The growth of digital financial services has led to a tremendous increase in the number of people, enjoying access to formal financial services. Today, Africa sees a lot more digital financial services deployments than ever before.

Small firms can directly benefit from digital solutions such as mobile money, online banking and other financial technology innovations. Financial institutions offer transactions, savings, credit, and even insurance opportunities.

Mobile financial solutions let those in rural villages and urban neighborhoods access these opportunities affordably, instantly, and reliably where no bank had ever established a branch. For the common African, this is more than convenient as one will not have to travel several kilometers, just to make use of a banking system. Literally, this is banking for everyone and at their fingertips too!

But what does this mean for the future? Could digital financial inclusion significantly contribute to economic growth, reduce poverty and narrow income inequalities without necessarily causing adverse effects on financial stability? Will it be possible, one day, for a farmer in rural Cameroon to stand with his phone in his field and borrow the money to pay for agricultural equipment, without even requiring an actual bank branch?

As the world evolves, new technologies and innovations are developed to make life comfortable and accessible. The financial sector is one of the fastest-growing sectors embracing technology. There is a high need for financial stability in the world in general, inclusive of more human beings.
Fintech refers to digital innovations that improve the quality of financial services. FinTechs make use of new technology and innovation to develop new and better financial services.
The fast growth of mobile technology and the internet are paving a way for fintech to support financial inclusion in Cameroon.

Financial inclusion (according to the World Bank) is the ability of individuals and businesses to have access to useful and affordable financial products and services that meet their needs — transactions, payments, savings, credit, and insurance — delivered in a responsible and sustainable way. Financial inclusion is designed to secure people access to basic financial services such as bank accounts, savings, credit, and other financial transactions.

In this article, Muellners Foundation dives into the case study of Cameroon.

Cameroon’s Financial Inclusion Story

The high cost of financial services, the distance b/w consumer and financial institutions, the long paperwork required to open an account, poor customer service, absence of guarantees and credit histories, exclusion of women including young people are few of the aspects that corner us as we begin to discuss Cameroon. We have no doubt that these factors have excluded a large part of the population from the financial system in Cameroon.

In Cameroon, just about 10% of the population (aged at least 15) had a bank account in 2017. This was revealed by the finance ministry (Minfi) in a “FinScope” survey [1], which aimed at assessing the levels of access to and use of financial services across the country. According to the document, financial inclusion is relatively low in Cameroon.
Indeed, people widely preferred informal credit (11%) over formal credit (3%). In addition, about 10% of the population received credit from relatives or friends.

“Consumer education and financial education are serious concerns in Cameroon, mainly in the insurance sector, where most adults lack financial literacy,” the study said.
About 51% of adults surveyed pointed out the need for financial education training, mainly on how to save and the benefits of financial products. Meanwhile, 45% do not seek financial advice due to a lack of financial information.
”Only 29% (of those aged 15 or above) use mobile money service while the mobile penetration rate was 76%. This means digital financial inclusion can still be improved. This is important because “Mobile Money” is a relatively new financial product with huge potential,” the FinScope mentioned.

As a solution, financial technology (fintech) offers the chance to boost economic growth and expand financial inclusion in Cameroon. Financial inclusion advocates methods such as the easy and inexpensive opening of a bank account. It advocates accessibility to financial products and institutions for all, financial education, and matching the needs of the population with financial products and services

Of late, field studies have shown that access to mobile money has increased daily per capita consumption levels of households, lifting them out of extreme poverty. Mobile money services have changed lives – for example, helping women to move from subsistence farming to business occupations and sustainable livelihoods [2].

The impressive growth in terms of financial inclusion in Cameroon over the last few years has been driven primarily by mobile money and agent banking. Despite all this, the growth in traditional financial institution accounts lag behind. I would say the future of the financial sector in the country is purely digital.

