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Micro finances play significant roles in the economy. Nut the roles they play now is with mixed perception as most of them face problems with their performance. This has been linked to the way they manage their cash management processes. It is against this backdrop that this study sort to assess the effects of cash management on the performance. The study has as specific objectives to establish the effects of cash planning on the performance on micro finance in Cameroon, to evaluate the influence of cash budgeting, to determine the effect of cash collection on the financial performance of micro finances in the municipality of Buea. This study was cross sectional in nature and the study population for this work included some selected registered micro finances in Buea. This comprises the manager, accountant, credit officer, teller, mobile agent, IT developer and other staff of the bank. The researcher worked with 5 of these micro finances and with about 6 workers per bank which therefore gave a total of 34 respondents as the target population for the study. This study adopted the convenient sampling technique. The study made use of both primary and secondary data. Data was analyzed using the regression analysis to get the effects between cash management and performance of these micro finances in Buea municipality. Also, tables were used to present the data. Based on the specific objectives, the findings revealed that there exist a significant positive effect between cash planning, cash budgeting and cash planning on the financial performance of micro finances in Buea. From there, the study brought forward some recommendations such as micro finances should enable to collect cash early which will help generate more profit.



This introductory chapter of the study will be discussed the background of the study, research problem, research objectives, research hypothesis, significant of the study scope and limitation of research and the organization of the research.

1.1  Background Of The Study

Cash management has attracted increasing attention mostly in businesses and firms or companies. The term cash management has been defined in different ways by different scholars. Barrett (1999) cash management as the series of processes used by an organization to obtain the maximum benefit from its flow of cash funds, sound cash management involves better timing of expenditure decisions, earlier collection and banking of revenue and accurate forecasts of cash flows.

However, Micro finances also has concern on cash management because it is a financial service which offers to individuals of lower economic backgrounds. Micro finance started with micro credit, whereby they practice providing small loans to those who do not have a steady source of income, collateral or any history. Upon the creation of micro credit by Bangladesh social entrepreneur Muhammed Yunus in 1983, Yunus established Grameen Bank in Bangladesh. The goal of this institution was to initially provide small loans to entrepreneur.

Yunus vision for microcredit was brought when he witnessed women who made village basket weavers in Bangladesh making two cents a day. He decided that if the woman were able to fall back on a loan, they would be able to improve their profits. After issuing them a loan, following the group model, the women were able to repay the loan and keep their business running.

Yunus received the Nobel peace prize for his efforts with Grameen Bank. The bank currently has 2500 operational locations and employs 22000 individuals. However, they are currently 10000 microfinance institutions.

Moreover, this study will present the cash management technics which will contributes in achieving and successful cash management according to Home and Wachowitz (2012), cash management is very vital for production firms whose assets are mostly composed of current assets. Cash management also directly affects the profitability and liquidity of firms (Raheman and Nasr 2013). This centers mostly on measuring the effects of cash management on performance of microfinance, just as it focuses on establishing, if any the association between liquidity and profitability of firms.  Cash management is a broad term that refers to the collection, concentration and disbursement of cash. The main aim is to manage the cash balances of an enterprise in such a way that maximizes the availability of cash not invested in fixed assets or inventories so as to avoid the risk of insolvency, (Mitnick). Factors monitored as part of cash management includes a company’s level of liquidity, its management of cash balances and its short-term investment strategies (Brock et al. 2008). Many companies are having negative cash flows which results to cash mismanagement.

Classen and Van Hottoren (2012) hold that cash management can be defined as “theories and methods for handling liquid capital” Larsson discusses; cash management consists of example: handling liquid capital and cash flow. Larson holds that many organizations neglect their work with cash management. This neglect arises from the shortcoming of example efficient payment routines, and trade receivables.

Equally, the “2009 Best practice handbook of European cash management” looks at cash management implementation trends and challenges. According to this Handbook, cash management is a system that comes to reduce working capital requirements over a longer term by improving efficiencies and generating cost savings in the management of cash flows and overall liquidity. So for businesses to overcome financial and liquidity crisis both internal and externally, they should effectively look at their existing cash management structures and procedures.

