Page 1 of 7

Advances in Social Sciences Research Journal – Vol. 11, No. 11

Publication Date: November 25, 2024

DOI:10.14738/assrj.1111.17855.

Bin, A. K.-N. (2024). The Microfinance Institution in Cameroon: Historical Perspectives. Advances in Social Sciences Research Journal,

11(11). 122-128.

Services for Science and Education – United Kingdom

The Microfinance Institution in Cameroon: Historical

Perspectives

Anyekezeh Kum-Ngong Bin

Pan African University, Institute of Governance,

Humanities and Social Sciences

ABSTRACT

Using the sociological approach to critical analysis, my paper examines the

evolution of the microfinance institution in Cameroon from a historical perspective.

It argues that due to a number of significant changes on the national and

international scene, the institution has undergone a number of palpable changes to

become what it is obvious today. I aim at showing how these varied changes on the

socioeconomic landscape have been informing templates of the banking sector and,

by extension, the microfinance sector in the country today.

Keywords: Microfinance, History, Sociological theory, Change.

INTRODUCTION

This paper examines the intersection between finance, sociology, and history in Cameroon as it

traces the historical evolution of the microfinance sector in the country. The idea is to

understand how this entity has come to occupy the central place it has in the country’s finance

sector today. The objective is to underscore the fact that while the microfinance institution has

received considerable attention as a financial instrument per se, an evaluation of the different

socioeconomic developments that have informed the sector in significant ways, is worth the

kind of attention I pay to it in the paper. However, before I proceed along these lines, it would

be expedient to define what the microfinance institution is.

Several scholars have noted the complexity in the definition of a microfinance institution (see).

This may stem from the confusion often noticed between the concept of ‘microcredit’ and the

broader ‘microfinance’. While these terms are sometimes employed interchangeably, it is

crucial to underscore that they represent distinct concepts. In general, microcredit refers to the

practice of providing modest loans to persons with low incomes, particularly women, who are

unable to get credit from traditional mainstream banks. The notion of microfinance, on the

other hand, encompasses a wider scope in comparative terms. The range of services offered by

microfinance includes microcredit, micro saving, microinsurance, money transfer, health care,

business training, education, and many other financial services (Van Rooyen et al., 2012).

Microcredit is thus among the diverse range of services under the domain of microfinance. In

definitional terms, (Robinson 2001) says a microfinance institution provides small-scale

financial services, such as credit and savings, to individuals engaged in microenterprises. These

microenterprises constitute various activities like the production, recycling, repair, and sale of

goods, as well as the provision of services. Additionally, microfinance targets individuals who

earn wages or commissions, generate income from renting out small amounts of land, vehicles,

draught animals, or machinery and tools, and other individuals and groups at the local levels of

Page 2 of 7

123

Bin, A. K.-N. (2024). The Microfinance Institution in Cameroon: Historical Perspectives. Advances in Social Sciences Research Journal, 11(11). 122-

128.

URL: http://dx.doi.org/10.14738/assrj.1111.17855

developing countries In the Cameroon context which informs my paper, the Central African

Banking Commission, known by its French acronym COBAC, refers to microfinance as the

operations conducted by authorised businesses that are not classified as banks or financial

institutions. These entities engage in the collection of savings or deposits, provision of credits

or loans, and offer specialised financial products to individuals who are often excluded from

traditional banking networks. Both definitions indicate that this sector deals primarily with the

population that cannot easily liaise with banks for their activities. To have evolve over time in

its dealings with small scale enterprises is an indication of the historical importance of this

sector on a global scale. But what about Cameroon, my focus in this paper? How has this

important economic sector evolved over time? What are the significant historical milestones

that have informed it? These questions and more constitute the motivation of this paper.

I employ sociological criticism in my evaluation of how the microfinance sector in Cameroon

has come to occupy the place it has in the economic sector of the country. While the study of

financial markets, money and banking has been the purview of economics, the discipline of

sociology, Lisa A. Kiester (2002) affirms, has contributed greatly to understanding financial

relations since the early history of this discipline. This means that the discipline of sociology is

crucial in coming to terms with situations of how the microfinance sector has come to play an

important role in the finance space in the country today. For instance, the sociological approach

can enable one examine questions of process, transition, and outcomes regarding the banking

sector; issues which definitely hinge on the sociological. In this light, Bruce G. Carruthers (2018)

affirms this when he notes in “What is Sociological about Banks and Banking?”, that banks and

banking are sociologically interesting even so because they are embedded in a variety of social

and economic networks and have played significant roles in the modern economy over time.

This critical tool is important in my paper because it is useful in underlining how different

socioeconomic parameters have undergird the microfinance space in Cameroon. The question

then remains, how has this sector evolved over time in the country? What are the significant

markers of its growth? Before I answer these questions, it would be important to briefly talk

about the growth of this sector globally, given that microfinance banking is not indigenous to

Cameroon, even if it occupies a strategic place in the country’s economic development.

