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KNOWLEDGE MANAGEMENT
SPOTLIGHT Alternative Collateral for Women January 2023
SUMMARY Challenge: Women face barriers to accessing larger loans because of their low access to acceptable forms of collateral. Opportunity’s Solution: In Ghana, Sinapi Aba Savings and Loans (SASL) piloted an alternative collateral program in which women leveraged their assets to access larger loans. Evidence of Success: Women used new types of collateral to receive the loan amount requested; only one client out of 105 defaulted on her loan (due to illness); the risk was lower than mainstream portfolio. Next Steps: Dialogue with regulators to mainstream “alternative” collateral, and streamlining processes such as collateral valuation.
THE CHALLENGE: REMOVING COLLATERAL BARRIERS FOR WOMEN SEEKING LARGER LOANS In many countries where Opportunity works, in the market of micro, small, and medium sized loans, women are concentrated in micro-loans, and their businesses are similarly concentrated at the informal, micro level. Yet, many women’s businesses are poised for growth and can handle larger loans. At the micro-level, women typically use a “group-loan” product in which member coguarantee one another’s loans. However, above a certain amount – often set by regulators – group guarantees may not be used, and other collateral is required. This collateral usually takes the form of an individual guarantor, or titled, physical property – primarily land or vehicles. Because of gender norms prevailing over property rights, women have lower access to titled property. The above dynamic results in women being “stuck” at the micro-loan level, unable to access the capital they need to grow their businesses. However, despite not have access to titled property, many women do have unregistered assets that could be leveraged to access larger loans.
OPPORTUNITY’S INNOVATION: ALTERNATIVE COLLATERAL FOR WOMEN – A PILOT PROGRAM As part of a larger program that increased access to credit for womenowned enterprises, Opportunity partner in Ghana, Sinapi Aba Savings and Loans (SASL), ran a pilot program to leverage women’s alternative collateral to access loans beyond the group-loan level. The program– u Leveraged new types of collateral including insured inventory, appliances, and household items; u Reduced level of collateral (from 200% to 150% of the value of the loan) and required cash deposit (from 10% to 5%-10%); u Trained staff, clients and spouses in business practices and gender issues; u Appraised applicants’ whole financial picture as well as business cash flow; u Involved a guarantee from Global Affairs Canada, the program’s funder; u Evaluated to capture data and lessons learned.
The program set out to test whether expanding the range of acceptable collateral makes it possible for women entrepreneurs to access much needed capital to help them group their businesses without increasing the risk of default. The program ran for 16 months in 2021 and 2022 with 105 participants comprising both existing and new clients of SASL. The clients had been in business 7-15 years and were, on average, in their forties. The vast majority (90%) were in retail trade and service businesses. Ten branches were involved in the Ashanti, Western, and Central regions of Ghana.
KNOWLEDGE MANAGEMENT SPOTLIGHT highlights Opportunity International innovations and industry trends.