In Cameroon, millions of people can now make payments and save money with a few clicks on a mobile phone. To better understand the average Cameroonian user, IFC and the Mastercard Foundation commissioned a [rare ethnographic study] into the usage, perceptions and attitudes towards digital financial services in the country. The study aimed to understand what digital financial inclusion means in Cameroon in relation to historical, cultural and social factors. It focused primarily on four key research questions:

A.  What is the contextual infrastructure of digital financial services in Cameroon?
B.  How is the meaning of money changing due to digitization?
C.  What are the factors informing people’s perceptions and attitudes towards digital financial services?
D.  What is the impact of Digital Financial Services (DFS) on financial inclusion, beyond the numbers that measure access to formal financial accounts?

The researchers interviewed both users and non-users of DFS, in urban as well as rural areas. The team focused on the informal sector, interviewing street traders, motor taxi drivers, and other small-scale business proprietors. They also spoke to students, teachers, journalists, accountants, and farmers.

One of the main findings of the study is the crucial and overarching importance of trust, and how this notion is culturally specific and historically embedded in the society. It also portrays this as the most outstanding factor that drives the uptake of digital financial services in the country. Trust in itself is a factor of how well the technology works, how supportive policies of customer protection are and perceived to be, the social and cultural notion, as well as the historical experiences of the financial sector.

It was realized the economy has experienced large swings of economic progression and deterioration over time, sometimes reflected in a collapse of the financial sector. Consequently, some potential DFS users may have learned to primarily rely on informal financial services and may be reluctant to adopt services perceived to be linked to a volatile banking sector. In such markets, it may be especially important for DFS providers to distinguish themselves from traditional financial services providers to attract users, and it also becomes crucial to swiftly overcome any issues of balancing floats, network outages or similar bugs in the technology systems.

Fears of new technology also emerged as a powerful barrier to DFS adoption, not just in terms of technological literacy, but also due to the anticipated effect of new technology within social and cultural norms.

Cameroon’s Economy

Financial inclusion can also lead to an increase in Gross Domestic Product (GDP). It is also crucial for emerging markets, where accessible financial products at affordable prices can dramatically affect economic growth.

Role of Affordable FinTech in Cameroon’s Financial Inclusion

Fintech has revolutionized the financial industry. This has given birth to new and exciting ideas aimed at improving user experience and helping financial institutions become more efficient and provide a better service.
Poor financial inclusion, especially in Cameroon, is due to several factors, including:
Strict KYC documentation requirements to open bank accounts
Low financial product penetration
Very few credit information services
Low financial literacy
Unavailability of proper banking infrastructures

How can fintech help in improving financial inclusion in Africa?
According to a World Bank report, nearly 2 billion people still do not have a basic transaction account. A previous report from this same entity stated that 17% of unbanked adults were located in Sub-Saharan Africa. Fintech is slowly but steadily finding ways to fill the gap. Some of the ways in which financial technology positively impact financial inclusion in Africa are:

Lowering transaction costs:

By developing e-payments and transfer services, fintechs provide accessible opportunities for low-income clients. Lower transaction costs encourage consumers to make use of these services, thereby helping households improve their financial stability and resiliency.
According to a Human Sciences Research Council (HSRC) survey, 76% of low-income consumers indicated that high transaction fees are major drivers of financial exclusion, which has led to a high percentage of Eastern Africans, to use mobile money, which is considerably cheaper than bank transactions, and available mainly due to fintech companies.

Improving competition and small finance banks:

Increasing competition with the few banks in Africa, can lead to banks improving the efficiency of their processes and reducing operating costs. New competitors are generally smaller, which means they have less operating costs and can offer the same services at lower prices, which will ultimately benefit consumers.

Reducing credit market problems:

Entrepreneurship is a key factor in economic growth in emerging markets, and yet, several small and medium enterprises (SMEs) are struggling to even start operating. The reason? Access to (affordable) credit.
Not having access to credit is a major constraint to business growth. In Cameroon, a very limited number of businesses have taken out a formal loan, and most of them are generally not approved. Trade credits are essential to day-to-day operations of small businesses, but due to the global financial crisis, provision is falling and access to trade credits is becoming increasingly more difficult. By adopting financial technology solutions, it is easier for small businesses to utilize credit options.

