors has decided to maintain the outsourcing of market and product
research activities to the Bureau of Market and Social Research Limited, its
long standing consultants, whiles the company focuses more on its core
activity, corporate social responsibility and both below and above the line
marketing as outlined in the marketing plan appended to this document.

57
These market and product research activities would be engaged in the first
and last quarters of the year when trading activities are high due to
agricultural harvest seasons and festive activities.

The potential business expansion areas with remote locations would be

heavily serviced with group loans as JEFAM intends to leverage on its
intensive periodic capacity building, corporate social activities after market
research and community loyalty; a hallmark of these traditional economies.
(all detailed in the marketing plan appendix 6.4 & 6.5)

JEFAM has also budgeted as part of its branch infrastructure, an amount of

GHC52,500 to cater for rentals, office equipment and accessories, furniture &
fittings and general branch visibility for 2 branches. The company would be in
a good position to finance further branch expansion when its branch network
totals 5 whiles still maintaining a recovery rate of above 96%. This position
would further be bolstered when the company enrols additional products such
as the Start-up loan product; which is currently unavailable on the market, to
encourage individuals who have undergone training under a specific
profession to set up their own businesses whiles banking with the institution.

The majority of the funds being sought would be working capital for on-
lending to the public engaged in sustainable businesses and a good sense of
responsibility towards savings. Currently, JEFAM disburses about GHC50,000
per month to a total number of 150 customers. This figure is supposed to
increase by over 50% over the next 5 years to an average monthly clientele
base of 300.

The company as part of its general expenditure would set up rigorous

controls, continuously train and engage competent staff and leverage
information technology in the provision of services.

58
 6. Appendix

6.1 INCOME STATEMENT (2008 2014)

59
6.2 BALANCE SHEET (2008 2014)

60
6.3 CASH FLOW STATEMENT (2008 2014)

6.4 MARKETING PLAN

61
62
63
6.5 KEY ASSUMPTIONS BEHIND THE MODEL

64
65