Osusu, savings groups and family loans: borrowing from people you know in Sierra Leone
In Sierra Leone, lending between individuals mostly runs through osusu, village savings and loan associations and family support, often backed by the diaspora, because no peer-to-peer lending platform licensed by the Bank of Sierra Leone has been identified.
Osusu, the rotating fund at the heart of Sierra Leonean markets
In an osusu, each member pays a fixed sum in leones at regular intervals and members take turns receiving the pot. Very widespread among market women in Freetown, Bo and Kenema, the system relies entirely on trust between the people taking part.
The daily osusu collector
In some markets, a collector comes round every day to pick up small sums and hands them back at the end of the month, minus a commission. The service helps people save, but the money has no protection at all if the collector disappears.
Village savings associations in Sierra Leonean districts
Supported by NGOs in rural districts, these associations bring together around twenty members who save jointly and lend the common fund to each other at a rate set by the group. Accounts are kept at meetings, often in a locked box.
Remittances from the diaspora
Sierra Leoneans living in the United Kingdom, the United States and elsewhere regularly send money home by transfer or mobile money. Part of these remittances takes the form of family loans to fund a business, school fees or a building project.
Put the loan in writing, even within the family
A simple document stating the amount, currency, timetable and the signatures of witnesses limits misunderstandings. The Borrowers and Lenders Act of 2019 governs loan agreements and collateral, which gives real weight to a clear written record of the deal.
Lending in leones or dollars between relatives
A loan made in dollars by a relative in the diaspora and repaid in leones raises the question of which exchange rate applies. Agreeing on the repayment currency from the outset avoids conflicts when the leone loses value against the dollar.
Securing a private loan with an asset
When an individual lends a large sum against a vehicle or piece of equipment, the security can be recorded in the Sierra Leone Collateral Registry. This protects the lender and prevents the same asset from being promised to several creditors at once.
Private lenders and excessive interest
Neighbourhood lenders offer weekly advances at very high interest, sometimes holding an identity card as a pledge. These practices push the borrower into a debt spiral and expose them to pressure that is hard to challenge without any contract.
From osusu to BSL-licensed microfinance
Many osusu members later move on to a group loan from a licensed institution. The microcredit in Sierra Leone page presents BRAC, the community banks and the Financial Services Associations that take over from informal savings circles.
Without a steady income, solidarity comes first
For someone without a salary, the family circle and the savings group are often the only sources of credit. The loan for the unemployed in Sierra Leone page details realistic options and the traps worth avoiding.
Peer-to-peer lending in Nigeria
In Nigeria, ajo and esusu play a role close to osusu, and digital group savings platforms have grown up. The peer-to-peer loan in Nigeria page lets you compare these models with the way things are done in Sierra Leone.
Pointers on formal credit in Sierra Leone
The loans in Sierra Leone page presents the banks and institutions licensed by the BSL. Going through an authorised lender gives you a contract, a repayment schedule and ways to complain that informal lending cannot guarantee.
Setting up a safe private loan in Sierra Leone
- Agree together on the amount, currency, term and any interest, taking the borrower's real income into account.
- Draw up a dated written agreement signed by both parties and by one or two trusted witnesses.
- Pay the money by bank transfer or mobile money to keep a record, rather than in cash.
- Record any security over a vehicle or equipment with the Sierra Leone Collateral Registry.
- Note every repayment and issue a receipt, then write a final discharge once the debt has been settled.
Costs of a loan between relatives in Sierra Leone
| Item | Situation | What makes the amount vary |
|---|---|---|
| Interest | Often none within the family, set by the group in an association | Agreement between the parties |
| Osusu collector's commission | Deducted from the savings collected | Each collector's practice |
| Mobile money fees | Orange Money or Afrimoney transfer | Amount and operator's tariff |
| International transfer fees | Money sent by the diaspora | Service chosen and exchange rate |
| Registering security | Collateral Registry | Type of asset |
Useful paperwork for a loan between relatives in Freetown
- Copies of both parties' national ID cards
- Dated IOU signed in front of witnesses
- Proof of payment: mobile money receipts or bank statements
- Documents for any asset given as security
- Notebook or ledger of repayments
Risks of informal lending in Sierra Leone
- Handing your savings to an unknown osusu collector who may vanish with the contributions of the whole market.
- Lending to a relative with nothing in writing, then being unable to prove the debt after a disagreement or a death.
- Leaving your identity card as a pledge with a private lender who then imposes ever-rising interest.
- Paying a registration fee to a so-called peer-to-peer lending platform promoted on Facebook that has no BSL licence.
Lenders to contact
- Ecobank Sierra Leone: Sierra Leonean subsidiary of the Ecobank group, a commercial bank providing personal banking services and financial support to the private sector.
Questions about osusu and family loans
Is osusu legal in Sierra Leone?
Osusu is a traditional form of collective saving that is widely tolerated. However, it offers no standard contract and no deposit protection, so in the event of fraud members have to rely on community mediation or the courts.
Can you charge interest on a loan to a friend?
The parties can agree on interest, preferably moderate and in writing. An excessive rate damages both the relationship and the borrower, while a written note setting out the interest prevents it from being disputed later.
Are there online peer-to-peer lending platforms in Sierra Leone?
No platform of this kind licensed by the Bank of Sierra Leone has been identified. Online offers that ask for a payment upfront to release a loan should be treated as attempted fraud and reported rather than answered.
How should I repay a relative in the diaspora?
Repayment can be made by bank transfer, through a money transfer service or by paying an expense locally on the lender's behalf. What matters is keeping a record and agreeing in advance on the exchange rate to be used.