Joe Dinga Pefok (Uncle Joe)
Many Microfinance Institutions Are In Problem Because They Are Owed Huge Amounts Of Unpaid Loans. Many Of The Loans Were Granted In Violation Of The Text, Because Of Corruption. The Fact Is That When Somebody For Example Has To Give Up 5 Million FCFA (20 %) As Bribe, To Be Able To Get A Loan Of 25 Million FCFA, The Chances To Repay The Loan Is Slim.
There are a number of major reasons why many microfinance institutions or credit unions in Cameroon, run into big financial problem. There is often the issue of poor or incompetent management. There are also often cases of fraud, especially inflated bills either done by management, or done with the complicity of management.
But the biggest problem that affects many credit unions in the country is corruption, especially in the granting of ‘big loans’. Corruption in the form of bribe, or undue influence of other forms, is the main thing behind the irregular ways in which several loans are given out by many credit unions. These credit unions end up with several big loans not being repaid, and thus plunging the financial institutions into serious financial problems. That is one of the major reasons why many microfinance institutions in Cameroon are currently in trouble with the Central African Banking Commission (COBAC), and the Central African Financial Market Supervisory Commission (COSUMAF). This will however be the subject of another article by The Mentor News, later.
Board Presidents Have A Lot Of Power Or Influence
Meanwhile, talking about the management of credit unions especially in Anglophone Cameroon, another part of the problem is that the Board of Directors, especially the Presidents and Vice Presidents, have too much power, under the pretext that they are elected to represented members who are owners or shareholders of the Unions. When it comes to commercial banks for example, one rarely hears about the Board of Directors of a bank. But they are there working quietly. There are many customers of commercial banks who know absolutely nothing, about the Board of Directors of their banks, and they do not even care about that. This is because commercial banks are managed by General Managers, their Deputies and other close collaborators appointed by the Boards, with powers to run the financial institutions. That is why when one hears about a bank, he hears more about the General Manager or Branch Manager, and not the Board President or Vice President.
But when it comes to a microfinance institution or credit unions especially West of the Mungo, it is instead the Board of Directors, especially the Presidents and Vice Presidents, that people hear, with very little or nothing heard about the General Managers and Branch Managers of many of the financial institutions. The General Managers as well as Branch Managers of many credit unions are not only very loyal to Board members in a bid to protect their jobs, but they operate as accomplices to the Board Presidents and Vice Presidents, in acts of corruption, inflated bills, or better still, in shady deals deals.
To Obtain A Loan, The Applicant Is Supposed to Have At least 1/ 4 the amount In His Account.
It should be noted that besides the presentation of collateral securities, one other official conditions that is supposed to be fulfilled to obtain a loan, especially a big loan, from microfinance institutions in Cameroon, is that an applicant for a loan should have at least 1 /4 of the amount of money he wants to borrow, in an account at the credit union. But many credit unions do not respect that text. There is for example, currently a case or problem at one of the micro finance institutions in Bamenda, where it has been discovered that somebody who obtained a loan of 50 million francs CFA for his small enterprise, had only 2.4 million FCFA (Two million, four hundred thousand francs CFA) in his account, instead of the 10 million francs FCFA required by the text. Today he can’t repay the money, and according to the text, the loan was granted irregularly, or in violation of the text.
There is of course no doubt that the management of the credit union that granted the 50 million francs CFA loan in violation of the text, struck a secret financial deal with the proprietor of the small enterprise that obtained the loan.
Why The Huge Unpaid Loans
The fact is that at the end of the day, many of the loans granted under irregular conditions or questionable circumstances by the management, including the Board, of many microfinance institutions, are, only partially repaid, while some in their entirety are not repaid at all. As aforementioned, the fact of the matter is that when somebody gets a loan under such a condition of having to sacrifice as much as 20 % as bribe, the chances of him repaying the money, especially repaying fully, is slim. If a businessman gets a loan of 25 million FCFA, on condition that 5 million FCFA of the money is given away as bribe, how will he make up for the 5 million FCFA to be able to reimburse the 25 million francs CFA? How will he be able to raise the 20 % that was deducted as bribe, to pay back to the credit union?
