CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Increased emphasis on financial inclusion reflects a growing recognition of its potential to reduce poverty and accelerate economic growth. “Greater access to financial services for both individuals and firms may help reduce income inequality and accelerate economic growth” Burgess and Pande (2005). When financial systems are inclusive, access to resources for individuals and businesses to meet financial needs increases. Put differently, when people are financially included, they are better able to start, operate and expand a business, secure their retirement through savings in anticipation for it, invest in education, manage risk (or have financial resilience) and absorb life’s shocks. However, in the real world, financial systems are far from being inclusive (Sabyasachi, 2021). Indeed, half of the world’s adult population does not have a bank account; with a majority of the financially excluded being from developing nations. The world’s poor and marginalized would benefit from financial services but are unable to access them due to market failures or insufficient government policies (Sabyasachi, 2021). According to the World Bank (2014), close to 50 countries have established objectives for financial inclusion, and the World Bank Group, together with a coalition of partners, have made commitments to promote it, setting a principal goal of achieving universal access for adults to the financial system by 2020. At the international level, one of the agencies most recognized for its work on financial inclusion topics is the Alliance for Financial Inclusion (AFI) created in 2008. The main objective of the AFI is to encourage the interaction and exchange of knowledge among its member countries, with the purpose of making financial services more accessible to individuals excluded from the system (AFI, 2013). Moreover, this growing interest has increased as a consequence of the 2007- 2008 international financial crisis because it highlighted the importance of the relation between the level of financial inclusion and financial stability (Mehrotra and Yetman, 2015).

According to Zulfiqar et al., (2016), financial inclusion is not only a key condition for attaining sustainable and inclusive growth, but it is equally a requirement for achieving the development targets of most nations of the world. This is because access to financial services will increase economic activities and employment opportunities (Khan, 2011). The World Bank (2022) asserts that, financial inclusion is an imperative to alleviating extreme poverty and encouraging shared prosperity; this beginning with being able to have access to an account. This is because it is through an account that individuals can save in, contract loans and receive payments from financial institutions, besides other financial transactions.   It has a multiplier effect in boosting overall economic output, reducing poverty and income inequality, and alone directly contributes to achieving 10 of the 17 Sustainable Development Goals of the United Nations. As a result, there is a global goal to ensure universal financial access by 2020 (World Bank, 2022). Rashando (2021) is of the opinion that financial inclusion helps to foster the financial wellbeing of the marginalised and if the United Nations Sustainable Development Goals must be realized by 2030, and particularly its pledge of “leaving no one behind”, financial inclusion must be an integral part of nations policies and development efforts. Marginalised groups in the world include minority groups, as well as vulnerable groups like children, women, youths, and the disabled.

In addition to achieving the Sustainable Development Goals, greater financial inclusion is an important driver for attaining social inclusion as mobile financial services offer the possibility of bringing millions into the formal economy, boosting individual livelihoods and transforming economies (Awanis et al., 2022). Besides, the United Nations Convention on the Rights of Persons with Disabilities (UNCRPD); a human right based global development agenda for people with disabilities to which Cameroon is a signatory, has a particular focus on the financial inclusion of people with disabilities. To this effect, it charges that all parties shall take appropriate and effective measures to ensure that persons with disabilities have equal rights to control their own financial affairs and have equal access to bank loans and other forms of financial credit (Sharker, 2022). This is an imperative because financial exclusion has devastating consequences on the education, healthcare, and employment of the disabled, thus leading to higher poverty rates (Bailey, 2022).

Moreso, World Bank (2018) strongly recommends financial inclusion as a means through which people are able to save to acquire family needs, borrow to set up and sustain businesses, and build for themselves a cushion against emergencies or shocks like loss of jobs, price heights, ill health, natural disasters, epidemics and pandemics. Access to financial services is thus a key to reducing poverty and societal inequalities. The World Bank also sees and recommends the mobile phone and the internet as the main tools for achieving and accelerating universal financial access. This organization, however, regrets that despite this, lots of gaps of implementation of financial inclusion are still very much present and its gains uneven across countries.

