1. Background of the Study

The North West region of Cameroon is characterized by a large number of microfinance institutions (MFIs) that provide money transfer services to the local population. However, the introduction of electronic money or mobile money has started to disrupt the traditional money transfer services offered by MFIs.

Access to financial services is a crucial boost to social and economic development of a country. Until recently in Cameroon, such services focused on the formal banking sector, which traditionally does not open branches in low income and rural areas as their returns there would not be able to justify their substantial operating costs. This meant that only wealthy and urban citizens could enjoy such privileges. The rapid growth of the mobile network industry led to half the world‟s population having at least one mobile subscription by 2014 (GSMA Intelligence, 2015), with a total number of mobile subscriptions worldwide reaching more than 7 billion by the close of 2015 (Sanou, 2015). These mobile devices offered a distribution technology for mobile financial services for the unbanked. The initial goal of mobile money was to enable the unbanked persons to be able to carry out person to person (P2P) money to transfer transactions, which were previously done through relatively unsecured physical means such as bus agencies as well as travelling relatives and friends. This service, therefore, brought people from the cash-based, “unbanked” economy to the modern system of “book entry money”. Thus began the era of “banking the unbanked” (Klein & Mayer, 2011)

Worldwide, mobile money service is available in 93 countries today. The service is fast overtaking the banking sector with the number of registered accounts in the world increasing by 31% to 411 million in 2015 compared to the previous year. Mobile money providers are processing an average of 33 million transactions per day. Mobile money services offering International Money Transfer (IMT) saw the volume of cross-border remittances increase by52% in 2015, compared to the previous year (GSMA, 2015). Indeed, the World Bank (2016) referred to mobile money as a “success story” that is also a “regulatory minefield”. Africa has a vast potential for growth in the telecoms industry, especially as there is only 47% penetration so far. One of the fastest growing areas in the telecom industry happens to be mobile money. This service makes it possible for mobile phone users to send and receive money anywhere by facilitating transactions through their mobile phones. This is essential especially in Africa which has poor infrastructure, and vast majority of the people do not have bank accounts (Paelo, 2014). So far, Kenya is the country where mobile money service is most successful as it has been there since 2007, especially with the advent of M-PESA provided by the Vodafone-owned Safaricom mobile network which has the largest market share in the country. Though not yet fully embraced, it is also present in Nigeria thanks to MTN Mobile Money (working in partnership with GT Bank), Glo Xchange, Paga and so on.

In Cameroon, less than 20% of the population has a bank account whereas the penetration of mobile telephony is estimated at 80% (Cameroon web, 2015). This could be because the cost of mobile phones is becoming more and more affordable over the years (currently as low as 5,000FCFA or $10) and subscribers do not necessarily need an expensive Smartphone or internet connection on their phones to be able to use mobile money. Some of these phone stake even up to 2 or 3 SIM cards at once, meaning a customer could have multiple mobile money accounts using the same phone. Three Mobile Network Operators (MNOs) – MTN, Orange and Nexttel are in Cameroon. Two of these currently provide mobile money services. MTN Mobile Money (also called MoMo) began in 2010 and Orange Money followed a year later in 2011. Nexttel Possa will be launched soon. According to Media Intelligence (2016), as of June 2016, there were about 6.8 million mobile money subscribers in Cameroon, with1.5 million active users.

Cameroon currently has a population of about 23 million and the mobile money market is continuing to proliferate in the country. For instance, Tabi (2018) posits that the Governor of the Bank of Central African States (BEAC) signed authorization in 2018 permitting Société Générale Cameroun (SGC) bank to partner with YUP Cameroun in launching its mobile money services within 12 months. Worthy of note is the fact that SGC had initially launched a mobile money service called Monifone, but this was suspended in 2014 due to competition and recurring conflicts with some telecommunication operators. This time around, it has decided not to rely on any telecommunication operator, and instead chosen to partner with YUP Cameroun (Business in Cameroon, 2018). Tabi (2018) states that official statistics show that there are presently 34,114 mobile money service points in the CEMAC (Economic and Monetary Community of Central Africa) zone, with Cameroon accounting for70% (23,880) of them.

Mobile money refers to the use of mobile phones and electronic wallets to perform financial transactions such as transfers, payments, and deposits. With the increasing popularity of mobile phones and the limited access to formal banking services in the region, mobile money has become a popular alternative for financial transactions. This has resulted in a growing number of individuals and businesses relying on mobile money for money transfer services, affecting the market share and revenue of MFIs that traditionally offered these services. The circumstances which prompted its launching were similar to those of most developing countries, particularly concerning the small numbers of members of the population who held bank accounts. As had been the case in the other countries in which the concept had been launched, many households and Mobile money in Cameroon had been effectively excluded from the traditional banking system and without access to funding in the formal sector. Although the services which mobile money provides in Cameroon do not include financing now, its introduction had significantly increased the financial inclusion rate (29%) by 2017, from 9% in 2012. As a direct consequence, many citizens have been able to ply trades and launch start-up enterprises, which have resulted in indirect employment for over 5000 people.

