Susu as a Vehicle to Advance Economic MobilityMar 19, 2021 10:22AM ● By Nana Ama Addo. Additional reports by Boitumelo Masihleho, Belinda Nzeribe, and Candice Stewart
Access to finance is an issue many entrepreneurs run into. When small business owners seek to launch their endeavors or move to the next level, obtaining loans can be an insurmountable barrier to business growth. To remedy this issue, many communities of the African Diaspora, including those in the informal sector and more, use a traditional African savings method known as Susu.
The term Susu evolved from the Yoruba term ‘esusu’, which is used to represent the financial institution. It involves a group of people periodically contributing a specified amount of money into a fund, with each person taking turns getting the lump sum contributed weekly, monthly or so forth, until the cycle ends. This community banking method is based on trust.
For centuries, Susu, in its various forms, has helped African community members to poll sizable amounts to accomplish specific goals. Through the Trans-Atlantic Slave Trade, this method spread to the Caribbean and Americas. Susu comes in handy for small business owners and informal workers who face difficulty living beyond hand-to-mouth and lack the means to save. Unfortunately, there are some in the African American communities who tried to exploit the process for selfish gains while others liken it to a pyramid scheme.
Through an analysis of the successes of Susu groups in Nigeria and America, and its institutionalized practices in Jamaica and Ghana and other parts of Africa, a duplicatable method is revealed.
Part I: Susu Success Stories
Nigeria: Esusu as Community Collaboration and a Nation Building Strategy
Uwem-Ima Nkereuwem is a Nigerian born investment analyst from the Ibibio tribe whose family has practiced Susu for generations. The informal Susu group, which the community calls Etibè, relies on goodwill and is often used to sponsor a person to go abroad to school, build houses, pay children’s school fees and more. He says women who have already built relationships amongst themselves are usually the heads of Susu in his community.
Describing the process Nkerreuwem said, “Etibè is predominantly managed and run by a group of women that often go to church together or are friends. They pick a leader, draw stones, and then participants pick them up. Whoever picks the first number is the first to get the money. Then they agree on an amount. Every month or every market day a member gets the funds. However, if a member has an emergency or a specific need, another person could say, ‘Okay I don’t need this money, you can take my place’. Membership is optional and it could be an entire community.”
If an informal Susu method is to be used, it may be helpful to operate it among permanent members of a community who have already established relationships. Nkereuwem says practicing this discernment has worked in his community. “The people who go into this business successfully are those who have a solid reputation in the community. In Nigeria, your reputation as an African person within a community is very important, because the consequences are very dire.”
Nkereuwem utilizes the savings strategy to build intergenerational wealth through real estate. “I’m currently putting one together with 10 of my friends…My goal is to buy properties all over Africa, because we want to build intergenerational wealth. We are each putting $1,000 aside every month…It is a way to develop the community without one person carrying all of the burden and the risks that come with it.”
Nkereuwem sees Susu, as a practice that African countries can use to build the continent. “Can you imagine if all the African governments were doing Etibè, putting countries together, and using it to develop the country. There would be no need for us to borrow money from the colonial country. It is a lack of vision, lack of understanding and just not seeing how easy the impact could be.”
In addition, Nkereuwem believes incorporating the idea of Susu into education systems will encourage financial literacy in the youth of the African Diaspora. “Because it’s a very private thing, if Etibè can be taught in schools to encourage the young ones, if the family can introduce it in churches, family centers, and communities, it can really change the economic direction and relationships between families in the communities so they can become self-reliant. For example, if their roads were bad, they could all put money together and fix the road instead of waiting for the government.”
America: The Results of a Long Term Vision
Wright says her organization uses a digital randomizer to pick the order of payout, and if someone needs a payment earlier, they will switch with a person who has an earlier payout time. They allot $300 or $500 loans. The last person on the payout list gets the equivalent of their savings.
Wright has been able to lead the Susu group to create equity for community members. She describes their impact: “Our group has a Kensington restaurant that feeds over 25,000 free meals to kids. We were the only USDA Summer Lunch Administration operating during pandemic. We also issued mortgage to a single parent, and are now completing our 7th real estate deal. We purchased five lots in Arkansas for people to have relief from the city. We sold a property in Strawberry Mansion and shared the profit.”