Also, how will the credit union be able to recover the money, if the person fails to repay the loan, and it happens that the collateral security that he presented for the loan is in reality far below the value, or amount, of the loan the person took? Of course the fact is that the members of the Credit Committee of the credit union were certainly aware of the facts, before approving the loan. But they opted to place their selfish interest above that of the credit Union.
The Problem Is Not That A Businessman Obtains A Loan, The Problem Is With Being A Bad Debtor
Meanwhile in the past, the managements of microfinance institutions in Cameroon, used, to complain that the reasons they were unable to take or drag bad debtors to court, in a bid to force them to repay the money, was because a debt was then considered as a civil matter, and not a criminal matter, in Cameroon. So a bad debtor could not be taken to court. In this article, The Mentor News qualifiers somebody as the bad debtor of a credit union, someone who obtained a loan, and from all indications is unwilling to pay back the money.
It is not a problem for a businessman to take a loan. It is in fact very normal. Most businesses across the world operate on loans. The problem is when somebody takes a loan, and is not willing to reimburse or repay it. That is, the person shows no serious sign that he is struggling to repay the loan. That is a bad debtor. It should be noted that the money given out as loans by a microfinance institution, just like a commercial bank, are the savings and deposits of members of the credit union, or customers of the commercial bank. The money thus, does not belong to the credit union or the commercial bank.
Gov’t Modifies Text, To Make It Possible For “Bad Debtors” To Be Dragged To Court
Meanwhile, when the Government got up from slumber, and started paying more attention to the activities of the microfinance sector, the complaint about huge sums of unpaid loans by bad debtors, repeatedly came up. In a bid to protect the savings of members of credit unions, the Government in 2020 modified the text, making it a criminal affair, for somebody to borrow money from a microfinance institution, and not repay.. So a microfinance institution or credit union can today drag a bad debtor to court, for unpaid debt or loan. An unpaid loan to a credit union is now considered as a criminal affair.
But then today the same credit unions are dragging their feet on taking bad debtors to court, under the pretext that the cooperative credit union spirit is against dragging members to court for debts. The fact is that the Credit Committees, or management of many of these credit unions, took bribes from many of those who today are considered as bad debtors, to approve the granting of big loans to them. To drag those bad debtors to court, precisely those from who bribes were taken to grant the loans, is a big risk to the bribe takers, as nobody knows what a bad debtor can say in court. It is also a complicated issue for the management of the credit unions, to drag a bad debtor to court, if the loan was granted to him or her, in violation of the text, because that aspect will also certainly come up in court.
In fact the person who accepted the deal to give up 20 % of the loan he obtained as bribe, has it in mind that it would be difficult for the President or Vice President of the Board, or members of the Credit Committee, that grabbed or shared the 20 % bribe from him, to authorize the management of the credit union, to take some tough or drastic measures against him, in an effort to recover the money. How can the manager even take drastic measures, if he too got his own share of the bribe?
Mezam SDO Calls On Bad Debtors Of Big Loans Taken At AZICCUL, To Repay The Money
At the recent General Assembly of the Azire Cooperative Credit Union Limited, AZICCUL, that held in Bamenda early this year, the Mezam SDO that presided over the meeting, called on those who took loans, especially big loans, from the credit union, and that have been defaulting in the repayment of the money, to reimburse the money to the financial institution. Canal 2 International (TV), that covered the event, reported that the SDO was referring to a total of 72 big loans being owed AZICCUL, without giving any details. These are cases of debtors that have not been making any efforts, or showing any willingness, to pay back the money. These are the bad debtors. It should be noted that big loans granted by credit unions, are often repaid in installments. This is method to facilitate the repayment, to ensure that the repayment of the loan does not weigh too much on the debtors, including enterprises.
Meanwhile, going back to the issue of the 72 bad debtors of AZICCUL, the question is what has become of the collateral securities that these 72 persons or enterprises, were supposed to have presented to credit union as one of the major official conditions to get the loans. It is even strange that it was the Mezam SDO, to call on those who took the big loans from AZICCUL, and have been defaulting in payment, to pay their debts. Is that the job of an SDO?
