Owe Money, Pay Money

29 March 2011 at 15:00 9 comments

By Mei-ing Cheok, KF14, Ghana
In Singapore, where I come from, if you were desperate enough to borrow from a loan shark (or “Ah Long” as they are not so affectionately known) and brave enough not to repay your debt on time, there are usually a few interesting messages sent to you before the heavies pay you a visit.
The name of the game is humiliation: there’s nothing like broadcasting your financial woes to your gossipy neighbours. First, you will find Chinese words painted in blood red on your door and walls, which directly translate into “Owe Money, Pay Money” (although these days, the Ah Longs have gone bilingual and sometimes paint “O$P$”). If that isn’t enough motivation for you, you might find a pig’s head at your doorstep. After that, it gets physical.

So when I met Evans, an employee of the Christian Rural Aid Network (a local microfinance institute that partners Kiva in Ghana), and he informed me that he was a Recovery Officer, I got a little nervous.

Me: So, what exactly do you do?

Evans: I recover loans from borrowers who have defaulted.

Me (gulp): Er, how do you recover the loans?

Evans: Why, I just track them down, of course.

Me: And then what? Does it, er, haha, get violent?

Evans (looks at me like I’m a half wit): No, of course not. I just arrange a repayment schedule with the borrower. I return every week to collect the payment.

Me: That’s it? Has anyone given your any trouble?

Evans: Yes, that’s it. The biggest challenge is looking for the borrower, especially if they have moved to another village or town. But once I locate them, they’re very co-operative. I arrange a time that is convenient for them to meet regularly to collect the repayments.

Evans, the Recovery Officer

Now Evans is a big guy, but he looks more like a teddy bear than Mr T. I really can’t picture him hurting a fly. But Recovery Officers get a 30 per cent commission on money that they recover and have no base salaries. So what’s to stop them from heavy handed tactics? It was time for a chat with George Tokpo, the Director of Operations at CRAN.

Mr Tokpo was very candid and painted a less rosy picture. He admitted that back in 2008, CRAN was having problems with repayments and their loan portfolio was looking less than healthy for a number of reasons: poor economic conditions, presidential elections and the way the loans were collected. The latter reason was within CRAN’s control, so they decided to revamp the way they did things.

Most of these low income borrowers have no property to offer as collateral, so many microfinance institutes, like CRAN, offer loans to solidarity groups rather than individuals. In essence, members of the solidarity group – usually women from the same village or community – vouch for each other. If one member fails to pay up, the others have to pay for her. In other words, they provide a mutual guarantee. (Read more about how CRAN empowers women here.)

A group of borrrowers from Dompoase Village


CRAN found the theory to be quite different from its reality. Back in 2008, they disbursed the loans and like traditional banks, waited for the group leader to collect loans back in their villages and deliver the payment to CRAN. However, there were a few hiccups:

  1. Some solidarity group leaders collected the repayments but chose to keep the money.
  2. Some members didn’t attend solidarity group meetings and didn’t make payments.
  3. There were few or no records kept so it became difficult to determine who the delinquent members were.
  4. CRAN loan officers were not able to anticipate problems with the borrowers or have a good understanding of their business issues because they were so detached from them.

and now…

The prevention of defaults is after all, better than the cure. The CRAN team has taken a more proactive approach to disbursing loans and collecting repayments:

  1. Loan officers now run financial education lessons in villages before the loans are disbursed
  2. They have weekly meetings at the villages with borrowers to collect their payments. These are meticulously recorded in journals and every borrower gets her own passbook.
  3. Importantly, borrowers also now have savings accounts, which help them repay their loans.
  4. CRAN has also started providing comprehensive insurance policies to help borrowers pay for major expenses, such as funerals or accidents. (CRAN has a strict policy of disbursing loans only as working capital, not for expenses.)
  5. CRAN also ensures that no other MFI works in the same communities so that borrowers are not over-leveraged.

These steps help prevent over-indebtedness and the resulting defaults on loans.

Loan Officer, Ayisha, busy recording repayments and savings

Mr Tokpo says, “Microfinance is not like traditional banking. We need to be on the ground with our clients to understand and anticipate problems. But getting our Loan Officers and Field Officers out in the field so often is expensive and it is a cost that we need to bear in order to make this work.”

Part and parcel of a loan officer’s work

Back to recoveries…


Today, CRAN is still trying to recover bad debts from 2008. It has employed Recovery Officers (ROs) and new methods:

  • Instead of demanding lump sum payments, ROs now work out a schedule for smaller (and more manageable) repayments. These meetings take place at a time that is convenient to the borrower.
  • In many instances, the interest on the bad debts is forgiven
  • When dealing with difficult cases, different ROs have different methods (see table) but Mr Tokpo is consulted first before any action is taken. Often, he meets these clients personally.

