International Journal of Development Issues

Role of microfinance saving in Cameroon: a neo-structuralist analysis

Jacob Tche
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Jacob Tche, (2009),"Role of microfinance saving in Cameroon: a neo-structuralist analysis", International
Journal of Development Issues, Vol. 8 Iss 1 pp. 48 - 60
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IJDI
8,1 Role of microfinance saving
in Cameroon:
a neo-structuralist analysis
48
Jacob Tche
Faculty of Economics and Management, University of Yaoundé II,
Yaoundé, Cameroon
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Abstract
Purpose – The aim of this paper is to establish an original database from fieldwork on microfinance
institutions in Cameroon.
Design/methodology/approach – The main method used for the research involved statistical
analysis of an original survey data. The latter fieldwork analysis has enabled us to test the hypothesis
of neoclassical and neo-structuralist economists advocating a significant relationship between
microfinance savings and liberalised real bank deposit interest rates.
Findings – The statistical analysis carried out indicated that microfinance savings are associated to
variables other than the rate of interest. The failure of a liberalised interest rate policy to cause a
significant portfolio shift from microfinance into the banking system does not support the interest
responsiveness of savings as advocated by the McKinnon-Shaw school. This paper supports,
therefore, the neo-structuralist analysis of financial development where microfinance institutions are
an important structural feature of financial systems in many developing countries.
Research limitations/implications – It would be interesting to extend statistical analysis
undertaken in this paper to other African countries.
Practical implications – The main policy issue affecting microfinance from the empirical analysis
is the need to mitigate the extremely high interest rates utilised by microfinance. Banks may be
encouraged to undertake a series of measures such as guaranteeing of future loans to their customer
by linking savings and loans to attract microfinance members.
Originality/value – The contribution of this paper, therefore, is to provide a unique opportunity to
investigate the association between microfinance institution assets and real interest rates in an
African country.
Keywords Interest rates, Cameroon, Savings, Personal finance, Credit institutions
Paper type Research paper