Credit risk assessment:

This is also quite costly in Sub-Saharan Africa. By not having reliable sources of accounting and financial information on businesses and individuals, as well as the fact that there are no credit bureaus, it is extremely difficult for banks to grant loans.
By adopting fintech solutions such as big data and machine learning, the cost of credit risk assessments goes down. They can, for example, provide more information on individuals and businesses through their mobile phone usage data as well as payment data.

Fintech solutions have definitely altered the slow trajectory of financial inclusion in Africa, resulting in extremely positive changes, but there is still a long way to go. Fintech can be applied not only to finance, but translate into important changes in other areas, such as infrastructure, agriculture, development, and economic growth, which also impact financial inclusion. This will also help improve upon massive amounts of travel and wait time due to a massive underbanked population. I believe affirmative action and affordable financial technology will go a long way to speed up the process of financial inclusion in Cameroon and Africa as a whole.

Affordable financial technology includes open-source products.They provide reliable, robust, and affordable solutions for entrepreneurs, financial institutions, and service providers to offer financial services to the world’s underbanked and unbanked population. They include both mobile and cloud-based solutions, which often enable digital transactions. Examples include:

Apache Fineract
Finscale
Cyclos
MyBanco
OpenCBS
OpenBank
Cobis

Status of the Fintech Industry in Cameroon

As Africa experiences the highest rate of growth of digital consumerism in the world, Cameroon finds itself at the forefront of the continent’s technological boom. This rise of the fintech industry in Cameroon is quickly changing the landscape of the country, including the investment opportunities these companies are bringing in, as well as the digital financial services they provide. This could prove key to building Cameroon’s economy and improving the lives of many of its impoverished citizens.

Cameroon’s fintech industry is gaining traction this year, a trend reflected by rising digital financial services adoption, considerable funding going towards startups, and several product announcements.

Mobile technology, one of the key elements of fintech in Cameroon, has enabled thousands of people to access financial transactions such as payments & money transfers.
The adoption and use of mobile Money & wallets in the provision of financial services is changing the way in which financial service providers operate and deliver products and services to their customers. A report published by the Cameroonian ministry of posts and telecoms (Minpostel) showed significant growth in the country’s mobile penetration rate, which rose from around 12% in 2005 to almost 83% in 2016.
The rise of mobile phone sales and internet expansion has led to FinTech startups and telecom companies to render financial services to the underbanked, merchants,micro entrepreneurs etc. Amongst many Fintech startups/companies said to be in Cameroon only a few are seen to be making waves in Africa as a whole.

Orange and MTN have democratized mobile payments and remittances in Africa. They are the most used money banking service in Cameroon. These mobile operators introduced mobile money services in Cameroon in 2011. Not only did they usher people in a new way of life (as far as handling money is concerned) but also increased the rate of financial transactions. Besides, this has also brought the services and financial institutions closer to people, enabling access to financial services for all and at a lower cost.

Mobile money also serves as an electronic wallet for users as they no longer need to move along with physical cash. Users can buy fuel, do shopping in supermarkets, get drinks in bars and snacks and pay using mobile money. Enterprises and institutions like Electricity supply company (ENEO), General Directorate of Taxation, CAMRAIL amongst others are also taking advantage of the technological revolution to facilitate revenue collection. Today, it is easier to pay electricity bills via mobile money with the enterprise attending to several clients at a time than the long and tiring queues at their counters.
Orange and MTN Money Agents can be found on streets and in local neighbourhoods.

Photo by Edouard TAMBA on Unsplash

Maviance, the owner of digital payment platform for merchants Smobilpay, raised a US$3 million seed round from pan-African fintech MFS Africa, Business in Cameroon reported in May. The investment will help fund Maviance’s expansion across the broader Economic and Monetary Community of Central African States (CEMAC) and extend its footprint. The company claims it serves over 500,000 unique customers monthly.