Furthermore, Trivelli (2013) asserts that financial inclusion is a key component of achieving a variety of welfare improvements. For instance, it is an important ingredient in people’s capacity to exercise their rights; new investment opportunities open up when the right financial tools are available – not just in immediately productive opportunities, but also in long-term investments like education, which are some of the means by which people can be empowered socioeconomically. Therefore, with increasing international recognition of its importance and potential for economic growth, poverty alleviation and reduction of societal inequalities, as well as for achieving the UN SDGs, governments the world over recently have been increasingly embracing financial inclusion as a policy objective and have made great strides towards its implementation (Staschen, 2013). This therefore means that financial inclusion is on the rise globally and financial services such as credit and savings are now more available to individuals and enterprises that were formally neglected by the mainstream banking sector. By October 2018, more than 55 countries, Cameroon inclusive, had commitments towards embarking on financial inclusion, and more than 60 were planning national strategies to promote it (World Bank, 2022).

In the USA, financial inclusion has been on the rise. Important steps have been taken in this regard by the Administration as a whole and the U.S. Department of the Treasury specifically, putting a focus on the need to expand access to safe and affordable financial services for all. One of the efforts realized by the American government is the creation of the Americans with Disabilities Act (ADA). The ADA was passed and signed into law by President George H.W. Bush on July 26, 1990 having four foundational pillars or aspirational goals; equality of opportunity, full participation, independent living, and economic self-sufficiency.  Its creation led to an increase in the number of U.S. households with a bank account in 2013 to 93 percent, up from 86 percent in 1989. The rise in financial assets from the period of 1970 to 2015 as a share of GDP from 5 percent to more than 11 percent as of 2015 is evidence of increased accessibility to financial services and products to all sections of the population (CEA brief, 2016). Access to affordable and inclusive financial services is an important aspect in reaching these goals (Whaley, 2022). But surprisingly slightly over 30 years after its creation, “research shows that Americans with disabilities are three times more likely to be unbanked than those without disabilities” (Whaley, 2022), even though with 61 million Americans, or one in four adults, being disabled and with the number steadily growing due to the COVID 19 pandemic. Whaley continues that persons with disabilities who even use traditional banks are less likely to employ ATMs or mobile apps and more likely to prefer using cash rather than electronic bill payment methods. They are also less likely to use credit or establish savings accounts that protect them from unforeseen expenses making them very vulnerable to natural, societal, and economic shocks like weather changes, the recent COVID 19 pandemic, the effects of the Russian Ukrainian war, loss of jobs, just to name a few. This is enough evidence that the application phase of financial inclusion initiatives for persons with disabilities in the USA still leaves much to be desired and calls for further research.

Additionally, although the USA is classified as the largest national world economy, statistics show that her employment rate for persons with disabilities of ages between 16 and 64 years is just 30% (Bureau of Labor Statistics [BLS], 2021). The situation has been worsened by the outbreak of the COVID – 19 Pandemic during which 1 out of every 5 persons with disabilities lost their jobs in the USA (National Organization on Disability [NOD], 2020). Besides, in almost all countries, the rate of unemployment for persons with disabilities is as high as being between 80% to 90% (Schuelka et al., 2022). It is also very unfortunate that persons with disabilities are the most marginalized, disadvantaged and vulnerable groups in human history: indeed, they are at the denominator of all vulnerabilities (ibid).

Given that Asian countries have prioritized inclusive and sustainable growth, it is no doubt that many countries in the continent like China, India, Indonesia, the Philipines, Thailand, among others, have intensified their interest in achieving financial inclusion (Rillo, 2014). China, being the world’s largest developing country and the second-largest economy in the world, after the USA, has experienced great development and accumulated rich experience in inclusive financial systems.  Efforts in this country’s financial inclusion date as far back as the 1950s, with the most progress made after 2005 (Peng et al., 2014). Among all efforts made to foster financial inclusion in the People’s Republic of China, the most outstanding and most significant is the state-led banking system dominated by the “big five” comprising the Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of Communication. This process has become more diversified with the entry of joint stock commercial banks and the establishment of a number of small and medium-sized commercial banks across the national territory including rural areas.  Efforts to integrate rural areas, agriculture, and farmers, who are generally referred to in Chinese as “Sang Nong” in the scheme are facilitated by state-controlled big commercial banks, especially the Agricultural Bank of China (ABC), and these have greatly expanded credit to “Sang Nong”. (Peng et al., 2014). The benefits of all these efforts have been enormous. For instance, between the years 2010 and 2020, these efforts and initiatives have greatly transformed China’s financial sector leading to a rapid development of the economy as more financial services are now provided for individuals and enterprises in China, especially Micro and Small Enterprises and low-income groups (Chen and Yuan, 2021).

