CHAPTER

INTRODUCTION

1.1   Background to the study

       Microfinance, also called microcredit is a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. While institutions participating in the area of microfinance most often provide lending, microloans can range from as small as 100  to as large as $ 2500, (kagan, 2022).Many banks offer additional service such as checking and saving account   as well as micro insurance product and some even provide financial and business education. The goal of a microfinance is to ultimately give impoverished people an opportunity to become self-sufficient. Finance is defined as the management of money, including activities such as investing, lending, budgeting, saving, and forecasting. There are three main types of finance- personal, corporate and pubic/ government.

The introduction of microfinance (MIF) in Buea is seen as the best alternative source of the financial services it renders to the inhabitant especially the student, low-income earners as a means to raise their income, hence reducing their poverty level and contributing to the country’s economy. (Urio, 2006).  Microfinance is not only this, but it also has a broader prospective which also include insurance, transactional services, and importantly saving (Barri, 2005).

Micro-finance allows people to take on unreasonable small business loan safely and in a manner that is consistent with ethical lending practice. Although they exist all around the world, the majority of micro finance operation occur in developing nations such as Cameroon. Many micro finance institutions focus on helping women in particular.

Micro finance is not a new concept because small operations have existed since the 18^th century. There are other micro finance operations around the world. Some larger organization work closely with the world bank, while other smaller groups operate in different nations. Some organization enable lenders to choose exactly who they want to support, categorizing borrowers with criterias such as level of poverty, geographic regions and types of small business.

This study has as case study the Ntarikon Credit Union particularly the Buea branch. Ntarikon credit union is not different from other microfinance organization in the world and her activities are expected to greatly influence welfare  in the Buea municipality which is what this study looks at.

The first credit union started in Njinikom, NW Region of Cameroon in 1963 with a membership of 16 and a total saving of 2.100frs CFA. The concept rapidly spread over the NW and SW Region. By 1986, there were 34 credit union in Cameroon. The Cameroon cooperative credit union league CAMCCUL limited is the umbrella organ of more than 200 credit unions. It is the largest micro-finance institute in Cameroon and the CEMAC region. In Cameroon, there are 208 credit union that also offers micro-finance services (George Nahodil,1968).

The importance of microfinance institutions cannot be over emphasized as they, provide immediate funds to members and create access to credit with a better rate of loan repayment. They equally provide for those who go unnoticed an opportunity to receive education. They also ensure the possibility of future investments which comes along the creation of new job opportunities hence creating employment. Their services improve on the economic gain thereby increasing the standard of living of its members.

1.2 Problem Statement

This study examines the role played by microfinance in the welfare of borrowers  in the Buea municipality. This is because despite the existence of many micro-finance within the municipality, there is still a persistence of poverty and low standard of living. It must however be noted that, a micro-finance bank has a mission to empower communities financially, making sure that members can meet up with some cost and investment projects. Microfinance is an effective development tool for promoting entrepreneurship and promoting welfare of borrowers  . Financial services enable poor and low income house- holds to take advantage of economic opportunities, build asset and reduce their vulnerability to external shock that adversely affect their living standard, yet much remain unclear about whether and how microcredit can help the poor to improve their lives and hence alleviate poverty. Evidently enough, micro-finance institution has been a tool for fighting serval economic challenges, poverty inclusive. However little research work has been done to actually determine the effect of micro-finance institutions in welfare of borrowers  therefore, the reason for the research. It is for this reason that the researcher researches on the of micro-finance services on  welfare of borrowers  in Buea south west region of Cameroon in considering the main microfinance services, that is micro credit, savings, training and micro insurance. This study examine the role played by on  welfare of borrowers  in the Buea municipality. All these issues have raised concerns toward investigating the effect of micro-finance institutions on on  welfare of borrowers  (Zeller and meyer2002).

1.3 Research Questions

Main Research Question:

1. • What is the impact of microfinance loans on the welfare of borrowers in Buea?

Specific Research Questions:

1. • How do microfinance loans influence the income levels of borrowers in Buea?
   • What is the effect of microfinance loans on the living standards of borrowers in Buea?
   • How do microfinance loans affect the ability of borrowers to access education and healthcare in Buea?
   • What role do microfinance loans play in empowering women and reducing gender inequality in Buea?
   • What challenges do borrowers face in accessing and repaying microfinance loans in Buea?

1.4 Research Objectives

Main Objective:

1. • To examine the impact of microfinance loans on the welfare of borrowers in Buea.

Specific Objectives:

1. • To assess the influence of microfinance loans on the income levels of borrowers in Buea.
   • To evaluate the effect of microfinance loans on the living standards of borrowers in Buea.
   • To analyze the role of microfinance loans in improving access to education and healthcare for borrowers in Buea.
   • To investigate the contribution of microfinance loans to women’s empowerment and gender equality in Buea.
   • To identify the challenges faced by borrowers in accessing and repaying microfinance loans in Buea.