Integrating Susu into the Microfinance Industry in Jamaica
Through the Trans-Atlantic Slave Trade, Susu traveled to many places in the Caribbean, including Jamaica, where it is known as Partna. Like other places in the diaspora, Susu is practiced informally. Garvin Grandison, Manager of Regulatory Reporting in the Finance Department at JN Bank Ltd, notes that JN Bank has integrated the Partna system into their services. Grandison says, “Partna is essentially a collective saving program. It is brought out of a need by people to provide themselves with liquidity or capital accumulation. Liquidity just means ready access to funds and most in the working class or the poor, don’t have that,” he says.
One person in particular, Melissa Allen, uses her savings from the Partna to pay for her children’s school books, supplement their school fee payments, put food on the table and pay for transportation expenses.
“I never saw it as a means of economic mobility. It was just a means to an end for me. I knew that if I throw four hands of J$5,000 (Approx. US $33.50) every month over a period of ten months, at some point, I would be able to get J$50,000 (Approx. US $335.00) for every single draw. That total sum would be sufficient to pay for whatever bill was more important at the time,” Allen tells FunTimes Magazine.
According to Allen, the banker in a Partna usually gets a percentage of every draw that someone receives. This is how some people use Partna as a source of income. The ‘banker’ in the Partna is likened to the bank at the instructional level. They operate similarly. So the percentage the banker gets is akin to the maintenance fees a bank charges to keep your account in order.
Allen who used her lunch money to become a member of Partna while in high school, used her savings to purchase school books and personal items.
The institution, JN Bank Ltd, operates its own version of the Partna Plan called the JN Partna Plan.
This plan is a savings product that is fashioned off the traditional Partna plan because people understand it better and it’s more relatable for them. However, it works a little differently than the original. Mr. Grandison explains the institutionalized process:
“You start off with a little as J$1000 (Approx. US $6.70). The least amount is as low as it is to catch the working class, unemployed and underemployed,” says Mr. Grandison. “You pay x amount of money for a certain time period and you get a certain amount of interest at the end of that period. The bank calls it a bonus,” he says.
“Whereas in the Partna plan, individuals can decide when they take their draw, at the institutional level you withdraw at the end of the agreed period when starting the account with the bank,” Mr. Grandision tells FunTimes.
Continuing, Mr. Grandison shares the following:
“Different institutions may come with different benefits because they’re part of conglomerates or they’re part of a group of companies that offer a myriad of services. So being part of an institutional Partna plan will allow individuals to access discounts from companies in conglomerates. It sweetens the deal.
He added that “It works as a regular savings account and targets, for the most part, persons who are anti-banks for various reasons. The marketing of the product is what gets the buy-in. This gets people used to and familiar with transactions at the institutional level leaving the door open for them to gain access to debit cards, credit cards and other institutional banking tools and services.”
Similar to Nkereuwem’s experience, the banker in the Partna system in Jamaica is oftentimes a woman. The logic is that the woman is a trusted person within most homogenous groups/communities. At the traditional level, it is said that the woman usually manages the family better than the man. She knows the details of every account, knows where all the important documents are stored and manages the familial expenses well. This further highlights the importance of a trusted person to be a leader of Partna or Susu.
Ghana: MABIA Microfinance Services
Susu was introduced to Ghana by Yoruba traders. In 2018, there were 604 microfinance institutions in Ghana registered with the Ghana Co-operative Susu Collectors Association, which provides a small glimpse of the prevalence of Susu in Ghana.
In 2018, the Daily Graphic reported that persons working in Ghana’s informal sector, who are most likely to participate in Susu groups, made between GHC150-GHC450 monthly, about (USD $30- USD $77). In 2011, 80% of the Ghanaian population was recorded to be working in the informal sector, which means the financial realities for a substantial amount of the population is quite stark. For people working low-income jobs, Susu may be a means for them to invest in a new venture.
Susu groups that are not governmentally institutionalized form alliances based on trust, and formalized Susu groups operate as audited microfinance institutions. In Ghana, microfinance institutions operate under the laws of the Bank of Ghana. MABIA Microfinance Services in Ghana is a Susu group that has been in operation since 2011. Augustus Akanware, Managing Director of Operations at MABIA, gives insight to the processes of Susu in a Ghanaian Microfinance society.