The McKinnon and Shaw model stressed that the control of bank deposit interest rates
has contributed to a rapid expansion of microfinance institutions. Shaw (1973, p. 35), for
example, pointed out that the relative importance of microfinance depends on the degree
of repression applied to the banking system. McKinnon (1973, p. 60) also argued that
microfinance assets will shrink following financial liberalisation. Therefore, a
liberalisation of the banking system will induce a portfolio shift from microfinance
into the banking system. Neoclassical economists such as Fry (1997) claimed that the
International Journal of Development McKinnon-Shaw remedy of liberalising the banking system within a stable
Issues macroeconomic and financial environment increases bank deposit interest rates
Vol. 8 No. 1, 2009
pp. 48-60
q Emerald Group Publishing Limited
1446-8956
The author would like to thank Philip Arestis, Jerry Coakley and Mike Cowen for their useful
DOI 10.1108/14468950910967065 comments.
 towards their competitive free-market equilibrium levels, permits financial deepening, Microfinance
promotes real output and constrains the expansion of microfinance. For more saving
information on the sequences of financial liberalisation please refer to Arestis (2006),
Auerbach and Siddiki (2004), Demetriades and Luintel (2002), Ramkishen (2002), in Cameroon
Reinhart and Toskalidis (2003), Saumitra (2000), and Taskin and Muradoglu (2003).
By contrast, post-Keynesian and neostructuralist economists, such as Arestis (2005,
2006), Taylor (1983), and van Wijnbergen (1983) contest the financial liberalisation 49
propositions and argue that the transition from the state of “financial repression” to
that of financial liberalisation may generate macroeconomic and financial instability.
More importantly, the neostructuralist economists asserted that deregulated bank
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deposit interest rates will reduce the level of investment and real output since the
substitution of assets from microfinance into bank deposits will be constrained by
the partial intermediation provided by commercial banks compared to the one-to-one
intermediation offered by microfinance.
The above development economists argued that the substitution between bank
deposits and microfinance is significantly related to liberalise bank deposit interest
rates. While this widely shared view among development economists may be
consistent in Asia as found by Chien-Hui and Smith (1996) and van Wijnbergen
(1985), it seems not to be applicable in Cameroon. More importantly, the global
evidence suggests that Asian developing countries may be more sensitive to bank
deposit interest rates changes than other groups of developing countries (Fry, 1997,
p. 762).
No published work on the association between microfinance assets and bank
deposit interest rates has focussed on Africa in General and on Cameroon in particular.
It can therefore be argued that financial liberalisation policies currently pursued in
Cameroon by the International Monetary Fund (IMF) and the World Bank overlook
microfinance institutions saving factors. The contribution of this paper, therefore, is to
provide a unique opportunity to investigate the association between microfinance
institution assets and bank deposit interest rates in an African country. The aim of this
paper is to establish an original database from fieldwork on microfinance institutions
in Cameroon. Nine saving variables were identified in the fieldwork offering an
alternative explanation of saving behaviour in the tontine. The sampling error
problems pertaining to these saving variables are investigated for the following
propositions:
P1. The tontine leader and member sample means represent the same population
mean in terms of saving variables.
P2. Leaders or members saving behaviour is not equally distributed.
P3. Leaders and members saving behaviour is ranked in the same order.
The tontine will be the main denomination of microfinance institutions used in this
paper. The tontine is described as a microfinance institution in Cameroon due to its
operation occurring in an atmosphere completely outside the regulation of the formal
banking sector. The tontine comprises moneylenders, Rotating Savings and Credit
Associations (RoSCAs), mobile bankers, mutual assistance groups, landlords,
neighbours, friends and family members. It is never subsidised by governments.
Therefore, microfinance in Cameroon collects savings, informally, that will be made
 IJDI available to members as credit. Yet the competence of the tontine to exist almost in all
8,1 places implies its financial ability to adapt to both rural and urban conditions. The
tontine supplies services desired by its members without the costly apparatus of
buildings, papers and staff. It does this at relatively low cost to borrowers because of
proximity, its quick response to requests and the flexibility permitted in repayment.
It has been established in this paper that the tontine has rendered services in many
50 developing countries whenever banks failed to do so.
This paper proceeds as follows. The second section explores the origins of the
tontine in Cameroon. Third section analyses the empirical findings from the fieldwork
on the tontine in Cameroon and final section concludes.
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The origins of the tontine in Cameroon

The tontine is a worldwide phenomenon, appearing in many parts of early Europe,
Asia, Latin America, the USA, the West Indies and Africa. The tontine has not evolved
autonomously in the various communities in which it is found. For example, Nzemen
(1993, p. 19) and Shanmugam (1989, p. 351) argued that the tontine was created in
Europe by a Neapolitan banker who initiated the scheme in France in 1653.
The fieldwork research in Cameroon indicates that the tontine began in the Western
regions by involving physical goods used by members to pay their rotating dues before
the introduction of cash in the economy. In the 1930s, monetisation of the Cameroonian
economy was beginning to develop side by side with batter trading. As money became
added to the list of needs in the rural sector, the tontine was expanded to meet the new
needs, and the money tontine was born. It may be noted that unlike the formal financial
sector, the tontine is popular in Cameroon because it provides financial services most
often demanded by individuals. The essence of the next section centres on the
proposition made by the McKinnon-Shaw school that, the liberalisation of bank deposit
interest rates in the formal financial sector will lessen the tontine expansion.