According to Roseberg (2010), cash management is very necessary for both new and growing businesses. Also, Partel (2010), cash management is important for the business profitability, future planning and sustainability. So, the putting in place of cash flow management will enable the management of micro finances to sustain their business and thus lead to financial performance. Despite the strategies, they however encountered some contemporary cash management challenges such as poor management, lack of resources, instability in the market.

In Africa, the implementation of cash management is sophisticated. A work by Kwane (2007) that was centered on the fact that, the putting in place of a cash balance policy ensures prudent cash budgeting and investment of surplus of cash. Therefore, reducing the time cash is tied up in the operating cycle improves business profitability and market value as well as business performance. Proper cash management will enable the owners of microfinance to meet up with cash disbursement, minimizing funds committed to cash balance as well as to meet up with cash balance. The various ways through which a company can manage cash includes; planning, budgeting, collection and disbursement of cash.

Moreover, the idea of cash management is not different like that in Cameroon. In Buea, there exist many micro finances. the operations of these finances’ corporate to the growth of the area. They however face some challenges which are; inadequate infrastructural development, high taxes, inadequate donor funding, bad debts challenges and also the absence of good record keeping.

Therefore, the researcher sets out to establish factors behind this stagnation in the growth of financial institutions in Cameroon with a particular interest in the cash managements practices employed and their effects on the bank’s financial performance taking BAFCCUL as a case study.

  • Statement of the problem.

Cash management technics are adopted by organizations in order to ensure effective investment of cash and in order to achieve profitability both in the short run and long run (Dodds 2009). Despite the adoption of these cash management technics, most organizations still go bankrupt due to poor cash management. Cash is the primary indicator of organizational health, hence the lifeblood of every organization. Cash needs to be monitored, protected, controlled and put to work (Marie, 2001). Efficient cash management is far beyond preserving bankruptcy but it improves the profitability and reduces the risk the micro finance is exposed to (Maness and John 2002).

According to San Jose et al. (2008, p. 103) basic cash management involves developing and undertaking administrative measures aimed at establishing the optimal level of cash, that would allow the company to make and receive payments in such a way that the normal operations of the company are preserved. They include setting up an optimal cash level, cash flow forecasting and optimizing the cash cycle, controlling bank operations daily.

For years now, the financial performance of some micro finance has been dropping. They have reduced their employment capacity; send away workers, less diversification decrease in profit and a reduction in the return on capital employed. So the researcher has been wondering why the situation is the way it is and she started looking for what could have been the reasons for this poor financial performance.

Furthermore, from a discussion with the Manager of BAFCCUL,Buea branch, the researcher observed that, according to him, this poor performance observed in these micro finances are as a result of poor cash management practices in these banks. For instance, in cash planning, they are facing problems like, having a huge estimation of the amount of cash they will have in the next month, did not have a proper plan for the expected cash inflows and outflows. For the cash budgeting, the problem observed is that they fail to practice sound cash forecasting to know when they will experience the peeks and slumps of the business cycle. As it was found out by Mong (2011:33-34) that only 28% of the small businesses drew up cash budget. On the part of cash collection and disbursement, the researcher noticed that these micro finance institutions face issues of bad debt as well as debtor’s payment period and creditor’s payment period. As it is asserted that sound receivable and payment timing is the business success.

Most banking institutions in Cameroon use poor cash management method and lack of financial performance, that’s why a lot of them fail, hence banking institutions has to follow the principles of cash management system and accounting standards in order to increase the satisfaction of their customers.

The researcher therefore seeks to ascertain whether this poor financial performance observed in these micro finances is as a result of the poor cash management practices among them.

1.3  Research Questions.

1.3.1 Main Research Questions

What is the effect of cash management on the performance of micro finance institutions in Buea municipality?

1.3.2 Specific Research Questions

  1. what is the effect of cash planning on the performance of micro finance institution in Buea municipality?
  2. What is the effect of cash budgeting on the performance of micro finance institutions in Buea municipality?
  3. What is the cash collection on the performance of micro finance institutions in Buea municipality?
  4. What is the effect of cash control on the performance of microfinance institutions in Buea municipality?
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