India, being a signatory of the United Nations Convention on the Rights of Persons with Disabilities (UNCRPD) since 2008, has an obligation to comply with the convention’s prescriptions which promotes, defends and reinforces human rights of the disabled. However, the financial inclusion of the disabled in the country has remained far from being realized, given that most initiatives aimed at achieving it have remained largely limited, and so she still faces great challenges in extending banking facilities to the disabled. For instance, Gupta (2014) observes that nationwide efforts to achieve financial inclusion through the Micro Finance Institutions have recently seen tens of millions of low-income Indians accessing the products and services of the Micro Finance Institutions. Gupta, however, regrets that in spite of this, the Micro Financial Institutions and other formal financial institutions have not made any significant strides in ensuring that their services are accessible to persons with disabilities. Furthermore, Singh (2017) points out that people with disabilities continue to be financially dependent; lacking privacy in accessing and using financial products and services in India, even in cases where they are capable to be on their own. Banks in India in general do not offer differentiated treatment from one kind of disability to another. In all, Singh sees a probability of the banking sector trying to avoid the disabled as they may not be capable of being a safe customer for the bank. Furthermore, banks in rural areas, with old-fashioned mind-set, have much serious prejudices while dealing with disabled, doubting their abilities and denying facilities like opening of accounts by deliberately delaying the process.

One key factor that has facilitated the achievements and improvements of financial inclusion in the above-mentioned economies and in the world at large is the rapid and continuous advancements and innovations recently taking place in the financial sector. For instance, innovations in mobile and digital technology and easy access to and more affordable mobile devices such as phones and laptops, the increasing provision of financial products like the ATM, as well as expansions in internet network coverage. According to World Bank data, 1.2 billion adults had access to a transaction account between 2011 and 2017. And this was to a greater extent attributed to new digital technologies (Awanis, 2022).

In matters of financial inclusion, research work shows that African countries lag behind the rest of the countries of the world. Chijioke (2015) asserts that in Africa, financial exclusion and the degree to which disadvantaged and vulnerable groups such as the poor, women, youths and those with disabilities are excluded from formal financial systems is common. As such, most African countries experience high proportions of financially excluded persons, reflecting a lack of access to and use of formal financial resources. For instance, recent evidence from Global Findex database shows that less than a quarter of adults in Africa have an account with a formal financial institution and many adults in Africa use informal methods to save and borrow. To a certain extent, however, some positive developments have led to more financial services, especially credit made available to individuals and enterprises and the widening of access to financial services by new technologies like mobile money which are new alternatives to traditional banking made possible by the rapid spread of mobile phones. Despite these efforts, the financial systems of many African countries still remain under-developed as compared to other developing economies and indicators of the use of financial services by adults and enterprises in the region show that many challenges remain toward building a more financially inclusive financial sector in Africa (Demirgüç-Kunt and Klapper, 2012a). They attribute the low levels of financial inclusion in Africa to four factors which are high costs of access to finance, the disparity between financial institutions, lack of documentation, low level of income and high costs for opening and maintaining accounts.

The objective of financial inclusion is to make financial services such as savings, credit, insurance, and money transfers more accessible to low-income households in low- and middle-income countries. This will make them more apt to take advantage of opportunities, mitigate shocks, improve their welfare, and to escape poverty (Duvendack et al.). Microcredit is one door through which people can escape from poverty. Yet “being a disabled person of any form deprives people of the use of banking services” (Atta et al., 2022). According to Global Findex (2017), 1.7 billion adults worldwide remain unbanked, including an estimated 400 million in Africa. Persons with Disabilities make up approximately 15% of the global population. Of this population, 82% live in developing countries and 20% of them live in abject poverty; living on less than $1.25 per day.

An exploration of the situation of financial inclusion in Cameroon in the Central African sub region is thus not different. For instance, a release by MINFI (2017) asserts that financial inclusion is relatively low in Cameroon; in 2017, only 10% of Cameroonians aged 15 and older had bank accounts. According to this publication, people widely preferred informal credit (11%) over formal credit (3%) with about 10% of the population studied preferring to receive credit from relatives or friends. Additionally, “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 although due to lack of financial information.

