ABSTRACT

The major challenge facing many developing countries, especially in Africa, is devising appropriate development strategies that will capture the financial services requirements of alleviating poverty in Fako. 

Delivery of microcredit to SME’s in developing countries is increasingly being viewed as a strategic means of assisting the working poor.

Over the past decades, a considerable amount of multi- and bilateral aid has been channeled into microfinance programs in Cameroon with varying degrees of success.

Like all development interventions evaluations and impact assessment studies to ascertain the achievements and failures of these programs would help a lot for future program design. In Cameroon, the microfinances sub-sector has realized tremendous growth in terms of alleviating poverty.

The sub-sector has therefore attracted great attention of financial service providers to extend a range of financial offer to the poor.  However, little is still known of the contribution of the microfinance industry to the growth of the SME sub-sector.

The study sought to establish the effects of microfinance products and service delivery on the alleviation of poverty in the southwest region of Cameroon.

The study employed both quantitative and qualitative data analytical methods, and a multiple regression was run to estimate the effect of financial and nonfinancial characteristics on the poverty alleviation services offered by the microfinances, while a legit model was used to assess the constraints to access to microfinance products in Fako.

The findings indicate that although the MFIs have performed below a set standard on average due to some industry wide challenges, they have had a significant impact in poverty reduction through credit and contributed to their financial growth.

It is recommended that similar studies be carried out in many other regions of the country because different regions have diverse contextual realities that affect a micro finance service offered to the poor.

This will reduce on the numerous constraints facing microfinance so as to make the nationals benefit from their overall contribution to poverty reduction.

Designed tailored made products of microfinances are essential through investment in education, setting up an authority or coordination center for poverty reduction and promotion of prudential mechanisms by setting a regulatory and supervisory framework for all Microfinance Institutions.  

Key Words: microfinance, Growth, poverty alleviation, Financial Services

CHAPTER ONE

GENERAL INTRODUCTION

 1.1 Background of the Study

Microfinance is not a new concept. Its origin can be traced back in 1978 when the Nobel Prize winner Professor Muhammad Yunus set up the Grameen Bank as an experiment on the outskirts of Chittagong university campus in the village of Jobra in Bangladesh.

In its traditional microfinance form, the route of formal microfinance activities can be traced back in 1963 following the creation of the first cooperative savings and loans institution (Credit Union), at Njinikom in the North West region of Cameroon by a Roman Catholic clergy from Holland called Father Anthony Jansen.

The development of microfinance institutions and their activities remain blurred until the early 1990s when President Paul Biya in order to incorporate the elites and various interest groups into his New Deal Policy passed the remarkable law No. 90/053 of 19 December 1990 relating to freedom of associations, and Law No. 92/006 of 14^th August 1992 relating to cooperatives, companies and common initiative groups.

For over three decades now, microfinance has proved its value in many countries as a weapon against poverty and hunger. (Morduch 2002) ‘Since the concept was born in Bangladesh almost three decades ago, microfinance has proved its value, in many countries, as a weapon against poverty and hunger. It really can change peoples’ lives for the better, especially the lives of those who need it most’’ UN secretary General Kofi A. Annan (Latifee, 2006)”.  

Thus since the 1990s, poverty alleviation has taken priority at both the national and international levels. Poverty alleviation tops the chart of the millennium development goals (MDGs) agreed at the UN and millennium summit in September 2000. Microfinance is regarded as a powerful tool in the reduction of poverty. Source Leikem, Kirsten, “Microfinance: A Tool for Poverty Reduction?” (2012).

The optimism over the role and the movement of microfinance as a poverty alleviation tool is increasingly becoming stronger evidenced by the microcredit summit campaign in 1997 to reduce the number of people living below the poverty line with an income of less than $1(approximately 500frs) per day and open access for 100million poorest families by 2015 for employment and the declaration of the year 2005asthe international microcredit year (UN resolution No: 53/197, 2002).

Since the upsurge of microfinance, it has caught the attention of many governments, NGOs, aid donors as an effective tool for poverty alleviation. (Georgia summit, 2004). However, in Cameroon there has always existed a controversial point of view on whether microfinance is actually a poverty alleviation tool or a business scenario.

Today within the network of microfinance institutions, cooperatives, and some common initiative groups carrying out savings and credits, it is estimated there are about 1.5million accounts. This number is significant when compared to the almost same level of accounts registered in the commercial banking sector (MINFI 2008).

However, access to financial services in Cameroon is deemed very low compared to other parts of Africa particularly when compared to the rest of developing countries. The situation is made worst as most MFIs limit their branch network in urban areas living out the rural areas which harbors about 87% of the poor population (IMF Country Report No.12/237).

Thus, studies have proven and majority of the population have agreed that microfinance has helped to reduce the number of poor people in Cameroon especially those who did not have access to the traditional banking system such as commercial banks services at least now are able to get access to the MFIs which provides eligible financial services thus striving towards growth and development the alleviation of poverty.

This research work however is focused on the manner in which microfinance can reduce or alleviate poverty focusing on the microfinance activities of cooperatives credit unions in the country.

The population in the rural areas need access to micro-saving facilities in order to make savings in a deposit account after having generated income from their various trades like farming, petty trade, fishing and live-stocks etc. in order to make ends meet and also make withdrawals from those accounts during rainy days that is in times of need.

A deposit account can help the rural poor to obtain micro-insurance, giving a sense of security, and it can help them to take loans in the form of microcredit to finance their small businesses.

Credit facilities are generally not extended to the rural poor, even for highly productive activities, because they have few or no assets to offer as collateral security as a backup measure in case the loan goes bad. Unless the poor can borrow, they are likely to remain trapped in poverty. (International Fund for Agricultural Development, 2004).

1.2 Problem Statement

In the 2012 recent report by the IMF Country Report No.12/237, Cameroon with and estimated population of 19.8million inhabitants, close to 40% of this population live below   the poverty line. About 87% of these poor populations are living in the rural areas. According to the poverty headcount ratio, the percentage of the population living on an income of $1.25 (approximately 625 FRS) a day has fallen from 25% in 1995 to 10% in 2005. (IMF Country Report No.12/237).

 After the president’s New Deal with law No. 90/053 of 19 December 1990 relating to freedom of associations, and Law No.92/006 of 14th August 1992 relating to cooperatives, companies and common initiative groups, by 2008, there were about 400 MFIs in the country with a number of 177 credit unions operation under the umbrella of CAMCCUL (MINFI2008).

This new wave of microfinance has not been a matter of microfinance practitioners alonethe government, business community, civil society, donors and others have taken interest in it.

Despite this, few studies which have been done on microfinance and poverty alleviation in Cameroon there is therefore a need to provide answers to these questions: 

What is role of the role of TICCUL services in Fako in alleviating poverty in Buea? 

1.3 Objectives of the Study 

 1.3.1 Main Objective

To examine the role of TICCUL services Fako Chapter in alleviating poverty in Fako Division, SWR, Cameroon.

1.3.2 Specific Objectives

To examine the role of TICCUL services on alleviating poverty in Buea.

To make recommendations based on the findings.