Permanent Alertness

Risk management appears to be the major disease that has attacked and is fast paralysing the microfinance sector in Cameroon.  For a sector that contributes about 10 per cent to the country’s economy, there is every reason to worry. The situation couldn’t be otherwise. In the year 2,000, Cameroon counted about 600 microfinance institutions according to the Central African Banking Commission (COBAC) but as a result of poor management, many have closed their doors and today the number has dwindled down to about 400. The main reason behind the massive business failure among these institutions is their inability to identify the various risks involved in microfinance management, the major one being loan recovery. Many of them issue out loans but are unable to get them paid back. Some are unable to size up what makes their customers credible.
Until the collapse of some of the main microfinance groups in major towns of the country, problems related to microfinance institutions were virtually side-lined. And of course, the results reached disastrous level when crises hit some of the major institutions forcing government to close down over 30 of them for irregularities. Cases abound where some of them absconded with customers’ savings. Customers of Cofinest for instance licked their wounds for several years following the collapse of the financial institution in 2011. Cofinest’s solvency problems were first revealed in December 2007 when COBAC placed it under provisional administration after audits disclosed a number of irregularities resulting into substantial non-performing and insider loans worth FCFA 3.9 billion.
The shortcomings in the microfinance...