Why ‘Susu’ works and why it doesn’t

It was very popular among the workers at the time, and I would hear people talk about “This month it is my turn”. As usual, the introducer, a colleague of mine, spelt out the eye-catching redemption benefits first, knowing that I, being so sceptical, would not agree to participate. When he was sure I was hooked, he began adding to it how it was contributed to. Fortunately, (or unfortunately) it was too late for me – I was sold, and I plunged in!

There were four of us, and we set out to each contribute what was then five hundred thousand cedis (fifty Ghana cedis now) every month. The contributions, a total of two million cedis (or two hundred Ghana cedis), would go to one of us, and we did that in turn. Two million cedis was a tidy sum then. I was to be the last on the list.

For three months, I contributed in agony. It was a gentlemen’s agreement among peers, with little recourse for speedy settlement and restitution, should a dispute have risen. Somehow, I managed to survive the three months. On the fourth month’s payday, I went about like an eager loan collector and received one million, five hundred thousand cedis (one hundred and fifty Ghana cedis) from my three colleagues. They were not as eager to pay as I was to receive, but they knew they had to, and they did. I had earmarked a much-needed purchase, and I quickly went to town to do just that.

One Day…

Susu is a very popular means of saving for many people in the informal sector. It is usual to spot the susu collector in a marketplace, either in a small, brightly-coloured kiosk that renders mobile banking services, too or from his or her clothes, an overcoat with many pockets strapped across him or her.

The susu collector serves as a source or lender of soft loans, which are usually not collateralized but carry interest. The money is collected daily from a contributor, with contributions as low as one Ghana cedi, and recorded with the contributors’ signatures or thumbprints. At the end of a period, usually a month, all contributions collected, save one day’s, are returned to contributors.

The one-day contribution held by the collector serves as his or her commission.

There are different forms and variations of this scheme. One is as practised by the susu collector outlined above. Another is by a loose agreement between friends or relations, like the one I had with my colleagues. All these end up as a cooperative way of building savings over a period.

It brings some predictability and, hopefully, discipline. With susu, the contributor can set aside money that would have been spent. At the end of the period, the contributor will have money to do something that daily savings would not be sufficient to do.

How did susu start? The practice has been with many African, Latin American, North American and Caribbean communities for a very long time. In Twi, ‘susu’ means ‘to measure’ or ‘to plan’. It is probable that the practice spread from Africa to the Americas and Caribbean countries through the slave trade. Today, susu is practised in Jamaica, Guyana and many countries in South America as well as in the US, especially among African-American communities.

There is no doubt that susu enables us to gather tiny amounts of money over a period without having to worry about taking from what we gather to spend before the period elapses. The money is gathered and given to someone to hold.

In the case of the marketplace susu collection, the susu collector holds the money thus gathered for a small fee. As contributors, we will not have access to the money, our own money, till a month has passed. This is especially helpful where we find it easy and tempting to dip our hands into our own kitty beforehand. This makes susu very important.

A useful aspect of susu at the marketplace is the access to short-term credit it gives to traders and artisans. Small businesses can sustain their business activity without having to post collateral they do not have. Usually, also, the monies required (as small as two hundred Ghana cedis) may be smaller than would be obtained as a loan from a commercial bank.

Additionally, credit is made available to small businesses at their doorsteps, with very little bureaucracy and paperwork. The collectors have intimate knowledge of their clientele and their businesses, as well as of the local economy. Transaction charges are little or non-existent.

The notion of setting aside money either for a rainy day, to build up funds for operational use in a small business or for long-term investment is an excellent one. Susu can help us to easily accumulate enough to begin an investment plan without denting our finances. Susu could be a good start to a long-term investment plan, e.g. pension planning or wealth generation. It is ‘easy to enter. It is easy to exit, too. After a few months, or probably in less time, we would have accumulated enough to begin a plan.

The Drawbacks

Susu practice has a number of drawbacks, however. For the contributors, there is a risk of the collector retaining possession of the funds till the time is ready for disbursement. What if the collector absconds one day with the monies collected? What if the collector gets robbed? What if the book of records gets missing and proper records cannot be kept and verified? The collector is well known to the contributors, but there is an overdependence on trust. There is really no proper linkage of savings and credit, so contributors do not get rewarded appropriately when their funds are used as credit. When problems arise, there is no legal recourse for stakeholders to find comfort and redress.

An inherent fact, and a disadvantage, is that susu precludes the notion of the time-value for money. It, therefore, exposes funds to inflation and erodes their real value. A commission is expensed, and yet no interest is paid at the end of the period.

To some extent, fears are mitigated by operations of the Ghana Cooperative Susu Collectors Association (GCSCA), which has a mandate from the Bank of Ghana to supervise susu collectors and their activities. GCSCA licenses members and provides the platform for training its member collectors. Although regulation may not be as stringent as is in the case of more formal commercial banks, membership of the Association serves to grant a level of legitimacy and credibility.

However, susu collection is still viewed as an informal sector tool that may or may not have some form of regulation to guide and regulate its activities. Many small groups, like my colleagues and me many years ago, operate susu schemes guided solely by trust and mutual respect. If something critical goes wrong, it would be better to imbibe losses and move on than to litigate or have arbitration. It is for this reason that it is usually confined to groups of people who are close (good friends) or who have a common bond (family). Beyond such groupings, susu may not work. To this day, I cannot even tell whether being first on the list to take contributions is better than being last on the list.

No doubt, susu collection is an important financial vehicle for saving and probably gathering to invest in a regulated scheme or business venture. It may not work for some because it is informal, with little regulation. Nevertheless, it works well because it helps us save while removing our access to the funds till a certain period.