Augustus Akanware describes traditional Susu as a system that involves: “petty traders, a financial group getting agents, visiting clients houses and doing savings for them.”
To enforce security on both ends, and in accordance with a process mandated by the Bank of Ghana, participants need a current ID, a definite place of residence, a cartograph for a person’s home or place and a bill to open an account at MABIA.
Akanware says, “Before they brought certain restrictions, microfinances (at MABIA) were discussed in the hundreds of thousands. It used to depend on the financial capability of the institution. There are competitors who also did transactions like that and ran into problems. Because of that, Bank of Ghana brought in regulations and they are limiting the amount of loans that we give. Now with microloans you cannot discuss more than GHC ₵20,000 (Approx US $3,436.00). If it is a part of savings, a person should not have an account of more than GHC ₵50,000 (Approx US $8,591.00).”
MABIA alters their Susu processes to fit both the needs and assets of their clients while protecting the business interests of the institution. Akanware says:“In the industry, people participate in Susu for three to six months before being able to apply for a loan. We (MABIA) look at the liquidity of the business that the person is doing and the collateral. It doesn’t matter if you just opened an account today. We give loans on the strength that the borrower can pay back. If it is an individual, we look at their collateral, including cars, lands etc, If one has land, we will give the loan and hold the land until they pay back the loan.”
As an inclusive and flexible institution, MABIA provides different services for diverse communities. One of such services is a group savings program. In this program, a group of 10 women who sell provisions, takes a loan every week, split the funds amongst themselves and make small payments over time. Now, men are requesting to have a similar program.
Akanware emphasized that for a microfinance institution’s Susu group to succeed in its mission, it must have strict structures to monitor in-house and field employees handling of customers’ deposits to prevent internal fraud.
Part III: Conclusion
In South Africa, Susu, known as Stokvel, is reported to generate R44Billion Rands every year, which is equivalent to almost US $3,000,000,000. It has been reported that most informal workers spend most of their Stokvel earnings on consumables. MTN Space Scholar, Rudzani Mulaudzi adds that those in the informal sector would benefit immensely from business training being incorporated into the Stokvel processes, so that they could use Susu in business building strategies.
As informal workers in South Africa were 73% of the workforce in 2019, putting strategic initiatives behind Susu loans would encourage financial mobility not just for informal workers, but for the whole country. This provides a huge potential benefit for the South African government if they were to provide this type of investment in Stokvel.
Instances in Nigeria, America, Jamaica and Ghana are microcosms of grassroot strategies that have worked for centuries to hoist underserved communities of the African Diaspora.
Through analyzing Susu practices in the aforementioned countries, it was discovered that strategies to utilize the multifaceted process of Susu may include good leadership, a transformation of collective consciousness, thorough in-house auditing process, governmental or conglomerate assistance to enforce security resources and a business development inclusive program. These tactics, if combined, have the power to advance the process of economic mobility for individuals to lift underserved communities from surviving to thriving.
This article brought to you in Partnership with Broke in Philly
Nana Ama Addo is a writer, multimedia strategist, film director, and storytelling artist. She graduated with a BA in Africana Studies from the College of Wooster, and has studied at the University of Ghana and Kwame Nkrumah University of Science and Technology. Visit her storytelling brand at www.asieduasimprint.blog, and connect with her creative agency on Instagram: @chitheagency.
Boitumelo Masihleho is a South African digital content creator. She graduated with a Bachelor of Arts from Rhodes University in Journalism and Media Studies and Politics and International Studies.
She's an experienced multimedia journalist who is committed to writing balanced, informative and interesting stories on a number of topics. Boitumelo has her own YouTube channel where she shares her love for affordable beauty and lifestyle content.
Belinda is a contributor for FunTimes Magazine. She runs creative writing clubs in high schools and lives with her husband and three children in Lagos, Nigeria. Her other passion is child literacy and she manages a charity working to improve reading levels of kids in low income communities. She is becoming adept at stealing time here and there to finish her novel. Belinda holds varied degrees in Theatre and Film, Public and Media Relations, International Affairs and Pre-Primary Education.
Candice Stewart is a Jamaican content writer specializing in human interest feature stories. She is a web content writer, blogger, and budding podcaster.