HE EFFECTS OF MICROFINANCE PROGRAMS ON POVERTY REDUCTION IN BAFIA-MUYUKA COMMUNITY, SOUTH-WEST REGION-CAMEROON
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Poverty reduction has been a major concern for successive governments in Cameroon over the years because it is believed to be the universally accepted way of achieving economic growth in the country. The intended purpose is to raise the living standards of the people and improve upon their quality of life. The Cameroonian government has been implementing policies to expand financial access to the poor including promoting microfinance credit access to the poor. Despite these programmes, about 50% of Cameroonian still live below the poverty line. Microfinance programmes are increasingly publicized as one of the most successful tools for development with the ability to positively affect its participant’s economic and social status. However, the effect of access to microfinance credit in Cameroonians remains unknown. Based on this knowledge, the study sought to find out the effect of microfinance credit on poverty alleviation at the household level in Bafia-Muyuka Community. The study employed a descriptive research method. The population consisted of households accessing microfinance credit in Bafia-Muyuka Community. Purposive sampling was to select households that were studied. The study used a questionnaire to collect data which was then summarized, coded and tabulated and analyzed using SPSS version 21. The study found that microfinance credit access positively contributes to the alleviation of poverty at household level in Bafia-Muyuka Community by providing finance access to low-income earners, less educated and those in the informal sector which helps in the expansion of business, acquisition of better residential places, and acquisition of education, health and improved welfare. The study also found that access to microfinance credit significantly increases household income and provide avenues for people to save. The study recommends that microfinance institutions to continuously improve their outreach to enable them to reach more deserving low-income earners in all Counties in Cameroon and households education on the use of finances obtained enhanced.
1.1 Background of the Study
Microfinance banks in generally target low-income communities and poverty reduction have been a major concern for successive government and it is believing to be the universal accepted ways of achieving economic growth in the country. Microfinance programs are increasingly published as one of the successful tools for development with the ability to positively affect it participant’s economic and social status (Ayuya, 2013).
Microfinance is financial services offered to low-income earners, these include; microcredits, savings and checking accounts, micro-insurance and payments systems(Parker,2000). During the 1990s, the microfinance provisions services dealing with very small deposits and loans, This thesis is about microfinance and its contribution to the improvement and poverty reduction for millions of the poorest people, microfinance in the process eradication of poverty by increasing the income-generating activities, empowerment of poor people to access development services such as health and education, and reduction in vulnerability(Kirkpatrik et al., 2002).
Microfinance banks in generally the whole world target low-income communities. Most microfinance give loans to borrowers without requiring collateral. They are micro not because of their institutional scale but because of the scale of typical transactions with customers (Dale and Pischke, 1992).
Microfinance institutions are said to have reached sustainability when the operating income from the loans is sufficient to cover all the operating costs(Sharma and Nepal,1997). Microfinance is not simply banking, it is a development tool. Microfinance activities usually involve:
Small loans, typically for working capital, Collateral substitutes, such as group guarantees or compulsory savings, Access to repeat and larger loans, based on repayment performance, Streamlined loan disbursement and monitoring and Secure savings products (Ledgerwood, 2002) .
Microfinance is a credit methodology, which employs effective collateral substitute for short-term and working capital loans to micro-entrepreneurs. The level of a country’s poverty has long been linked with measures of its economic development. For example, empowerment vs. alienation of people, sustainable uses vs depletion of the environment(Barr and Michael, 2005).
Microfinance is therefore a panacea for eradicating poverty. This study focuses on microfinance program and its effect on poverty eradication and also discusses its relationship to other developmental activities. There is the political, social and economic influence of microfinance institutions having access to financial services such as savings, account, and the lending scheme is useful for the poor that trying to break the cycle (Steven 2012). Politically, microfinance influences policymakers to increasingly rely on theories of social capital to fashion development interventions that mobilized local social networks in the alleviation of poverty. Economically, micro-savings and other funds guarantee the economic sustainability of a well -managed institutions. Socially microfinance institutions include livelihood sustainability through micro-enterprises and social development to empower the marginalized sections of communities across the globe.
Microfinance is a mechanism for financing direct health cost-most also, microfinance clients can benefit from health financing products such as savings, health loans and micro-insurance(Khan,2014). Microfinance is a form of banking that fills the gap by creating to the less well off, either on a profile or non-profit basis(Steven, 2012).
Microfinance can relate to the chronic (non-destitute) poor to the transitory poor in different ways. microfinance institutions attempt to overcome the barriers of poverty reduction through innovative measure such as group lending and regular saving schemes, as well as the establishment of close between the poor clients and staffs of the institution concern (Eliudaoaware,2006).
Microfinance assists the poor population in so many ways; they create room for the peasant population to easily save their daily income. In as much as they could save to make up their registration, they are equally given the opportunity to save and withdraw the little amount of money which may not be acceptable in commercial banks. In such gradual processes, many have realized huge capital accumulation comparable to those of commercial banks. There is therefore a lot of self-relevance when their little earnings are acceptable by the formal system of banking (Susan,1997).
