Joe Dinga Pefok (Uncle Joe)
Many SMEs In Cameroon, That Are Unable To Get Loans From Commercial Banks, Are Turning To Microfinance Institutions (Credit Unions), For Loans. And The Managements Of Most Of These Financial Institutions, For Selfish Interest Prefer To Grant Loans To SMES Than Ordinary Members. Is “The Poor Man’s Bank”, Now Abandoning The “Poor Man”!
Why are elections of Board members of microfinance institutions or credit unions in Cameroon, especially elections to the posts of President and Vice President, a do or die affair in most of these financial institutions? Board members of a credit union, including the President and Vice President are not paid a salary or monthly stipend. The money they legally get is what is commonly known as sitting allowance, paid at the end of a Board meeting.
But when it comes to elections of Board members of a credit union, especially to the posts of President and Vice President, the candidates, especially the incumbents, take the election as a do or die affair. Why? Candidates spend huge sums of money during campaigns to bribe members, or better still, to buy voters. Some candidates even borrow millions of francs CFA to spend for campaigns. Some candidates even go the extent of visiting ‘Juju houses” in a bid to win the elections at all cost. Yet, they say they just want to serve. LIES!
Making Money From Corruption
The fact of the matter is that many Board Presidents, Vice Presidents, as well as the General Managers and Deputy General Manager of most of the microfinance institutions around, make a lot of money through corruption or mafia in the granting of loans, especially big loans, though there are Credit Committees in the financial institutions. That is why somebody with a moderate financial status who becomes the Board President, Vice President, General Manager, Assistant General Manager, or Branch Manager, of a microfinance institution today, becomes a multimillionaire tomorrow, with houses built here and there. The corruption or mafia is of course at the detrimental of the credit unions and their members. Every year the amount of money shared to members of credit unions as annual interest, keeps dropping, while members of the management teams, including Board members, get richer and richer.
Granting Of Loans
The decisions to grant loans to customers of commercial banks are taken by the management of the banks, while with credit unions, the decisions to grant loans, especially big loans, are influenced by members of the Boards, especially the Presidents and Vice Presidents. There is a Credit Committee in Credit Unions that decide on the granting of loans, especially big loans. But the decisions of these Credit Committees are highly influenced by Board Members, especially the President and Vice Presidents. And the influence that the Presidents or Vice Presidents exert on the Credit Committees is done for their selfish or personal interests, to the detriment of the financial institutions. At the end of the day, several of these loans granted under questionable conditions, are not repaid, and the credit unions are in trouble..
Executing Orders Of Board Presidents
In some cases, especially when the loans are in the range of hundreds of thousands of francs CFA, or a few million francs CFA, considered as small loans, the managers of some credit unions receive instructions from the Board President or Vice President to grant the loans, and the orders are executed, even in cases that the managers know that the conditions under which such loans are supposed to be granted, have not been met. And at the end, several of these loans are not repaid, and the Credit Unions find themselves in problems. Also, as the saying goes, one ‘good turn’ deserves another. When loyal and unscrupulous managers, pilfer the funds of the credit unions, their Board Presidents often try to cover them, as ‘compensation’ for their loyalty, at the detriment of the credit unions.
Come to think of it, that the members of internal audit teams of credit unions are in most cases Board Members.
Corruption Is The Name Of The Game
Meanwhile, the question is why the Board President or Vice President of a credit union, will intervene to influence the granting of a loan to somebody, when the person has not met the required conditions. The simple response is that in most cases, it is due to corruption. There are many loans, especially big loans that, are granted on the secret arrangement of percentages.
Somebody applies for a loan of 25 million francs CFA for example, but has no concrete collateral security, or the value of the collateral security is not enough for the loan. He contacts the President or Vice President of the Board, for a ‘discussion’. He strikes a deal with the President or Vice President of the Board, that that the person will get 5 million francs CFA, that is, 20 %, of the loan, to ‘share’ to members of the Credit Committee. The deal is struck, and the person obtains the loan.
Somebody with a small enterprise wants a loan of 100 million francs CFA from a credit union, but does not have enough collateral security. He strikes a deal to give 20 million francs CFA as bribe, for the loan to be approved by the Credit Committee. The bribe money is shared to members of the Credit Committee, of course the President or Vice President who negotiated the deal, allocates a big amount for himself. The manager of the credit union of course has his own share.
Management Of Credit Unions Increasing Prefer To Grant Loans To SMEs, That To The “Poor Man”
As The Mentor News stated in an earlier article, commercials banks in Cameroon, are in generally unwilling to grant loans to Small and Medium Size Enterprises, SMEs, which are generally owned by nationals, because most cannot provide the type of collateral securities demanded by the banks for the loans. Many SMEs are now turning to microfinance institutions for loans, and in desperation at times are forced to accept very unpleasant conditions. The name of the game, is corruption, SMES are forced to negotiate deals to give up a percentage of loans they have to obtain, as bribe for the loans to be approved.
Making Money From Most Loans Granted SMEs
Partly because of the juicy deals with SMEs, the management teams, including Board of Directors, of many microfinance institutions in the country, now prefer to give priorities the granting of loans to SMEs, than to the ordinary people that are members or owners of the credit unions.
For one thing, members of the management teams that include the the Boards of the credit unions, personally benefit through corruption from the loans of 10 million FCFA, 25 million FCFA, 50 million FCFA and more, that are granted to SMEs, as compared to the small loans of 200,000 francs CFA, 300,000 Francs CFA, 500,000 francs FCFA, or 1 million francs CFA, that ordinary people, market women, ordinary workers, want. This is because it is easy for them to strike deals with proprietors of SMES on percentages of the loans to be given as bribe, to have those loans approved, than the ordinary people demanding small amount of money as loans. What can management get out of the loan of 300,000 or 500,000 francs CFA demanded by a market woman who is a member of the credit union? Nothing!
Poor People’s Savings And Deposits
But the fun about it, is that the money that are being by the managements of microfinance institutions or credit unions to grant the big loans to SMES, are the small savings and deposits of those ordinary people who are members of those financial institutions. They are the ones than own the credit unions, and that is why these credit unions have over the years been referred to as the “Poor Man’s Bank”. There are questions being asked these days, as to whether the managements of many of the “The Poor Man’s Bank”, are now abandoning or paying less attention to the “Poor Man”, because of big bribes they are getting from SME’s in deals for big loans.
