Molyko, Southwest Region - Buea, Cameroon


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Payment Systems and Their Impact on the Performance of Small and Medium-Sized Enterprises in Buea, Cameroon

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This study assesses the effect of payment system which are traditional or modern on the performance of SME enterprises. SMEs sectors are of importance in the economic development of any country. In recent years SME cannot be underrated especially with regard to creation of employment, innovation, uplifting the people’s standard of living and financial contribution to the growth of the country’s GDP. This sector’s growth is hindered by the challenges of payment system which could be traditional or electronic which if not addressed affects the performance of SME in terms of innovation, speed of transaction financial resources to expand and complexity.

This study period was carried out in 2019. The objectives of this study was to identify the forms of Payment Systems in used in Buea, to identify the factors affecting the choice of Payments Systems in Buea, to evaluate the challenges involved in the existing Payment Systems in Buea and examine the challenges involved in the adoption and use of modern payment systems. In carrying out the study, a non-probability sampling technique was used to sample 10 SME using purposive technique through interviews guided questionnaires.  Statistical analysis in the study was done using SPSS 21.0 to generate statistics for multiple regression analysis and descriptive statistics.

Results from study revealed that payment system of small and medium size enterprises in Buea determines the performance of organization with a P-value of 0.02. The issue of payment discipline is strongly interconnected with the competitiveness and performance of SME at such SME owners should consider the type of payment systems they use in business operation so as to increase their productivity.





1.1 Background to the study


Small and medium-sized enterprises (SMEs) are important participants in the global economy (Badulescu, 2010; Karpak and Topcu, 2010; Mura and Gašparíková, 2010; Petr, 2016), and engines of economic growth (Henderson and Weiler, 2010; Rajnoha et al., 2016). SMEs greatly outnumber large companies in most countries, and concurrently have significantly more employees.

Arguably, a vibrant SME sector is the foundation of economic growth within a market economy, and the beneficial influence of SMEs leads to reduced unemployment and an im¬proved standard of living (Jahur and Quadir, 2012). SMEs are exposed to challenges of payment systems that may influence its performance. A payment system is a method used to settle financial transactions through the transfer of monetary value.

This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make it exchange possible (Biago B, 2001). Performance of SME is the accuracy, speed, cost effectiveness to which the objectives of an SME. There is a link between growth and innovation and that innovation don’t only trigger growth but also improves on company’s processes/ services and products. According to Laforet (2010) company leaders may have visionary potential growth strategies, but still require innovation to grow.

So is it important for SMEs to engage in either product, process or both to enable them to grow. In a real world business situation, SMEs turn to undertake modern payment systems as a process innovation to enjoy benefits reducing financial risk in transaction, increase transaction accuracy and speed of delivery of services in a way to improve customer services.

Traditional payment systems include negotiable instruments such as drafts (e.g., cheques) and documentary credits such as letters of credit. With the advent of computers and electronic communications, a large number of alternative electronic payment systems have emerged. The term electronic payment refers to a payment made from one bank account to another using electronic methods and forgoing the direct intervention of bank employees (Patrick, 2017). Narrowly defined electronic payment refers to e-commerce; a payment for buying and selling goods or services offered through the Internet, or broadly to any type of electronic funds transfer.


In Cameroon, small and medium size enterprises play an important role in the development of a country with increasing number of SME which is notably on the rise in recent decade. These businesses contribute to socio economic growth and employment levels in the country. The Growth of SMEs in Cameroon is affected by payment systems which are traditional and modern incline. the macroeconomic environment of the country from which they operate just like any other business (Chittithaworn, et al. 2011). At such establishing the factors that affect payment systems in Cameroon is a stepping stone to improving performance of businesses carry out in SME in the country.




1.2 Problem Statement


Payment systems may be physical or electronic and each has its own procedures and protocols. Standardization has allowed some of these systems and networks to grow to a global scale, but there are still many country-specific and product-specific systems. The world has witnessed an upsurge of payment systems which are meant to facilitate trade and simplify payments (Abor, 2004). Before the introduction of electronic payment system, all businesses had to make use of the traditional payment method of physical cash payment to undertake transaction of all kinds. Buyers had to queue up and spend more hours to talk to a teller for their transactions (ibid). The inconveniences caused by these long queues could discourage many from making transactions especially payments. For many years, small business technology specialists and entrepreneurs among others have advocated for the replacement of physical cash and the introduction of more flexible, efficient and cost-effective retail payment solutions (Bank for International Settlement, 1998). Cameroon a developing economy is not immune to these developments. The SME in country face challenges in optimizing payment system process for the common good profit maximization by businesses in pursuit of economic buoyancy. These challenges include speed of transaction, new types of fraud, black outs and arm robbery attacks. Thus, the issue of challenges to payment system in Cameroon if not addressed will have its impact felt on the performance of SME. The performance of a SME is closely linked to the marketing strategy put in place by current business so as to optimize their operational systems with the use of software’s and technology to speed up transaction requirements and services. At such having a good payment system is a plus on the side of the company as customers will find it very easy to settle their financial obligations. Based on this background this study addresses the effects of payment systems on the performance of SME in Buea Cameroon.




1.3 Objectives of the Study


1.3.1 Main Objective


The main objective of this research was to study the effects of payment systems on the performance of small and medium size enterprises in Buea, Cameroon


1.3.2 specific objectives


To Identify the forms of Payment Systems in used in Cameroon

To Identify the factors affecting the choice of Payments Systems in Cameroon

To Evaluate the challenges involved in the existing Payment Systems in Cameroon

To Examine the challenges involved in the adoption and use of modern payment systems



1.4 Research Questions


Given the problems identified with excessive decency of cash in transactions in Cameroon, this has led to various initiatives on Electronic Payment Systems in Cameroon. It is in the view of this that the research seeks to find answers to the following questions.


What are the forms of Payment Systems in use by SMEs in Buea Cameroon?

What factors affect the choice of Payment Systems in Cameroon?

What are the challenges involved in the existing cash Payment System?

What are the challenges involved in the adoption and use of modern Payment System?



1.5 Hypothesis


The hypothesis for this study include;


Hₒ: payment system of small and medium-size enterprises in Buea does not determine the performance of organization.


Hᵢ: payment system of small and medium-size enterprises in Buea determines




1.6 Scope of the Study


The research would concentrate on payment systems in Cameroon, the e-payment and traditional payment system (physical cash). This research covered small and medium size businesses in Buea.


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