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The Challenges Faced By Microfinance Institutions In Cameroon

This article will look at some of the challenges faced by Microfinance institutions in Cameroon.

Before looking at these challenges, the article shall examine the meaning and definition of A microfinance institution; the total number of microfinance institutions in Cameroon;

The categories of microfinance institutions in Cameroon; the advantages and disadvantages of microfinance institutions in Cameroon and the challenges faced by microfinance institutions in Cameroon

The meaning and definition of a Microfinance institution

MFIs are organizations such as credit unions, downscaled commercial banks, and financial Cooperatives that provide financial services to the poor

These Organizations might vary in their legal structure, mission, methodology, and sustainability, but they all have one thing in common.

They provide abroad range of financial services such as deposits, loans, payment services, money transfers and insurance to the poor and low-income households and their micro-enterprises at cheap and affordable interest rates.

Total numbers of Micro finance Institutions in Cameroon

Today, there are over 850 registered MFIs in Cameroon (statistics compiled by this researcher from official government figures). Cameroon is a member of CEMAC (Center Monitaired’AfriqueCentrale or Monetary Authority of Central African States).

What is the most significant issue that triggers transformation of microfinance?

A trigger for transformation is in the diversity of financial services offered. While in most cases credit is the trigger to start microfinance activities, MFOs soon realize the need to provide other support services.

However, Micro Finance institutions in Cameroon face some challenges as well as they enjoy some advantages or benefits

Examples of Micro finance institutions products in Cameroon

Micro finance institutions in Cameroon provide the following products

  • Group Loans.
  • Individual Business Loans.
  • Agriculture Loans.
  • Insurance.
  • Money Transfers.
  • Energy Loans.
  • Savings Accounts.

Categories of Microfinance institutions in Cameroon

There are three (3) types of Micro finances namely; Category One, Category Two and Category Three

Category One

Category one deals with institutions that collect savings and deposits and lend to their Members.

CamCCUL (Cameroon Corporative Credit Union League) is an Example of a Category One Financial Institution. All MFIs under CamCCUL are category one financial institutions

Category Two

Category two is institutions which accept deposits from members and third parties (customers). This category groups limited liability companies that function more like micro banks

Examples of category two financial institutions in Cameroon include……..Banking institutions

Category Three

Category three are institutions that engaged just in lending. They do not collect savings and deposits.

Examples of category three financial institutions In Cameroon include ……..Micro credit and Project financing institutions

Difference between a Micro finance and a Bank

A Micro Finance is different from a bank.  A bank is a financial institution that accepts deposits from the public and creates credit.

Microfinance is a source of financial services for entrepreneurs and small businesses lacking access to banking and related services

What are the advantages and disadvantages of Microfinance institutions in Cameroon?

The advantages of micro finance institutions in Cameroon include:

  • It allows people to provide for their families
  • It gives people access to credit
  • It serves those who are often overlooked in society. …
  • It creates the possibility of future investments. …
  • It is sustainable
  • It can create jobs
  • It encourages people to save

The disadvantages of micro finance institutions in Cameroon include:

  • Harsh repayment criteria
  • Small loan amount
  • High-interest rate
Some Challenges Faced by Microfinance institutions in Cameroon

In the article below, we discuss the challenges faced by Microfinance institutions in Cameroon.

Challenges Faced by Micro-finance institutions in Cameroon

The Micro Finance institutions in Cameroon face the following issues………Poor management, lack of resources, skilled personnel, inadequate donor funding, insufficient support from governments, high taxes, inadequate infrastructural development and fund shortages are some of the challenges facing accessibility and affordability of MFIs in Cameroon.


Over-indebtedness poses a serious challenge to the microfinance sector’s growth because it deals with marginalized sections of Cameroonian society who want to improve their standard of living.

The most significant factors that stress the microfinance industry in Cameroon are the growing trend of multiple borrowing by clients and ineffective risk management.

Microfinance institutions make loans without requiring collateral, increasing the risk of bad debts. Fast-paced growth necessitates well-planned infrastructure, which the Cameroonian microfinance sector clearly lacks.

In comparison to mainstream banks, interest rates are higher.

When compared to commercial banks in Cameroon, MFIs have a limited financial success. The centuries-old banking system is firmly established in Cameroonian soil and is gradually evolving to meet the needs of the times.

When compared to commercial banks, most microfinance institutions charge a very high rate of interest (10-20%). (5-10 percent)

Dependence on the Cameroonian banking system is widespread.

Because most microfinance institutions are registered as non-profits, they rely on financial institutions such as commercial banks for stable funding to carry out their lending activities.

 The majority of these commercial banks are private institutions with higher interest rates. They also grant loans for a shorter period of time.

Cameroonian MFIs are incompetent lending partners due to their massive reliance on banks.