Survey of the tontine

The financial liberalisation policy prescribed by the IMF and the World Bank in
Cameroon, expects a substantial amount of savings held in the tontine to shift into
bank deposits due to the assumed positive causal effect of interest-elasticity of tontine
saving. The latter outcome is addressed in the following statistical investigation of
tontine saving variables using t-statistics[1] and the x 2-test[2]. This sample consists of
an original data source from fieldwork on the tontine in 2004.
From the 6 May 2004 to 30 July 2004, I conducted interviews of a random sample of
100 Cameroonians using a financial intermediation questionnaire. The survey was
conducted in the following Cameroonian regions: central, littoral, and northwest.
Structured interviews with open-ended questions, and self-completing questionnaires
based on fixed sequence of largely closed questions, were the inquiry methods
employed for a random sample of 20 microfinance leaders and 53 microfinance
members in order to establish an original database on the nature, operation,
performance and extent of the use of microfinance. The response rate for the two
groups interviewed is specified in Table I.
Microfinance leaders were often prepared to be interviewed on appointment while
microfinance members were interviewed on the spot. During the survey process, the
identity of all respondents was not disclosed in order to maintain confidentiality.
 This procedure allowed ideas to be considered on merit without regard to the Microfinance
originator. The response rate was not as high as expected due to the sensitivity of the saving
quality of the data usually sought on financial institution fieldwork. The potential bias
is limited to the extent that the analysis of these variables reflects the opinion of 73 in Cameroon
microfinance members (20 microfinance leaders and 53 microfinance members).
Furthermore, I attempted to limit the extent of bias by comparing the findings with
those of other surveys carried out in the same area of research. 51
Categories of the surveyed tontine
Three broad categories of the tontine were surveyed in this fieldwork:
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(1) The basic tontine.

(2) The rotating savings and credit tontine (ROSACRET).
(3) The auction tontine.

The basic tontine. The basic tontine is a kind of tontine found among students of
Cameroonian universities. They regularly deposit funds with a group leader who, in
turn, places in a credit union or in a bank. The main feature of this tontine is that
although funds are collected, they are not distributed among members through any
systematic rotation. Members collect these funds at the end of a given period. About 88
percent of university students interviewed preferred collecting their share at the
beginning of the academic year to pay for their university fees or other educational
expenses. In other cases, the funds collected may be used to invest in a specific project
or in enterprises that are administrated by the group. The basic tontine is normally run
by volunteer leader. Members can keep or withdraw money at anytime during the year.
It is clear that bank deposit interest rates here are not what motivate members to save.
Students interviewed did not consider a negative bank deposit interest rates as an
obstacle to their saving behaviour because other saving incentives, as discussed
further below, are considered to be more important.
The rotating savings and credit tontine (ROSACRET). The second category of the
tontine investigated was the ROSACRET 1 and the ROSACRET 2. The ROSACRET 1 is
common among Cameroonians. The 18 ROSACRETs 1 sampled were practised by 64
respondents. The ROSACRET 1 requires two contributions: the rotating contribution and
the self-help contribution. The total amount of the first contribution is given to a member
on a rotating basis. The amounts to be contributed per member and the order in which
members will receive the collections are generally agreed up on before the commencement
of the cycle. The rotating contribution may be made of a fixed and a variable amounts. In
the case of a fixed amount, members who want more than one share can have their name
written twice in the register or have other shares in the names of their wives. In the case of a
variable amount, a minimum amount is set and members wishing to contribute more can
do so. The contribution process continues until every member in their turn receives the

Number of questionnaire

Distributed 100 Table I.

