Abstract

  This study was undertaken to ascertain the effects of payment methods on small and medium-sized enterprises (SMEs). How methods of payment can have a significant impact on their overall operational efficiency and financial performance. This study examines the relationship between various payment methods and the efficiency of SMEs.

The research focused on analyzing how different payment options, such as cash, electronic payments, mobile payments, and credit/debit cards, influence the efficiency of SMEs.

The data was collected and analysed using both quantitative and qualitative data analysis methods. Data was collected from a primary sources Quantitative method involved both descriptive and inferential analysis. Descriptive involve use of frequencies, pie charts, bar charts, etc. Descriptive analysis such as frequencies and percentages will be used to present quantitative data in form of tables and graphs.

CHAPTER ONE

INTRODUCTION

• Background to the study

The ongoing rapid growth in information and technology, the payment system in SMEs is also evolving globally with respect to level of development.

Kumari, and Khanna. (2017) see that the need to attain a more convenient especially with respect to time and cost the developed world have adopted cashless system of payments and electronic payments have become very popular in must developed countries.

A cited example is the United Kingdom made up of England, Scotland, Wales and Northern Ireland. The United Kingdom (UK) is the second-largest economy in Europe and the third-largest ecommerce market in the world with a value of 239 billion behind China and the United State of America Lloyd (2017). The use is fast growing in the United Kingdom. About 89% of the consumers of the United Kingdom use mobile payment at least monthly and 43% do so weekly. The most popular methods of e-payment in the United Kingdom are debit cards, PayPal, credit cards, Apple Pay, and Google Pay. The Covid-19 pandemic accelerated the growth of mobile payment in the United Kingdom and worldwide. Due to this the usage of cash dropt drastically as from the year 2020 in the United Kingdom as only 12% of consumers in the UK rated cash as a preferred method of payment.

Cheques came into use in the UK (England) in 1600s. Cheque clearing is the process of reconciling cash amongst, The person to whom the cheque was drawn (payee) could go to the drawers banK (the issuing bank) and present the cheque and receive payment. Also the payee could deposit the cheque with their own bank who would arrange for it be presented to the issuing bank for payment. Around the 1770 an informal exchange of cheques took place between London banks. According to Congdon, T. (2009). Daily bank clerks met at the Six Bells a tavern in Dove Court of Lombard street in the City of London. There they exchange all their cheques in one place and settle the balances in cash. The first organization for clearing cheques was the Bankers Clearing House established in London in the 19^th century founded by Lubbock’s Bank. During the Second World War, the Bankers Clearing house was moved to Tretham Estate in Safford Shire. The cycle is now operated by the cheque and credit clearing company known as the United Kingdom Clearing house.

The cash payment system is the king in Africa. Per the study carryout by Aina and Oluyombo,  (2014) show that Most African nations are categorised under developing countries where cash is the main system of payment as majority of transactions are done using cash payment. Using a case of Nigeria, despite the popularity and frequent use of cash, however the cost of cash to the Nigeria financial system is increasingly high. But due to the current, ongoing increase in information and technology the payment system of Nigeria is rapidly evolving and adapting to this changes with the objective to encourage a payment system that is affordable, secured and convenient (Tchouassi, 2012). This new payment system of cashless transactions of payment method of settling transactions comprises many e-payment methods like debit cards, credit cards, ATM machine, and mobile payment system amongst many others. In recent times, the mobile phone is increasingly used to purchase digital contents (e.g. ringtones, music or games, tickets, parking fees and transport fees) just by flashing the mobile phone in front of the scanner at either manned or unmanned point of sales (POS). In Nigeria, as it is in many developing countries, cash is the main mode of payment and a large percentage of the populations are unbanked (Ajayi and Ojo (2006). The use of mobile payment system is gradually increasing over time as mobile telephones have penetrated many societies in Nigeria and have become very common and popular in this areas.

The payment system of Cameroon is part of the Economic and Monetary Community of Central African States (CEMAC) system. There are various payment methods which plays vital roles in the system such as cash, cheques, mobile payment, electronic bank transfers, debit card payments and credit card payments. The cash payment system include payment methods of cash transfer like bank-to-bank transfer, wired transfers, automated clearing houses, prepaid debit cards and cash-to-cash transfers.

According to the study carryout by Talom, and Tengeh, (2019), The central bank validates transfer orders of account holders on its books within the CEMAC zone and abroad. The payment system of Cameroon include two parts: clearing centres at the level of the bank of the central African States (BEAC) branches for high-volume, small value payments and settlements through regional BEAC current account for large value payments.

In 2008 the central bank implemented a regional payment system that integrated large size electronic payments clearing. BEAC uses SWIFT payments; this are transactions made through an intermediary bank that allows you to send and receive electronic payments internationally. Although BEAC uses the SWIFT network, there are administrative delays in the international transfers and its processes which has led some banks to use alternative ways of carrying out transactions. According to Lasagabaster et al (2005), so many individuals have resorted to services provided by nonbanks such as Western Union. The payment methods used for import and export transactions are internationally accepted settlement methods. This is due the prevalent credit risk in the banking sector which has made foreign exporters to Cameroon to insist on irrevocable letters of credit drawn on banks with strong foreign associates.

The current consistent growth in information and communication technology has also led to the rise of mobile phone payments which is increasingly growing in popularity and usage in all domains of life( Røpke, et al 2010). Due to the new technological advancement, mobile phone payment systems of payment has emerged. Mobile phones which was initially used for making calls and sending text massages have grown so fast that it is now been used to carry out various transactions. Despite the fact that mobile payment is considered the future economic transactions because it reduces time wastage, reduces cost, and reduces the inconvenience involved in waiting on long lines to carry out banking transactions.  

• Statement of problem

Over the past decade the efficiency of SMEs in Cameroon have suffered many challenges due to poor payment systems. As said by Bryant (1980) that the need and awareness of banking increased the existing cash system of SMEs which became inefficient because it was costly and time consuming. This system through its old and slow methods and procedures made it difficult for customers to carry out financial transactions as often times they will have to travel long distances and queue up in long lines sometimes for a long period of time before been attended to by the bank. But over the years the banking has greatly advanced with the ongoing and rapid growth in information and technology which has led to the introduction of new payment systems such as mobile payments and credit card, debit card, ATM and many other payment methods and gateways that Cameroon is gradually adopting with time.

Payment systems are very important instruments in enhancing the efficiency in bank but however there have been very limited studies carried out to examine the effects of payment systems on banking. Thus the purpose of this study is to examine the effect of payment systems on the efficiency of banking in Cameroon and also to compare Cameroons mobile banking with that of Nigeria.

• Research Questions

1.3.1 Main research question

What are the effects of payment systems on the efficiency of Small and medium size enterprises in Bamenda Cameroon?

1.3.2 Specific Research Questions

What are the effect of the cash payment system on the efficiency of SMEs in Bamenda Cameroon?

What are the effects of cheque clearance system on the efficiency of SMEs in Bamenda Cameroon?

What are the effects of mobile payment system on the efficiency of SMEs in Bamenda Cameroon?

• Research Objective
  • Main Research Objective

To examine the effects of payment systems on the efficiency of Small and medium size enterprises   in Bamenda Cameroon

1.4.2 Specific Research Objectives

To examine the effects of cash payment system on the efficiency of Small and medium size enterprises in Bamenda Cameroon.

To examine the effects of cheque clearance system on the efficiency of Small and medium size enterprises in Bamenda Cameroon.

To examine the effects of mobile payment system on the efficiency of Small and medium size enterprises in Bamenda Cameroon.