Demirgüç-Kunt and Klapper (2012b) observe that lack of financial inclusion hinders economic development because when people cannot access financial products and services, it limits their investment in education and entrepreneurship. Without inclusive financial systems, poor people must rely on their own limited savings to invest in their education or become entrepreneurs and small enterprises must rely on their limited earnings to pursue promising growth opportunities. This can contribute to persistent income inequality and slower economic growth. Bruhn and Love (2014), and Zhang and Posso (2019) also noted that financial inclusion favours the disadvantaged and the poor by increasing their incomes and ability to access employment opportunities. Therefore, given the great importance of financial inclusion as a tool for fostering inclusive and sustained economic growth of all countries, reduce societal inequalities and poverty, and promote the socioeconomic empowerment of all segments of the society, and particularly that of persons with disabilities, all African countries must implement financial inclusion policies.

It is important in this research to explicitly consider financial exclusion; the direct reverse of financial inclusion. The absence of financial inclusion creates social barriers and prejudices especially Persons with Disabilities and other marginalized groups of the society. Therefore, financial exclusion could be costly to the society and individuals. Hariharan and Marktanner (2012), make a distinction between five factors that account for financial exclusion. Access exclusion due to geographical and “risk management of financial segment”, condition exclusion “due to conditions that are inappropriate for some people”, price exclusion due to non-affordability of financial services, marketing exclusion due to the non-attractiveness of conducting business with creative groups within the society (lending risk), and self-exclusion due to fear of refusal or due to psychological barriers. From the demand side or channel of financial services, Demirguc-Kunt and Klapper (2012b) bring out seven self-reported reasons for lack of financial inclusion. In descending order of importance, they include; not enough money, too expensive, family members already have account, too far away, lack of necessary documentation, lack of trust, religious reasons, and strong informal financial sector. Therefore, the main barriers to financial inclusion can be grouped into attitudinal, physical, communication and systemic barriers.

The socioeconomic empowerment of persons with disabilities is also gaining attention in research work these days, especially with the increasing economic and political shocks that are recently plaguing many areas of the world and subjecting many families to situations of poverty. According to Riley et al., (2022), empowerment enables an individual or group to gain independence, control, and have power over what happens in their lives. To her still, social empowerment gives one enough control and confidence to change how society is socially constructed, including its institutions and the social roles that have been assigned to people (such as gender and sex social roles) within society. This includes empowering people with little resources through education, employment, health services, and giving them a sense of identity and community in which they can thrive and grow.

On its part, Economic empowerment aims at empowering people with little resources with the resources they need to live beyond mere subsistence. Economic empowerment gives them a chance at financial stability which, in turn, opens up more choices for them in life. The economic empowerment of persons with disabilities can be achieved through initiatives that make them have access to jobs and livelihoods and basic entitlements, such as education, health services, and housing (UN, 2013).  Besides, economic participation facilitates the social integration of persons with disabilities (Schuelka et al., 2022). Therefore, persons with disabilities should be encouraged, promoted and supported to become self-employed, to develop their entrepreneurship capacity or even to own and operate their business.  To crown it all, Socio-economic empowerment, therefore, helps to liberate people and communities from cycles of poverty and assigned social roles and giving them the resources (employment, education, health services, etc.) to raise their and their communities’ social and economic opportunities.

1.2 Statement of the Problem

The importance of financial inclusion as a tool for achieving inclusive economic growth, alleviating poverty and reducing societal inequalities, and empowering the disabled has raised an interest in the subject among most world governments as well as international institutions. However, in Africa and elsewhere, financial exclusion and the degree to which disadvantaged groups such as the poor, women, youths and people with disabilities are excluded from the formal financial systems is common (Chijioke, 2015). According CGAP (2013) the situation for financial inclusion is precarious as it is estimated that less than 1% of the poor served by financial institutions are people with disabilities. Evidence from Global Findex (2014) database shows that less than a quarter of adults in Africa have an account with a formal financial institution and many adults in Africa use informal methods to save and borrow. Rust and Metts (2007) assert that socioeconomic discrimination, architectural, transportation, environmental, attitudinal, institutional and policy barriers continue to prevent the disabled from accessing any life opportunities; financial services inclusive.

