Microfinance is a type of banking that provides financial services to low income individuals or groups of people who would otherwise have no access to finance.
The term "Microfinance Institution," abbreviated as "MFI," refers to entities that conduct microfinance activities within the Central African Economic and Monetary Community (CEMAC).
For the purposes of the regulation, the following definitions apply:
- National Monetary Authority: means the Minister responsible for Currency and Credit of the State;
- Banking Commission: means the Banking Commission of Central Africa (COBAC);
- Institution: means the Microfinance Institution;
- Member: means any person who contributes to the capital or endowment of a first-category MFI, assumes the responsibilities arising therefrom, and may benefit from the services provided by the MFI;
- User: means any natural or legal person who benefits from the services of a first-category MFI without being a member.
Microfinance Institutions are grouped into three categories in Cameroon.
- Institutions that collect savings from their members and use these savings for lending operations exclusively for the benefit of those members are classified in Category One.
- Institutions that collect savings and grant loans to third parties are classified in Category Two.
- Institutions that grant loans to third parties, without collecting savings, are classified in Category Three.
The legal forms of microfinance institutions (MFIs) are specified for each category by regulations of the Banking Commission of Central Africa.
Institutions licensed in one of the above categories are required to follow their name with the words "Microfinance Institution," followed by the references to the legislation governing them, their license, the category in which they were licensed, and their registration number. The use of the words "bank" or "financial institution" is prohibited.
CAPITAL OF MICROFINANCE INSTITUTIONS IN CAMEROON
The minimum capital for institutions is set as follows:
- First category. The capital must be sufficient to comply with all standards established by the Banking Commission. They are also called credit unions.
- For institutions in the Second category, the minimum capital which was previously set at 50 million francs is now 300,000,000 Fcfa.
- For institutions in the Third category, other than projects, the minimum capital which was previously set at 25 million francs is now set at 150,000,000 Fcfa.
The capital, endowment, or any equivalent resource of the governing body may not be less than 20% of the capital or endowment of affiliated institutions.
National authorities may set higher minimum capital levels if the development of the microfinance sector so requires, after receiving the approval of the Banking Commission.
AUTHORIZED OPERATIONS AND SERVICES OF MICROFINANCE INSTITUTIONS IN CAMEROON
Operations carried out by institutions acting as intermediaries are limited to the State where they are established.
For transactions with other entities, institutions must use the services of a bank or financial institution in the same State.
The principal authorized operations include:
1. Savings Collection
For institutions in the First Category, savings are defined as funds other than mandatory dues and contributions collected by the institution from its members, with the right to use them within the scope of its business activities, provided that the institution returns them upon request from said member.
The savings of institutions in the Second Category consist of funds collected by the institution from the public in the form of deposits, with the right to use them within the scope of its business activities, provided that the institution returns them upon request from the depositor.
Third-category institutions are not permitted to collect savings.
For Third-category institutions, the following funds are not considered savings:
- Security deposits;
- Sums left by customers to meet their obligations;
- Loans;
- Funds left in accounts by partners or shareholders.
2. Credit Operations
A credit operation is defined as any act by which an institution makes or promises to make funds available to a member or a third party, or undertakes a commitment by signature on their behalf, such as an endorsement, a guarantee, or another form of security.
First-category institutions may only grant credit to their members. Those affiliated with a network may only make a commitment to another institution affiliated with the same network.
3. Financial Investments
Institutions with surplus funds may make investments with commercial banks in their country of operation.
They may also allocate these funds to the purchase of Treasury bonds or bonds issued by the Bank of Central African States.
4. Other Resources
Institutions may receive other resources in accordance with the provisions of their statutes and the standards established by the Banking Commission.
First-category establishments are required to establish a solidarity fund upon their creation to cover losses. This fund will receive, upon each new membership and at the beginning of each fiscal year, contributions made equitably by the members, as well as the allocation of a portion of the profits or surpluses for the fiscal year.
Ancillary operations include:
- Procurement of foreign currency and traveller's checks from banking institutions for customer needs;
- Safe deposit box rental;
- Training programs;
- Purchase of goods for customer needs. This operation must be related to the customer's business;
- Leasing operations.
Ancillary operations are subject to the limits set by the Banking Commission. Microfinance Institutions in Cameroon may issue means of payment.
A means of payment is defined as any instrument that, regardless of the medium or technical process used, allows for the transfer of funds.
However, these means of payment may only be used for the transfer of funds within the country where the institution is established and between institutions governed by these regulations.
Institutions may only issue check forms for drawings within the same location or network. The concept of a market will be defined by regulation of the Banking Commission.
Institutions may organize clearing mechanisms relating to the means of payment they have issued.