Cobac Control Measures on The Performance of MFIs

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Published on International Journal of Economics & Business
ISSN: 2717-3151, Volume 1, Issue 1, page 39 – 53
Publication Date: 7 September 2018

Nkiendem Felix, Gahmuti R. N., Felix Nyuysemo A., Fokeng Sylvie, Nchitu P. A.
Nkiendem Felix
Department of Marketing and Organisation, University of Dschang

Gahmuti Roland N.
Engineering in Applied Mathematics in Social Sciences, University of Yde II Soa

Felix Nyuysemo Ayenika, Fokeng Sylvie, Nchitu Polycarpe Asah
Department of Management and Marketing, University of Yde II Soa

Journal Full text PDF: Cobac Control Measures on The Performance of MFIs.

Globally, the emergence of MFIS presents an unprecedented opportunity to extend financial services to the vast majority of the population. In Cameroon, MFIs and banks are governed by a series of enactments (conventions, laws, ordinance, presidential decrees, ministerial orders and circulars). Cobac control measures are becoming increasingly important to the performance of microfinance institutions in Cameroon. This measures seems to be indispensible for customer satisfaction as a measure of performance. We therefore set out to verify the level to which these measures influence the performance of microfinancial institutions. Data was collected from 160 respondents in the northwest and littoral regions in Cameroon. Measures of dispersion were studied including inferential statistics in terms of person correlation, test of hypothesis, analysis of variance, chi square. Our results show that COBAC control measures positively influence the performance of MFIs. Thus MFIs should re-enforce the implementation of COBAC control measures instead of considering them as threats.

Keywords; COBAC Control Measures, Performance, MFIS

1. Introduction
A great portion of the economy of CEMAC is finance to a great extent by Micro Finance Institutions (MFIs). In sub Saharan Africa, MFIs helps to develops countries and boosting of entrepreneurship development especially amongst the low income earners (George et al, 2000). These institutions according to Eoin (2005 as in Schreiner and Colombet, 2001) attempt to improve access to small deposits and small loans for poor households neglected by banks. Thus, Rhyne (2001) argued that the main products and services of these institutions consists of providing microcredit’s, subsidizing collateral through group leading guarantees or compulsory savings, disbursing more larger and repeated loans to customers depending on their repayment capabilities, monitoring loans disbursed to customers and safeguarding customers saving. Hence, different types of MFIs exists as savings and credit cooperatives, NGOs, programmes established by international organizations, legally-recognized micro-finance institutions, and micro-finance banks and their sizes greatly vary from 100 clients to over 6 million clients for the largest (Micro World, 2010-2016). According to Chiyah (2010a), informal financial institutions are village banks, cooperative credit unions, and social venture capital funds among others that assist in the financial needs of the society. MFIs often include both financial ………..

2. Literature Review
2.1 COBAC control measures on MFIs
Prudential regulations
Prudential stands for licensed MFIs (Joselito et al, 2005). Prudential regulations aimed specifically at protecting the financial system as a whole as well as protecting the safety of small deposits in individual institutions into considerations capital adequacy, relaxation of unsecured leading limits, loan loss provisions, loan documentation among others (Seth, 2009a). Thus, good and better theories of prudential regulation consists of Marcro-prudential and Micro-prudential according to this author. Macro-prudential is concerned with the stability of the financial system in general whereas; Micro-prudential is deals with the health of the individual deposit taking institutions (David et al. 2010).

Non-prudential regulations
Non-prudential regulations comprise a variety of issues that determinate how MFIs need to be conducted as consumer protection, prevention of fraud and financial crimes, implementation of credit bureaus, transparent disclosure of interest rate to customers (Christen et al, 2003). Non-prudential rules also stands for screening out unsuitable owners or managers or requiring transparent reporting and disclosure-tend to be easier to administer because state authorities do not have to take responsibility for the financial soundness of the organisation (Richard, 2003). Non-prudential regulations issues span a series of spectrum as enabling the formation and operation of Micro leading institutions, protecting consumers, preventing fraud and financial crimes, setting up credit information services among others (B. Seth, 2009b).

Prudential and Non-Prudential Standards for Regulating MFIs
According to the Word Bank (2012b) standards for regulating MFIs, these institutions are classified in terms of what MFIs stands for in terms of financial inclusion as a regulatory objective, prudential and non-prudential regulation among others. This Bank further illustrate that prudential norms are make up of capital adequacy, capital adequacy for financial cooperatives and their networks, unsecured leading limits and loan-loss provisions ………

3. Methodological Issues
In this research work, the researcher had as main objectives to assess the effect of COBAC control measures on the performance of MFIs in the North West and Littoral Regions of Cameroon. The specific hypotheses were four in number. The first was to examine the effect of the risk coverage control measures on the performance of MFIs. The second was to assess the impact of the credit control measures on the performance of MFIs. The third was to evaluate the effect of the asset coverage control measures on the performance of MFIs, fourth was to verify if liquidity control measures has an effect on the performance of MFIs and lastly to what is the impact of obligatory reserve measures on the performance of MFIs?
Data analysis for this study involved two major steps: the data reduction process and the structural relationship analysis. The data reduction process aimed to reduce the number of variables and parameters in the research model to a manageable number in terms of the ratio between sample size and parameters estimated in the structural equation modeling (SEM). The structural relationship analysis would be used to establish models for the Ordinal Regression analyses to examine the relationship between COBAC control measures and performance. The data reduction process was conducted in order to reduce the constructs employed in this study into composite variables. 10 constructs (Solidarity funds as a percentage of Capita, Obligatory reserves control norms, Risk coverage control measures, Assets coverage control measures, Administrators, management and employees engagement control norm, Credit /resource ratio or transformation control measures, Ratio relative to line of financing received control measure, Liquidity control Ratio, Ratio of highest debtor-Highest debtor as a percentage of total debt control measure …………..