Respondent 73 Fieldwork in Cameroon
Rejection 27 (May-July 2004)
 IJDI funds they contributed and the cycle is completed. An example of a ROSACRET 1 with ten
8,1 members and FCFA[3] 200,000 contribution per session each is illustrated in Table II. This
example shows that the first beneficiary will receive FCFA 2,000,000 including his or her
contribution. That is, the member saves FCFA 200,000 and obtains a loan of FCFA
1,800,000 from the other nine members. By a similar process, the second beneficiary
receives a total contribution of FCFA 2,000,000. The member saves FCFA 400,000 and
52 borrows FCFA 1,600,000. The collection process continues until every member in turn
must have received FCFA 2,000,000 and the cycle is completed.
What is specific about the ROSACRET 1 is that members acquire the discipline of
saving because they are supported by mutual trust and believe in each member
honouring his or her obligations in the group. Their social-cultural ties reinforce this
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mutual trust. The ROSACRET 1 is a closed informal financial market with non-profit
goals. Emboldening members in a social setting towards self-development is the
objective of this tontine. The meeting place of the ROSACRET 1 rotates or is fixed.
Where it rotates, members meet at the home of the one receiving the total contribution.
Where the meeting place is fixed, it is often at the residence of the eldest member or at a
home judged most convenient by members. In the ROSACRET, the frequent posts of
responsibility are those of the president, vice-president, treasurer, financial secretary,
and, sometimes, a chief adviser. In addition to these posts, there is always somebody in
charge of entertainment. In the ROSACRET 1, the homogeneity and the non-profit
maximisation goal of the group make interest rate irrelevant since no interest is charged
on all loans. Members of the ROSACRET 1 may be required to make a second
contribution known as the self-help contribution. The object of the self-help contribution
is that of mutual assistance to provide for either misfortunate or celebratory events. The
self-help contribution is distributed at the end of the year if it has not been used. The goal
of this second contribution underlines a strong social expression as will be elaborated
later in the analysis of saving variables.
The ROSACRET 2 differs from the ROSACRET 1 due to the introduction of a
laissez-faire price mechanism in its loan market and its profit oriented goals. In
addition to the two original contributions made in ROSACRET 1, the ROSACRET 2
requires a third contribution called the discretionary contribution, to be disbursed as
loans to members and non-members. The rotating contribution averaged only
30 percent of the discretionary contribution in the 17 ROSACRETs 2 investigated.

Total contribution Net savings Net borrowing Monthly rotating

(FCFA 000) (FCFA 000) (FCFA 000) session

2,000 200 1,800 1

2,000 400 1,600 2
2,000 600 1,400 3
2,000 800 1,200 4
2,000 1,000 1,000 5
2,000 1,200 800 6
Table II. 2,000 1,400 600 7
Example of a ROSACRET 2,000 1,600 400 8
1 with FCFA 200,000 per 2,000 1,800 200 9
member 2,000 2,000 0 10
 The laissez-faire price mechanism is characterised by the fact that unlike the rotating Microfinance
contribution, the lending interest rates in the discretionary contribution are determined saving
by the loan market. The lending interest rates in the discretionary contribution are
either pre-agreed upon at any fixed level in each ROSACRET 2 or are determined by in Cameroon
auctioning of loans. In the later case, it is the highest bidder who receives the collection
at say 20 percent a month. For a loan of FCFA 1,000,000, the borrower will pay an
interest of FCFA 200,000 per month. The FCFA 200,000 is also auctioned at say 20 53
percent a month yielding an interest of FCFA 40,000. The auction process will continue
till either no money is left or no person is willing to bid. The total amount collected
belongs to the group and at the end of the round it may be distributed or again put back
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into the tontine for auction. The ROSACRET 2 is arranged in such a way that each
member has an opportunity to buy the contribution made available for loans. However,
the monthly interest rate is always subtracted before a loan is given out and
subsequently charged on the remaining monthly total balance.
The auction tontine. The third category of the tontine sampled known as the auction
tontine is made solely of the discretionary contribution. The auction tontine was found
to be common among business people in the urban areas. Members participating in this
tontine are capable of providing short and medium terms business finance. The
contribution per member in this case is usually higher than that of ROSACRETs 1 and
2 and it is the highest bidder who receives the collection.
Given the origin of the tontine since the 1600s, one would expect the tontine to be
sophisticated. Categories of the surveyed tontine showed that the tontine is still quite
rudimentary. Surprisingly, the tontine was also found to be common among employees of
formal banks. Bank official’s behaviour in this circumstance raises interesting questions
about specific benefits bank employees realised in the tontine rather than banks. The
fieldwork analysis reported below on the benefits realised from participating in the tontine
proved rewarding since it identified saving variables sensitive to tontine members.