Peprah et al. (2022) are of the opinion that being a person with disability diminishes the likelihood of having at least one financial product or service with any financial institution. Persons with disabilities (PWDs) are 6.3 percent less likely to use a bank for at least one financial product or service. Thus, PWDs regrettably have to rely on their own limited savings to invest in their education or become entrepreneurs and small enterprises must rely on their limited earnings, and would often resort to seeking finance from informal means, with the associated high costs, to pursue promising growth opportunities.

The Cameroon government on her part has made efforts to include the disable in her development agenda. For instance, Section 2 of Law N°2010/002 of April 13, 2010 addresses the Protection and Promotion of persons with disabilities in Cameroon. However, the situation remains preoccupying as large segments of Cameroonians, particularly PWDs still suffer massive financial exclusion. For instance, in 2017 only 10% of Cameroonians aged 15 and above had a bank account among which less than 1% of them were Persons with Disability (MINFI, 2017). Besides, the enabling infrastructure for financial inclusion is still in its infancy in Cameroon (De Allegri, 2018).  This disability gap thus created has made it difficult for PWDs  to find an easy way out of poverty (Ring, 2015). SEEPD (2017) further asserts that “persons with disabilities continue to endure limited access to quality healthcare service, education and livelihood opportunities in Cameroon”. Furthermore, Ozili (2020) points out regrettably that most literature has outrightly neglected some potential beneficiaries of financial inclusion, particularly people with disabilities. The situation of Cameroon being more preoccupying because given the great financial exclusion of the disabled therein, among all the literature reviewed for this work, none was found to address the subject under research, thus creating a gap which the work aims at closing.

Ashiyo, T. (2023) asserts that disabled people in Cameroon say that families, the government and society don’t consider their needs, especially when it comes to developing infrastructure that will increase access. “People without disabilities treat people with disabilities as inferior, fostering discrimination against people with disabilities who want to run their own businesses”. Due to such prejudice, many people with disabilities who even manage to become entrepreneurs face competitive disadvantages compared with people without disabilities (Roni, 2009; Mwangi, 2013; Kitching, 2014). Difficulty in accessing financial resources has been compounded by the fact that PWDs often encounter challenges selling their products or services due to the prejudices of potential clients (Handojo, 2004). These may constitute serious barriers to the self-employment of people with disabilities and may act as a hinderance to their socioeconomic empowerment and leading to serious misery among this group of persons.

The Socioeconomic Empowerment of Persons with Disabilities Program (SEEPD) has a strong presence in all seven divisions of the Northwest Region, where interventions are mostly implemented, with supported medical services also provided at the Baptist Hospital in Mutengene, Southwest Region of Cameroon. With its well of experience in issues of disability and development, the program actively supports development actors, government inclusive, to adopt a disability approach in their development plans and actions through disabilities specific interventions and mainstreaming. The SEEPD Program isolates six components which include medical and rehabilitation, inclusive education, livelihood, social, gender, and child protection, advocacy, research and communication (SEEPD, 2020).  It is clear that financial inclusion is not yet one of the explicit components of the Program; a cause for concern. All the above concerns have thus been the motivation for this study.

Research Questions

The following main and specific research questions to guide this study have been formulated:

• Main Research Question

What is the effect of financial inclusion on the socioeconomic empowerment of Persons with Disabilities (PWDs) in the North West Region (NWR) of Cameroon?

1.2.2 Specific Research Questions

• What is the effect of commercial bank inclusion on the socioeconomic empowerment of PWDs?
• What is the effect of microfinance inclusion on the socioeconomic empowerment of PWDs?
• What is the effect of mobile money inclusion on the socioeconomic empowerment of PWDs?

1.3  Objectives of the Study

1.3.1 Main Research Objective

The main research objective of the study is to examine the effect of financial inclusion on the socioeconomic empowerment of persons with disabilities (PWDs) in the North West Region (NWR) of Cameroon?

1.3.2 Specific Research Objective

The specific research objectives of this study shall be to:

• To examine the level to which commercial bank inclusion influences the socioeconomic empowerment of PWDs.
• To examine the extent to which microfinance inclusion affects the socioeconomic empowerment of PWDs.
• To examine the level to which mobile money inclusion affects the socioeconomic empowerment of PWDs.