Abstract
In the Extreme North Region of Cameroon, the non-performing loans increased continuously by 17.5%, as the number of banks in the financial sector facing insolvency continued rising. Hence, the present study is carried out to understand how members of microfinance institutions (MFIs) cope with the credit they are awarded in this region. Using questionnaire addressed to 201 members of MFIs (comprised of 107 non-defaulters and 94 defaulters), the descriptive statistics and logit model are used in order to analyze the factors affecting the loan repayment capacity of credit beneficiaries in the MFIs. The results indicate that, members with small household size, with profitable activities, less distant from cash desks, trained for credit management, not married/single, and who use their credit for farming activities are more likely to refund their credit on time. These six factors show significant coefficients in the logit model. However, the six other factors such as the age, gender, farm size, source of finance, loan size, and use of improved technology show insignificant coefficients in the logit model, proving that they have less impact on the defaulter rate of credit beneficiaries. We therefore recommend to the government authorities to give much attention to the significant factors, if microfinance services need to be improved in this region.
Highlights
The movement of microfinance institutions (MFIs) in Cameroon has its roots in the 1960s through the creation of the first cooperative in 1963 (Muluh, 1995)
Our results are similar with those obtained by Mingoas et al (2014) who found out that, more than 59% of the farmers requesting credit from MFIs are between 26 and 45 years old
This study was undertaken in order to analyze the determinants of the repayment capacity of credit granted by MFIs to farmers of this region
Summary
The movement of microfinance institutions (MFIs) in Cameroon has its roots in the 1960s through the creation of the first cooperative in 1963 (Muluh, 1995). The microfinance sector has greatly evolved and currently counts 438 establishments with 1,000 branches spread across the country Among all these cash desks, 178 belong to the biggest network of MFIs, such as the Cameroon Cooperative Credit Union League (CAMCCUL), while 187 are independent institutions. About 70% of the country’s population lives in rural areas with agriculture being their main occupation These MFIs act as source of funds to most farmers willing to invest in farming and other related activities. Failure by farmers to repay their loans on time or not to repay them at all has become a serious problem facing both agricultural credit institutions and smallholder farmers These difficulties are often the causes of failure of many MFIs in the country. During the same period, the non-performing loans increased continuously by 17.5%, as the number of banks in the financial sector facing insolvency continued rising (IMF, 2012)
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