Analysis of the tontine saving variables

P1. Tontine leaders and members samples have the same population mean in
terms of saving behaviour.
The respective null and alternative hypotheses are:
H0. mL ¼ mM.
H1. mL – mM.
where mL is the population mean represented in the sample of leaders while, mM is the
population mean relating to members.
Table III indicates that the t-ratios are less than their critical value at 5 percent
significance level for all saving variables. We accept the null hypothesis and deduce
that it is likely that the two samples represent populations with equal means. This
result represents a justification for combining data from the two samples to obtain
pooled mean estimates in Table III.
P2.1. Leaders or members do not rank saving variables in the same order.
P2.2. Leaders and members rank saving variables in the same order.
 IJDI
SC MA CO CB EAL SD LE FS LC
8,1
Leader
Mean 0.75 0.65 0.55 0.70 0.75 0.35 0.30 0.40 0.25
Variance 0.20 0.24 0.26 0.22 0.19 0.24 0.22 0.25 0.20
Observation 20 20 20 20 20 20 20 20 20
54 Ordinary members
Mean 0.66 0.55 0.60 0.73 0.60 0.34 0.24 0.39 0.17
Variance 0.23 0.25 0.24 0.19 0.24 0.23 0.19 0.24 0.14
Observation 53 53 53 53 53 53 53 53 53
Pooled mean 0.71 0.60 0.58 0.72 0.68 0.35 0.27 0.40 0.21
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t-ratio value 0.73 0.79 0.41 0.30 1.16 0.08 0.47 0.03 0.77
t *0.025 (73) 1.99 1.99 1.99 1.99 1.99 1.99 1.99 1.99 1.99
Notes: *10 percent significance level; SC, social-cultural services; MA, mutual assistance;
Table III. CO, convenience of tontine services; CB, common bond among tontine members; EAL, easy access
Student t-test of saving to tontine loans; SD, small deposits; LE, level of education; FS, force savings; and LC loss of confidence
variables in commercial banks

In the first stage (P2.1), the respective null and alternative hypotheses are:
H0. Leaders or members do not rank saving variables in the same order.
H1. Leaders or members rank saving variables in the same order.
Tables IV and V show that in the leaders sample, the x 2-value of 12.3 is below its critical
value at the 5 percent significance level while, in the members sample, the x 2-value of
33.9 is well above its critical value at the 5 percent significance level. The null hypothesis
is accepted only in the members’ sample. We infer that unlike leaders, members saving
behaviour is not equally sensitive to the identified variables. These opposing results
may be due to the discrepancy in the size of both samples. It should be noted that more
observations with less variables tend to reduce the degree of the sampling error.

SC MA CO CB EAL SD LE FS LC Total

Observed frequencies 15 13 11 14 15 7 6 8 5 94
Theoretical frequencies 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5 94
Table IV. x 2-value 12.3
Leaders sample x 20.05(8) 15.5

SC MA CO CB EAL SD LE FS LC Total

Observed frequencies 35 29 32 39 32 19 13 21 9 229

Theoretical frequencies 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 229
x 2-value 33.9 *
x 20.05(8) 15.5
Table V.
Members sample Note: Significant at *5 percent level
 The distribution of leaders and members samples is now compared in terms of the Microfinance
rankings of these nine variables as determinants of saving behaviour. The respective saving
null and alternative hypotheses are:
in Cameroon
H0. Both samples have equal distribution in terms of ranking the nine saving
variables.
H1. Both samples do not have equal distribution in terms of ranking the nine 55
saving variables.
Table VI indicates that the x 2-value of 0.87 is well below its critical value at the
5 percent significance level. We accept the null hypothesis and conclude that the
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sample of leaders and members does not deviate significantly from the hypothesised
equal distribution in terms of ranking the nine saving variables. This result accords
with that of P1 where the sample of leaders and members represents populations with
equal means.
On the basis of the above statistical analysis, we could rank the following tontine
saving variables based on pooled sample means estimated in Table III.
Common bond. A total of 72 percent of the respondents asserted that the common
bond among members is one of the reasons for their preference of the tontine. The
tontine is organised within a group of people with a common intangible bond such as
belonging to the same tribe, religion, profession or share the same political view.
Social-cultural activities. A total of 71 percent of the respondents stated that
social-cultural activities are the reason behind the use of the tontine as opposed to
banks. The social-cultural activities comprise drinking, eating, traditional and modern
dancing. The importance of these activities has led to the contribution of a specific
amount in each session used by the host to entertain members. Dumes (2004) concluded
in his survey on the tontine in Cameroon that:
The tontine offers its members a sense of community. Culturally compatible and flexible to
the demands of an increasingly interconnected world, the tontine is indeed a powerful tool for
meeting the social and financial needs of Cameroonian women, whether those needs are
cooking supplies or emotional support (Dumes, 2007, p. 30).
Easy access to loans. A total of 68 percent of the respondents indicated that unlike
banks, loans and savings are often mutually exclusive in the tontine. Individuals can
facilitate their access to loans by proving themselves through saving performance.