Mobile money transfer has a lot of advantages. It improves efficiency and effectiveness by increasing the speed, safety and frequency of payments and decreasing the cost, paper work, and processes of sending and receiving money even on off days and odd hours. Besides, security is also a significant benefit here, as it eliminates the risk of theft. Cash inflow to rural areas can be enhanced too. Increased money flow from Urban to rural dwellers can greatly enhance economic growth. Those who partner with telecom providers to offer financial services are called Mobile Money Agents in this paper.

However, this has revolutionized the financial landscape in many parts of the world. Mobile money allows individuals to conduct financial transactions electronically using mobile phones, without the need for traditional banking services. The convenience and accessibility of mobile money have led to its widespread adoption in many developing countries. This regulating arrangement of convenience is the status currently prevailing in Cameroon and will surely deter the significance of the MM in the long run. Although its importance is affected by factors related to regulation, infrastructures and customs, Mobile Money appears to be the solution to the multiple problems, namely, liquidity, means of payments, debt collection, working capital and financing faced by Mobile money.

1.2. Statement of Problem

The adoption of mobile money has both positive and negative implications on the effectiveness of money transfer services provided by MFIs in the North West region of Cameroon. While it offers convenience and efficiency, it also poses certain challenges that need to be addressed. The ability to carry out financial transactions through a mobile phone has attracted MNOs (especially in developing countries) to the financial services industry. They were able to penetrate the market due to their comparatively quicker service and lower charges, compared to the formal banking sector. In the case of Cameroon, MTN and Orange now offer Mobile Money Transfer (MMT) services called MTN Mobile Money and Orange Money respectively. The third, Nexttel has plans to launch its own called Nexttel Possa. According to Paelo (2014), Cameroon had more mobile money subscribers than bank account holders by the end of 2013. OCHA (2016) indicates that MTN Mobile Money formed a partnership with Afriland First Bank whereby MTN manages the technical platform as well as the marketing and distribution network, while Afriland issues the e-money and ensures compliance with the financial regulations. It goes on to say the services include person to person (P2P), bill to payment and purchasing of goods and services from authorised retailers but do not substantiate on any of these aspects. Bahri-Damon (2015) posits that Mobile Money services in Cameroon enable Cameroonians to send and receive money anywhere within and outside the country as well as pay their electricity bills, cable bills, insurance premiums, university tuition fees and taxes. It equally creates a medium through which they can buy train tickets, flight tickets, airtime and fuel. It even enables them to do shopping in their authorized supermarkets. Some companies pay salaries to their employees using this means. Though these numerous activities are going on in the field of mobile money transfer in Cameroon, the economy of the country has been at a comatose and no study has attempted to determine the effect of the scheme on her economic growth. Langaa (2012) only explored the social impact of mobile money and mobile electronic transfer services among rural farmers in the North West Region of Cameroon.

To address these problems, it is crucial to conduct a detailed study on the effects of the adoption mobile money services on the effectiveness of money transfer transactions of microfinance institutions in the North West region of Cameroon. Such a study will provide insights into the challenges faced by MFIs, the opportunities they can leverage, and strategies to enhance the adoption and utilization of mobile money services.

1.3 Research Questions 

1.3.1 Main research question

How does the adoption of mobile money services affect the effectiveness of money transfer transactions carried out by microfinance institutions in the North West region?

1.3.2 Specific Research Questions

1. what is the effect of adopting cash deposit services on the effectiveness of money transfer services?
2. What is the level of awareness and usage of cash withdrawal services among microfinance institution in the region?
3. How does the adoption of mobile money services affect the payment of bills and services carried out by MFIs?

1.4 Objectives

1.4.1 Main objectives

To assess the effect of the adoption of mobile money services on the effectiveness of money transfer services provided by microfinance institutions in the north west region cameroon.

1.4.2 Specific objectives

The main objective of this study, is to assess the adoption of mobile money transfer services on the effectiveness of money transfer services provided by microfinance institutions in the North West region. However, the specific objectives of the study are as follows;

1) To examine the use of cash deposit services for effective money transfer by the microfinance institutions in the North West region.

2) To analyse cash withdrawal services through mobile money offered by microfinance institution in the region.

3) To Assess the payment of bills and services through mobile money services by MFIs.