Diool is another Cameroonian paytech startup that raised considerable funding this year. The startup, which provides small merchants with payment capabilities, announced in February a US$3.5 million funding round to scale operations. Founded in 2015, Diool has reportedly signed up more than 2,500 merchants and has processed over US$120 million in transactions.

This year also saw the launch of new fintech startups and products:
Bank’Up, an affiliate of French startup Loan2Cash, launched its buy now pay later product in Cameroon in February. Purchases are currently capped at 100,000 XAF (US$185), and moving forward, this startup aims to extend its offer to unbanked customers. Within the next three years, Bank’Up hopes to reach 250,000 monthly transactions and 5,000 customers.

Maealth Technologies, another new startup, introduced its mobile-first savings solution Nkwa in March. The mobile app allows users to save money easily and conveniently towards a precise goal, whether that’s buying a car or for future vacations. Users can fund their account using popular payment options MTN Mobile Money (MoMo) or Orange Money, starting with as little as 50 XAF (US$0.09).

Cameroon’s fintech scene is largely dominated by paytech startups like ZuumPay and Adwa, and mobile money innovations, where the domestic mobile money market is dominated by MTN Cameroon and Orange Cameroun which run MTN MoMo and Orange Money respectively, but other players do exist including Monifone by Société Générale de Banques au Cameroun and CampostMoney by state-owned Cameroon Postal Services. Viettel Cameroon said earlier this month that it will be launching its mobile money service Nexttel Possa by the end of this year.

As of early 2019, MTN MoMo had more than 5 million subscribers, and competitor Orange Money, about 4.5 million subscribers, reported Business in Cameroon. MTN held a 40.7% market share, followed by Orange (40.3%), and AfrikPay by fintech company King Triple (8.5%).

According to data compiled by the Bank of Central African States, mobile money transactions in Cameroon reached 2,224.7 billion XAF (US$4 billion) between June and September 2017. Experts estimate that this value has probably increased twofold since then.

Besides digital payments and mobile money, other fintech segments are also present in Cameroon, including blockchain (e.g. Fintech Ltd.) and crowdfunding (e.g. Guanxi Invest) [3].

Fintech Startups:

SEED
FinTech Ltd
Guanxi Invest
Zito Financial
WazaPay

Why the phobia of Fintech:

Even though we can see a few fintech startups gaining grounds in Cameroon, they really have trouble making their way through the system. While some countries in the African continent are already on another stage of consuming banking, insurance, and credit, Cameroon is still at the nascent stage which is the transfer and payment of money.

The literacy levels of the population is a major factor at play. For example, Fintech startups need to provide enough information on what they offer. They must recognize the fact that 80% of the Cameroon population are unbanked and as such have little or no knowledge of what it means to do money transactions online or purchasing products using their platforms etc.
People still prefer the long queue at the bank for their transactions like paying bills, because of the fear of being duped.
This has brought me to the conclusion that there is no way Cameroon can achieve the level of financial inclusion expected by certain individuals, startups and fintech companies if basic factors such as this haven’t been evaluated critically..

I would say Fintech – which has been identified as a Financial inclusion factor by the World Bank is not a danger to finance, but rather an improvement and evolution of the sector. Digital finance will improve financial services in terms of accessibility and cost. Cameroon giving more rooms for young developers to come up with more advanced financial solutions will indeed contribute to financial inclusion for the entire population.

How are farmers supported by financial inclusion?

Cameroon is a country in Central Africa located right below the Sahara Desert. With a population close to 24 million, estimates show that 48 percent of the population lives below the poverty line. The majority of those who live in poverty reside in northern, rural regions.

Although Cameroon has experienced growth in GDP since 2018, it is the largest economy in the Central African Economic and Monetary Community (CEMAC), a region that has suffered in Africa due to the fall of oil prices. Cameroon aims to become an emerging country by 2035, which means the real GDP will have to grow by 8 percent. In order to reach this goal, credit access is an advancement that must be focused on. Seeking a solution for credit access in Cameroon is a crucial task for its government.
Unfortunately, in 2017, only 10 percent of Cameroon’s population reported that they have a bank account.