SC MA CO CB EAL SD LE FS LC Row sums

Leaders
Observed frequencies 15 13 11 14 15 7 6 8 5 94
Theoretical frequencies 15 12 12 15 14 8 6 8 5 (94)
Members
Observed frequencies 35 29 32 39 32 19 13 21 9 229
Theoretical frequencies 35 30 31 38 33 18 13 21 10 (229)
Column sums (50) (42) (43) (53) (47) (26) (19) (29) (14) (323) Table VI.
x 2-value 0.87 Leader and member
x 20.05(8) 15.5 samples
 IJDI The International Labour Organization (ILO), in a survey on micro-enterprises in
8,1 Cameroon, concluded that:
The lack of access to credit is the major felt need of the modern informal sector heads of
enterprises. It is evident, however, that most of the micro-enterprises cannot provide the
formal guarantees required by the formal banking system (ILO, 1980, p. 34).

56 In another survey carried out by the Freidrich-Ebert Foundation in Cameroon, it was

found that the lack of access to credit by 62 percent of micro-enterprises investigated
constituted a major obstacle to their survival (Freidrich-Ebert Foundation, 1992, p. 87).
Despite the remarkable expansion of the formal banking credit throughout rural areas
in Cameroon, less than 15 percent of Cameroonians have access to formal credit
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(Nzemen, 1993, p. 115).

