The Effect Of Micro Finance Institution In Poverty Reduction in Cameroon: Case Stud CCC PLC Buea
Abstract
Microfinance
is currently being promoted as a key development strategy for promoting poverty
reduction and empowerment of people economically. This is because it has been
potential to effectively address poverty by granting financial services to
households who are not served by the formal banking sector.
This
study research on the effect of MFIs in poverty reduction. The study focused on
Community Credit Company PLC BUEA South West Region as case study, a local
provider of Microfinance services. It intended to cover credit facilities
provided by the MFIs and clients perception on income improvement and reduced
poverty level.
The
study used descriptive research design, the main source of data collection
method used was structured questionnaire targeted to the company’s management
and some of the clients. The study revealed that CCC PLC as a Microfinance
institution has been able to fight reduce poverty to a certain level by providing
microfinance services to different groups, women or active poor, enable the
household to increase their living standard through increase in their income
compare to non-borrower, also enable them engage in more profitable and
economic activities than non-borrowers.
CHAPTER ONE
1.1 Background of the Study
Micro
Finance Institutions exist in order to provide financial services to the
society in the most convenient way, on like the formal Financial Institutions
like banks. It provides credit as well as deposit, savings, insurance to its
clients
Poverty
is a condition in which a person of a community is deprived of the basic
essentials and necessities for a minimum standard of living (Yunus, 2003)
Micro
finance can be a critical element of an effective poverty reduction strategy.
Improved access and efficient provision of savings, credit and insurance
facilities in particular can enable the poor to smooth their consumption
patterns, manage their risks better, gradually build their assets based,
develop their micro enterprises, enhance their income earning capacity, and
enjoy an improved quality of life.
Through the impact brought up by the
microfinance, it has culminated to the flourishing of Microfinance Institutions
[MFIs] in South West region in particular and in Cameroon in general. MFIs has been defined as “ an organization
that provides financial services to the poor” [ CGAP, 2012 ], it’s clear that MFIs are very important to
any country wishing to have a growth and stable economy hence reduce the level
of poverty. The introduction of MFI in Cameroon is seen as the best alternative
source of financial services for low income earners as a means to raise their
income, hence reducing their poverty level and contributing in country economy
[Kessy&Urio, 2006].
Micro Finance Institutions [MFIs] are useful
as they reduce poverty through increased income and standards of living,
empower women, develop the business sector through growth potentials, and
develop a parallel financial sector. Since the government has so many functions
to perform so as to ensure that the economy grow well then the establishment
and the growth of MFIs in Cameroon has been a better method to reach poor individuals
who were not easy to be reached hence providing them with an opportunity of
improving their living standard. Also
over-emphasis on financial sustainability over social objectives and a failure
of many MFIs to work with the poorest in the society has seen as other
challenges toward accomplishing the purposes of MFIs on poverty reduction.
Micro
finance is a form of financial development that has primary focused on
alleviating poverty through providing financial services to the poor. Most
people think of micro finance; if at all, as being about micro-credit i.e.
leading small amount of money to the poor. Micro finance is not only this, but
it also has a broader perspective which also includes insurance, transactional
services, and importantly savings (Barr, 2005).
According
to Sida (2005), poverty has a multiple and complex causes. The poor are not
just deprived of basic resources, they lack access to information that is vital
to their lives and livelihoods, information about market prices for goods they
produce, about health, about the structure and services of public institutions
and about their rights.
The
lack political visibility and voice in the institutions and power relations
that shape their lives. They lack access to knowledge, education and skills
development that could improve their livelihoods. They often lack access to
markets and institutions, both governmental and social that could provide them
with needed resources and services. They lack access to information about
income earning opportunities.
1.2 Problem Statement
Poverty
reduction has been a major concern for succeeding governments in the world,
because it is believed to be the universally accepted way of archiving economic
growth in the country. Efforts in fighting poverty in Cameroon can be traced
from dependence. Mostly the poor person in the rural areas is not reflected in
the micro economic interventions and because of this, poverty is growing
rapidly.
Challenged
with this problem, governmental organizations have and are still looking for
better ways to reduce the high level of poverty, especially in Africa. Focusing
on Cameroon, the government of Cameroon on their part have used several
strategies such as promoting a stable macro-economic framework, strengthening
growth by diversifying the economy and promoting the growth of micro finance
institutions.
Evidently
enough, micro finance institutions have been a tool for fighting several
economic challenges, poverty inclusive, however little research work has been
done to actually determine the effect of microfinance institutions in poverty
reduction in Cameroon, therefore the reason for the research.
Economic
crisis in Cameroon in the mid-1980s, this is a situation where the economic
performance of a society is declining as measured by falling GDP growth,
falling export earnings, investment, accumulation of debts increasing
unemployment and poor living condition. In 1986 to 1987 financial year, the
economy contracted considerably 2.8%, and -8.6 in 1988. This decline was
persistent and in fact aggravated until 1994.
This
motivated the researcher to carry out a research and see where the country will
be in the years ahead in terms of investment. Considering the great role that
micro finance institutions play in the reduction of poverty, research on it
cannot be ignored if Cameroon is becoming industrialized by the year 2030.
Previous studies were conducted in urban
areas. According to statistics provided by formal Planning National Development
and Vision 2030 Ministry, Poverty Level in Cameroon is estimated at 64.1% above
the national average of 45.9% placing the country among the poorest countries.
This
calls for research to be conducted in Cameroon to know the poverty level and
where the country will be before 2030. It is for this reason that the
researcher conducted a research on the effects of micro finance services on
poverty reduction in Buea South West Cameroon in consideration of the main
micro finance services, that is Micro-Credit, Savings, training and micro
insurance.
1.3 Research Questions
The
Study was guided by the following Research Questions
- How does Micro Finance Institution Services contribute in poverty reduction amongst of Buea inhabitants of Buea?
- Does MFIs services have any effect in poverty reduction in Buea?
- What are the lending models use by MFIs to advance credit to clients?
- Does CCC PLC meet the objectives of MFIs in South West Buea?