Agriculture and the Economy

It’s clear that financial services and education are not reaching a larger portion of Cameroon’s population. Often described as a miniature Africa, Cameroon exhibits all the climates of the continent, with a large chain of mountains separating the arid and green regions. This terrain also presents a challenge in acclimating the population to new advancements such as mobile banking and credit access.

Cameroon’s economy is rooted in agriculture, something found mostly in rural regions where access to credit is poor. Because of the country’s rich landscape and natural resources, 70 percent of the population’s labor force is in Cameroon’s farms. However, 23 percent of farmer households rely on subsistence farming, which means they are working to feed themselves and their family. This is an alternative to both consuming and selling the produce.

While subsistence farming can provide a family with a self-sufficient method towards survival, their financial success is dependent on a non-hazardous climate and funding.
Most farmers sell their products at the marketplace, where physical cash is exchanged for goods. Out of the 90 percent who do not own a bank account, the majority reported that they had no money to save or made no regular income.

Photo by Edouard TAMBA on Unsplash

A Need to Expand Credit Access in Cameroon

There are currently around 840 or so accredited microfinance institutions in Cameroon [4]. The country’s loan performance has worsened due to the number of uninformed loans given to consumers. In 2018, the Risk Prevention Bureau for Microfinance (CREMF) was established as a system that helps these institutions track and disseminate the correct data on all their customers. This makes it somewhat easier for them to recover borrowed money. However, the challenge is still present: the majority of these microfinance institutions are in rural areas where a majority of these famers reside, but there is low internet connectivity. This makes it difficult to continue giving out loans to those who need them.

In order to make credit access in Cameroon more financially inclusive, mobile services must be extended to rural areas. Additionally, services should also cover financial education and funding for farmers. Mobile money offers a quick method for payments and access to finances.

While there are 6.8 million subscribers, there are only 1.5 million active users of mobile money services. The biggest challenge is implementing a cashless culture in a country that is reliant on a cash-based agricultural market.

Improvement Efforts
One solution to help foster jobs, improve access to credit and reduce poverty in Cameroon has been to build a bridge between agriculture, agribusiness, and the financial sector. For example, this includes:

A. Providing financial education for farmers
B. Providing them with the means to create quality produce
C. Connecting them with agro-industrial companies like Guinness through mobile applications.
These advancements have helped boost the financial sector and improve credit access in Cameroon, while others like offering credit to farmers via digital financial services are in progress.

As a result, the livelihood of the country’s poor has improved. With consistent improvement, it’s possible that Cameroon’s economy can emerge into one that is economically stable, with more equally-distributed prosperity among regions.

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Citations:
[1] FinScope Consumer survey Cameroon, 2017
http://slmp-550-104.slc.westdc.net/~stat54/nada/index.php/catalog/130/download/1143
[2] DIGITAL ACCESS: THE FUTURE OF FINANCIAL INCLUSION IN AFRICA
https://www.ifc.org/wps/wcm/connect/96a4f610-62b1-4830-8516-f11642cfeafd/201805_Digital-Access_The-Future-of-Financial-Inclusion-in-Africa_v1.pdf?MOD=AJPERES&CVID=mdz-QF0
[3] Interest in Fintech Picks up in Cameroon
https://fintechnews.africa/39497/cameroon/interest-in-fintech-picks-up-in-cameroon/
[4] The Microofinance Market of Cameroon
https://www.findevgateway.org/sites/default/files/publications/files/mfg-en-paper-the-microfinance-market-of-cameroon-analyzing-trends-and-current-developments-mar-2012.pdf
[5] Tech Industry in Cameroon
https://borgenproject.org/tech-industry-in-cameroon/
[6] Fintech — The Gateway to Financial Inclusion in Cameroon
https://medium.datadriveninvestor.com/fintech-the-gateway-to-financial-inclusion-in-cameroon-45eb51d3cd3
Abbreviations
**DFS:** Digital Financial Service
[cover image attribution] : https://unsplash.com/photos/CXKk4zU7anE

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