Given the recent spate of horror stories from India, Andhra Pradesh specifically, about how borrowers were over-leveraged and the thuggish tactics used by lenders to collect payments, it is a relief to know that at least with CRAN, steps are taken to educate borrowers and that collection methods are non-threatening.

Mr Tokpo also assures that me red paint or pigs’ heads are not part of CRAN’s modus operandi. Phew.


Table: Recovery Methods

When collecting bad debts, ROs employ different methods to get repayments on bad debts when borrowers get difficult. In other words, when they have the ability to pay but avoid doing so. They usually get help from third parties:

  • Village Chiefs:  Village Chiefs, not wanting their village to be blacklisted by MFIs, would usually intervene.
  • Family members: Family members sometimes help repay the debt.
  • Police: Only in the most difficult cases and only when there is fraud involved (the group leader keeps the members’ repayment monies) do the police get involved.

To help keep borrowers’ dignity intact, CRAN has stopped using its vehicle, which has its logo emblazoned at the sides, when collecting repayments on bad debts. Or if the use of the vehicles is required, borrowers are contacted in advance to arrange a place and time to meet.

Loan Officer, Village Chieft and Solidarity Group Leader at the weekly borrowers' meeting

Mei-ing is a Kiva Fellow in Cape Coast, Ghana, working with the wonderful team at the Christian Rural Aid Network, a Kiva Field Partner.

Find out how you can make a loan or how to become a Kiva Fellow. To lend to CRAN’s borrowers, join the CRAN lending team.

Mei-ing’s previous posts:

Empowering Women through Microfinance in Ghana

Celebrating Women around the World

Gone Fishing

Hey, Soul Sisters!

Have Tro Tro, Will Travel in Ghana

Entry filed under: Africa, blogsherpa, Christian Rural Aid Network (CRAN), Ghana, KF14 (Kiva Fellows 14th Class), Kiva Field Partners. Tags: , , , , , , , , , , , , .

Performing meaningful work for Kiva while learning a new culture What was your last business trip like?


  • […] measures to ensure they collect on their money, whether through threats, public humiliation, leaving pigs’ heads on doorsteps, seizure of other family members’ assets (all of their assets), or outright forceful and illegal […]

  • […] measures to ensure they collect on their money, whether through threats, public humiliation, leaving pigs’ heads on doorsteps, seizure of other family members’ assets (all of their assets), or outright forceful and illegal […]

  • […] Owe Money, Pay Money Country: Ghana / Fellow: Mei-ing Cheok (KF14) Mei-ing is very relieved that her partner microfinance institution takes a much gentler and more respectful approach to collecting on delinquent loans than loan sharks back in her native Singapore. […]

  • 4. Jeff Bochsler  |  30 March 2011 at 13:51


    One point you mentioned as to reasons for defaults in 2008 is quite interesting and in-line with some personal research I’ve been doing. Currently, in Argentina, it is an election year, so many hand-outs are going out by different parties to win votes. Because of this the normal clients for microloans are not seeing the need. I’m wondering if these sames influences were present in Ghana in 2008. Let me know know if you have any further background on this topic! …I’m only ankle deep in the idea, but am hoping to better understand this reality.

    From those working out of Cuzco, Peru for KIVA, we salute you and your efforts,


    • 5. cheok-a-blog  |  31 March 2011 at 08:25

      Hi Jeff,

      Thanks for your comment. What I understand is that in Ghana, the economy was impacted by presidential elections because everyone adopted a wait-and-see attitude. They were concerned the new administration would freeze or cancel certain projects. No one was buying, banks were not lending. In other words, no money was moving. This had a knock-on effect on people who were especially dependent on the local economy (or local spenders) – CRAN’s borrowers.

  • 6. Tama  |  30 March 2011 at 04:26

    Fab read Ah Mei…I always learn something new from your blogs and even tho we are miles away, it seems that we are there experiencing it….
    Glad to know there’s a process in place….their version of Ah Long is quite smart….X

  • 7. Dreamer  |  30 March 2011 at 02:17

    Very interesting read and very informative! I love the insights and happy to hear that CRAN does not believe in red paint or pig’s head! Bravo !!!

  • 8. deothermom  |  30 March 2011 at 02:08

    mei your corporate background definitely showing:) think you should ask Mr T to take Mariam with him when trying to recover loans and tell borrowers she will stay with them and eat them out of house and home until they pay…i feel safe abusing mariam as i know she seldom reads the blogs….hehe…also tell them about walt!

  • 9. Pot Head  |  29 March 2011 at 23:43

    Wah Lao! This is more like a Standard Operating Procedure/Manual than a usual blog! Takes more juices in order to digest! LOL

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