Investment Validation Is Inadequate

Investment valuation is a critical capability for an MFI’s smooth operation. Because the markets in which MFIs operate are still developing, market activity is often limited.

As a result, MFI finds it difficult to obtain market data for valuation purposes.

MFI management teams are unable to obtain the level of quality information required to make investment decisions due to a lack of consistent and reliable valuation procedures.

The bilingual nature of Cameroon is a great challenge

The fact that Cameroon is a bi-jural country with two different languages and many cultures makes it difficult for micro-finance institutions in Cameroon to carry out their activities.

As a result of this bilingual nature, it is a great challenge to microfinance institutions to operate as they sometimes need to translate all documents into French or English to satisfy their customers

There is also lack of Bilingual employees who can speak both French and English. This is very challenging as most of the employees of Microfinance institutions in Cameroon speak just one of the two languages.

Financial institutions Services in the Economy aren’t well-known enough.

Cameroon, a developing country in the making, has a low literacy rate that is even lower in rural areas. A large portion of Cameroons population is unaware of basic financial concepts.

The general public is largely unaware of the financial services provided by the microfinance industry.

The rural population’s lack of knowledge is a major barrier to them being able to obtain easy credit from MFIs to meet their financial needs.

It also contributes to the country’s widespread financial exclusion. MFIs also have the additional responsibility of educating the public and establishing trust before making loans.

 MFIs find it difficult to survive in the highly competitive environments found in developing countries due to a severe lack of awareness about their policies and products.

Poor management

Managing microfinance in the 21st Century can be very challenging. One of the problems faced microfinance institutions in Cameroon is poor management.

Most microfinance institutions in Cameroon are poorly managed. This explains why sustainability of microfinance institutions in Cameroon remains a problem.

Poor management causes microfinance institutions in Cameroon to shutdown. When this happens, the customers who have created accounts are sometimes not compensated leading to loss of savings

 Lack of resources

Most microfinance institutions in Cameroon lack human and material resources to function properly. This explains why some of these microfinance institutions cannot expand to other cities in Cameroon.

Lack of resources caused these microfinance institutions in Cameroon to remain stagnant and cannot establish customer Trust

 Skilled personnel

Most startup microfinance institutions in Cameroon lack skilled personnel’s. This is because they do not have enough funds to recruit skilled personnel.

Another challenge is the inadequate skilled personnel’s. Most university graduate with a degree in Accounting or Equivalent lack the computerized accounting system skills. This is because most these courses are not taught in state universities in Cameroon.

Sometimes, students turn to neglect the practical sessions of the computerized accounting which is highly needed by microfinance institutions in Cameroon.

In order to solve this problem, a department on computerized Accounting system has been set up in the English speaking university of Buea in Cameroon.

 Inadequate donor funding

Most financial institutions in Cameroon have inadequate donor funding since most of them operate as a Nongovernmental organizations. Operating as Self Help Groups is a lay way for these institutions to practice tax evasion

The government on her part does not fund financial institutions in Cameroon very often. This makes it difficult for some of these institutions to pay workers as they lack funders.

 Insufficient support from governments

In some developing countries in Africa, the government often supports financial institutions. This is not the case in Cameroon. The Cameroon government does not support financial institutions.

This is because these financial institutions operate as private businesses.

Other challenges faced by microfinance institutions in Cameroon include High taxes and Inadequate infrastructural development and fund shortages 


Applying for funding is also a great way that could lead to sustainability of microfinance institutions in Cameroon.  

Finezza lending management software is a well-integrated software solution for microfinance institutions in Cameroon.

The software solution also enables MFIs to gain access to world-class banking capabilities, allowing them to compete effectively with mainstream commercial banks.

The 360-degree suite not only gives lenders a complete picture of the borrower, allowing them to make more balanced decisions, but the use of AI and ML technologies also makes the process more risk-free.

The use of alternative data makes it simple to provide loans to rural residents with poor credit histories, which helps to reduce over-indebtedness.

Borrowers can also get personalized product recommendations from the software tool based on their needs. Finezza also assists with process regulatory compliance.

People also read:

The efficiency of internal audit as a tool to improve the financial performance of Microfinance Institutions (MFIs) in Buea

An analysis of the information necessary for lending decisions in microfinance institutions

The challenges faced by Microfinance institutions in Cameroon. the challenges faced by Microfinance institutions in Cameroon.

The challenges faced by Microfinance institutions in Cameroon. the challenges faced by Microfinance institutions in Cameroon. the challenges faced by Microfinance institutions in Cameroon.

The challenges faced by Microfinance institutions in Cameroon. the challenges faced by Microfinance institutions in Cameroon.

The challenges faced by Microfinance institutions in Cameroon. the challenges faced by Microfinance institutions in Cameroon. the challenges faced by Microfinance institutions in Cameroon.

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