BACKWARD GLANCES: MICROFINANCE SECTOR IN THE GLOBAL ARENA

Generally, the beginnings of microfinance are traceable to countries like Indonesia, India,

Nigeria, Pakistan, and Germany (Mia et al., 2019). Morduch (1999) isolates Germany as the

birthplace of contemporary microfinance because of Friedrich Wilhelm Raiffeisen’s inaugural

credit cooperative in the country in 1864 (Guinnane 2001). For Morduch, the German credit

cooperative movement was meant to enhance the well-being of rural communities by means of

microfinance with the ultimate goal of liberating them from the clutches of informal

moneylenders. From this time onward, the cooperative movement grew to embrace Europe,

North America, and some emerging nations globally (Helms 2006).

To begin this historical overview thus is not to negate the development of the notion of

microfinance which goes back several centuries with the establishment of pawnshops in

Europe around the early 1500s. These substitutions for exploitative money lending methods

(Helms, 2006), constitute early indications of microfinance banking even if they weren’t as

developed along the lines that we have today. At another level, official financial institutions,

attending to the needs of the unbanked population, have existed in Europe for several years.

Page 3 of 7

124

Advances in Social Sciences Research Journal (ASSRJ) Vol. 11, Issue 11, November-2024

Services for Science and Education – United Kingdom

For instance, Jonathan Swift, a prominent figure in Irish nationalism, established the Irish Loan

Fund System in 1720 providing small loans to the poor in his country (Hollis and Sweetman,

2001). The changing fortunes of the scheme notwithstanding (Helms 2006, Hollis and

Sweetman 2004, Seibel 2005), the system served as an early illustration of financial inclusion,

which is a hallmark of the microfinance sector. In Africa where Cameroon is found, the practice

dates back to the 17th century with Nigeria establishing indigenous rotating saving and credit

associations (RoSCA), also referred to as 'ajo' and 'esusu' (Mia et al., 2019; Seibel, 2005).

As the institution evolved globally, a number of noteworthy regional/local trajectories, came to

define it. In 1895 Indonesia, for instance, the People's Credit Banks/Bank Pembiayaan Rakyat

Syariah (BPRs) emerged as the most expansive microfinance system in the country, with

around 9,000 branches, thanks to its emphasis on financial inclusion (Helms 2006). In Latin

America, during the early 1900s, a number of rural financial initiatives saw the light of day

whose ownership and operation included commercial banks and government organisations.

Their major objectives were to alleviate burdensome lending practises for the rural

impoverished population, stimulate investment through credit, encourage savings

mobilisation, and facilitate the modernization of the agricultural sector. Between the 1950s and

the 1970s, several donors and governmental entities, in these contexts, provided agricultural

loans to small and disadvantaged farmers, with the aim of improving their production and

income levels (Helms, 2006). At the same time, farmers' cooperatives and state-owned

development finance institutions were active in providing help to farmers through lending

initiatives. Even though resultant corruption and the inability of some clients to adhere to

repayment obligations depleted capital reserves, leading sometimes to the closure of these

institutions, suffice it to say that they showed the development of the microfinance sector over

time.

From the 1970s, ACCION International of the USA and Grameen Bank of Bangladesh were

instrumental in the establishment of the contemporary microfinance system, through provision

of modest credit to individuals engaged in petty trading activities in Latin America and South

Asia (Chiu, 2015). Their achievements in this domain have inspired several other organisations

in this regard. The Grameen Bank, in particular, has emerged as a well-recognised banking

paradigm on a global scale. When one comes to the 1990s the emergence of Islamic

microfinance institutions (MFIs) that introduced a profit-sharing loan model, aimed at offering

interest-free loans to those living in poverty across Asia and Africa, stand out. This has

contributed in no small way to the global evolution of the microfinance sector. As it were, the

Islamic model has proven its success in mitigating poverty. This brief global overview helps us

to understand how, from a social level, the advancement of contemporary microfinance is

informed by the progressive growth of credit unions/cooperatives and other associated

microfinance initiatives, which have benefited from centuries of experiential learning, hinged

on both failures and successes (Mia et al., 2019). I now move on to examine the evolution of this

institution in Cameroon.

THE MICROFINANCE SPACE IN CAMEROON: HISTORICAL ANTECEDENTS

As far as Cameroon is concerned, history has it that the beginnings of the microfinance

institutions (MFIs) are traceable to the establishment, in 1963, of the first credit union in

Njinikom, located in the Northwest Region. This, however, does not deny the existence of

tontines/njangis all over the national territory before this time. Tontines/njangis refer to