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Tuesday, December 1, 2015
- Microfinance institutions (MFIs) have improved access to credit and banking services for poor Cameroonians. But the rapid growth in the number and size of these institutions in recent years is underpinned by dangerous disorder.
MFIs are the only financial institutions available in 42 percent of the national territory. They provide a host of services such as savings and loans, rapid money transfer, insurance and the payment of salaries.
Microfinance – in the form of traditional “njangis” or “tontines” – have been around for about a hundred years in Cameroon. 1963 witnessed the creation of the first formal credit union in Anglophone Cameroon with under Dutch coaching and assistance.
But MFIs only established their present powerful presence in Cameroon’s financial landscape following changes to the law in the early 1990s, which eased freedom of association and the creation of cooperatives.
At roughly the same time, Cameroon’s formal banks experienced a crisis; many banks closed down, leaving a big vacuum especially in rural areas. Senior staff and other workers from these collapsing banks took up the challenge to help both themselves and the rural communities.
An example of these cadres is Daniel Kalbassou, General Manager of Credit Du Sahel. He remembers how ten years ago, BIAO-Meridian Bank closed down and he lost his job as Director of Marketing and Field Operations.
He then started an MFI with just $40.000. Today Credit Du Sahel has a revolving capital base of one million dollars and covers its 18 branches are spread through half the country.
MFIs grew rapidly in size and number through the 1990s, in diversified and innovative forms: agricultural, village-based, gender-focused and more. This dynamism – and a lack of professionalism and control – attracted government intervention.
The Cameroon Credit Union Leaque (CAMCCUL), is without a doubt the MFI with the largest network having over 177 affiliates and a membership of 300,000. This success continues despite a whopping 2.5 million dollars lost by CAMCCUL when two banks hosting their accounts collapsed in 2002.
In 2006, the total volume of MFI transactions stood at 324 million dollars up from $76 million in 2000 and representing 20 percent of national banking transactions – up from 6 percent in 2000.
With the proliferation of MFIs, conmen and quacks have also infiltrated the sector. Reports are frequent in newspapers of dubious MFIs disappearing with the meagre savings of poor earners. Such impostors have pushed the general public to be wary of any newcomer into the sector.
In the absence of proper governance, an establishment may be no more than a front for an individual or a family. Some of them have acute liquidity problems; sometimes unable to satisfy even five percent of their customers.
According to Guy Roger Zo’o Olouman, sub-director in charge of MFIs at Cameroon’s Ministry of Finance, even when authorised, many of these institutions still operate outside the law. “They indulge in operations that do not fall within their competence, creating confusion and rendering control difficult for the administration.”
Olouman says some of them engage in international transactions and open branches of their institutions – an exercise which he says requires a prior evaluation by the ministry. According to the official, too many establishments recruit incompetent and untrained staff and do not respect the internal control mechanisms of the structures.
But speaking at a recent sensitisation forum for microfinance stakehlders, he warned that such short cuts will have to cease, MFIs have to avoid the unpleasant surprises from the Central African Banking Commission (COBAC). “Irregular MFIs will be closed down in the nearest future if they do not respect the regulations in place.”
In 2006, 250 MFIs were closed down for operating without authorisation and non-compliance with the regulatory framework.
While accepting that they sometimes violate the law, MFIs accuse formal banks of unfair competition. “Some banking institutions view us as competitors instead of considering us as complementary actors down the base,” says Nfor Musa Shey, President of CAMCCUL. Shey says the banks tend to deliberately delay or block their transactions just to kick them out of business.
Hamadama Housseini, manager of the Garoua branch of Credit Du Sahel sees this as a serious impediment to the survival of MFIs. “Banks delay guarantee certifications for tender files of our clients and our cheque clearance thereby discrediting us vis-à-vis our clients.
In response to this, Madiba Thomas Mann, branch manager of SCB Bank, Garoua accused MFIs of dabbling in services reserved for the formal banking system. “If a company is big enough to bid for contracts it should open an account with a bank rather dealing with a MFI,” he says.
In the face of these growing problems, the government is organising training seminars and forums for stakeholders. It is also working with the African Development Bank to put in place a revolving fund to assist the sector. The Governor of the Bank of Central African States, Philibert Andzembe says in addition to the adopted legal framework, COBAC will now go into the repressive phase to ensure that the rules of the game are respected.
MFIs could serve as an effective bulwark in the fight against poverty if government pays more attention in cleaning up the sector.