Microfinance also creates easy access to finance in form of microloans. The plight of the poor population has been the inability to obtain investment capital. Many of their micro-projects such as crop cultivation, school fees, health care are being provided by microfinance institutions.
A stable political environment that enabling micro-economy, is seen that the provision of microfinance is an important component of any effort to improve the livelihood of the rural population. Microfinance is also seen as all type of financial intermediation services; savings, credit funds transfer, insurance pension (Robinson,2002).
Since poverty is understood as low level of annual income per household, reducing poverty is about raising average income level, poverty reduction could be measured by counting the number or proportion of people who cross that poverty line (Ben, 1997).
Poverty entails more than the lack of income and productivity resources to ensure sustainable livelihoods. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion as well as the lack of participation in decision making in various social groups bear a disproportionate burden of poverty.
Microfinance can be effective for a broad group of clients, including those who are living in the bottom half of those below a country’s poverty line we will call these strata the ‘poorest that is extreme poverty; landlessness, limited access to basic social services (Morduch et al., 2001).
The world social summit identified poverty eradication as an ethical, social, political and economic imperative of mankind and called on Governments to address the root causes of poverty, provide for basic needs for all and ensure that the poor have access to productive resources, including credit, education and training thereby recognizing insufficient progress in poverty reduction. The 24th special session of the General Assembly devoted to a review of the Copenhagen commitments decided to set up targets to reduce the proportion of people living in extreme poverty by one half by 2015. This target has been endorsed by Millennium Summit AS Millennium Development Goal.
A social perspective on development requires addressing poverty in all its dimensions. It promotes people-centred approached to poverty eradication, advocating the empowerment of people living in poverty through their full participation in all aspects of political, economic and social life, especially in the design and implementation of policies that affect the poorest and most vulnerable groups of society(Barbara Heley,2001).
1.2 Statement of the Problem
Despite the growth of microfinance institutions, the poor still suffer limited access to credit and finance this is because microfinance fails to alleviate poverty significantly because the performance of microfinance institutions in terms of institutional sustainability seems not encouraging despite the fact that international development programs have not been giving high priority on sustainable microfinance for poor for many years. An answer to this problem, many proposals have been forwarded for initiating small farmers-development programs and encourage their participation in sustainable microfinance institutions (Shakya,2003).
Although, the apparent success and popularity of microfinance, no clear evidence yet exist that microfinance programs have positive impacts. This is seen from the spect that microfinance can make a real difference in lives of those served, rigorous quantitative evidence on the nature, magnitude and balance of microfinance impact is still scarce and inclusive (Armendariz and Morhuch,2005)banks.
Despite the growth of microfinance banks, there is lack of infrastructures such as electricity, lack of banking culture among client, detestation of interest rate, lack of confidence on the part of prospective clients, limited support for human and institutional capacity. therefore, the above mention problems can be handled through Government participation in the arear of infrastructure, building the confidence of microfinance clients by NGOs, inculcating the banking culture to the poor and low-income persons.
In the face of, the growth microfinance is not still a solution to global poverty but neither is health or education or economic growth. There is no one single solution to global poverty. The solution must include a broad array of empowering interventions(Yonus, 2003).
The growth of microfinance in which can be attributed to factors such as their contributions to social welfare, job creation and generate economic and improvement of lives of the poor. Despite the interest of the sector and the subsidies that have flowed into some of the macro-oriented, is still appear challenging to meet up (Tang, 2002).
Microfinance institutions that focus on savings more than credit turn to reach a smaller proportion of the poorest, have a lower and slower impact on poverty reduction and are therefore less conducive to reaching the Millennium Development Goals on poverty reduction (Fruman,1998). Thus, this study seeks to analyse the effects of microfinance programs on poverty reduction in Cameroon, the case of SWAVIB Bafia-Muyuka Community.
1.3Objectives of the Study
1.3.1 Main Objective
The main objective of this study is to examine the effects of microfinance programs on poverty reduction in Bafia-Muyuka Community.
1.3.2 Specific Objectives
Specifically, this study is out:
- To describe the characteristics of respondents
- To identify the target activities of Microfinance Institutions
- To examine the effects of microfinance-institutions to a reduction in poverty.
- To examine the benefit of microfinance-institutions to women
- To identify factors challenging workers in SWAVIB Bafia-Muyuka community.
- To identify the challenges of microfinance–institutions.
1.4 Research Questions
1.4.1 Main research question
1.What are the target activities of microfinance institution?
2.What are the effects of microfinance -institutions to poverty reduction?
3.What are the benefits of microfinance -institution to women?
4.What are the factors challenging workers in the case SWAVIB Bafia-Muyuka?
5.What are the challenges of microfinance -institutions?