Atieno (2001) who carried out fieldwork survey on microfinance in Kenya observed
that low loan application fees, collateral value, application period and repayment
period in microfinance makes it easy for members to access loans. He noted that:
The results show that apart from application fees, all the other loan aspects are significantly
different between formal and informal credit markets in this sample. In all cases, the values
from formal sources are higher than those in the informal market. Loan terms and conditions
therefore appear to be relevant in the choice of which credit market to use (Atieno, 2001, p. 36).
Mutual assistance. A total of 60 percent of the respondents stated that they would
never leave their tontine because of the mutual assistance they receive from it. The
tontine allows for the promotion of the act of solidarity among members in case of
celebratory events such as marriages, births or misfortunes such as deaths, funerals,
and illnesses. In Jamaica, for example, Poole and Grant (2003, p. 7) asserted that:
The size and remoteness of the communities engender the formation of networks for mutual
assistance. Such an environment provides a pre-existing social network within which the
RoSCAs can be embedded.
Convenience of tontine services. A total of 58 percent of the respondents pointed out
that the convenience of tontine services is the reason for its use as opposed to banks.
Morales (2004, p. 10), ECSSD Microfinance Team (2004, p. 92) and Morduch (2002, p. 80)
supported this saving variable by arguing that microfinance tends to be popular
because of the convenience of its services. In a similar survey carried out in Kenya,
Atieno (2001, p. 24) concluded that:
A total of 246 (74 percent) respondents saved part of their income for the future [. . .]
convenience of microfinance services was the most common reason for being a member of
microfinance.
Forced savings. A total of 40 percent of the respondents use the tontine as opposed
to banks because it forces its members to save. In the tontine, members are compelled to
save at least a percentage of their usual session contribution, which accumulates over
time. In addition, members are free to save any amount. Both these compulsory and
voluntary savings accumulate in the sense that members do not withdraw their savings
during the cycle. For example, in the Grameen Bank of Bangladesh each member
must save at least 1 taka each week (Morduch, 2002, p. 85). Furthermore, Wrenn (2007,
p. 9) concluded in his survey analysis that, compulsory savings are a prerequisite
of all microfinance surveyed and this has instilled a culture of savings in members.
 He went on to say that, in a microfinance called the Soweto Urban Development Microfinance
Association in Kenya, all members interviewed are saving, whereas only one person had saving
been saving on a regular basis prior to joining. Furthermore, only 12 percent of members
of another microfinance called Hofokam in Uganda were saving prior to joining the in Cameroon
microfinance and now all are saving. Wrenn (2007, p. 9) stressed that many microfinance
members are saving in order to access larger loans in the future and to cover any
emergency, or difficulty in meeting loan repayments, that may arise in the future. 57
Small savings allowed. A total of 35 percent of the respondents stated that they are
rationed out of bank services because of the relatively low level of their savings. Dumes
(2004) who carried out fieldwork on the tontine in Cameroon pointed out that:
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In Tsinkup quartier, the majority of tontines have fixed cash contributions, which can range
from FCFA 500 to FCFA 5,000. Most tontines with fixed cash contributions give multiple
contribution options. For example, members of the Association of Women from Fongo Tongo
and Dschang either contributed FCFA 500 or FCFA 1,000 or both, depending on their
individual financial situations (Dumes, 2004, p. 21).
In Cameroon, FCFA 200,000-FCFA 500,000 is the minimum deposit range required to
open a saving account (Bame, 2000, p. 71).
Following the same reasoning, Vletter (2001) reported her findings on microfinance
in Mozambique as follows:
In 1998 savings groups were introduced to eight districts and as of December covered 1,407
members of whom 71 percent were men and 29 percent women (savings groups found on the
farmers’ association involved mainly men). The average savings balance per person was
about US$5. To date, 39 groups have been established in Angoche and Moma-Mucoroge
involving 318 members of whom 78 percent are women. Groups are usually of one gender.
The system allows for members to make deposits of any size (Vletter, 2001, p. 9).
Level of education. A total of 27 percent of the respondents regarded their illiteracy as
hindrance to their capacity to save in formal institutions. This lacuna represents a
major problem for 24 percent of Cameroonians[4] who do not have the skill of reading,
writing and basic numeracy. The latter finding was supported by Khandker (2001, p. 9)
in his econometric work. He concluded that, “the regression analysis of all types of
households found that the households that were resource poor, both in landholding and
formal education did participate in microfinance programs”. Khandker’s (2001)
conclusion is an indication that microfinance also caters for illiterate.
Loss of confidence in commercial banks. A total of 21 percent of the respondents have
lost confidence in the banking system and prefer saving in the tontine.
Outright bankruptcy of Cameroonian commercial banks caused by a substantial
number of ill-advised and politically motivated loans led to the loss of confidence in the
formal financial system. The World Bank supported this view by stressing that:
Governments in the CFA franc zone have interfered with the allocation of credit in several
ways. They have induced commercial banks to extend credit to public enterprises that were
not creditworthy. They have financed crop credit on the basis of productive costs that were
greater than export proceeds. Sometimes credit has been extended to individuals because of
personal connections (World Bank, 1989, p. 170).
It should be noted that Cameroon’s membership to the CFA[5] zone implies a fixed
parity for the franc CFA (Cameroon currency) to the French franc.
 IJDI The above nine saving variables identified in the fieldwork analysis, supported by
8,1 surveys carried out in the same area of research, point out the inadequacy of the
explanation based on liberalised bank deposit interest rates as a saving variable in
microfinance. Moreover, Table VII shows that survey analysis carried out by Djoum
(1999, p. 68) on micro-enterprises financed by the tontine in Cameroon did not identify
controlled bank deposit interest rates as a variable explaining the reason for joining the
58 tontine.
The less relevant ranking discrepancies found in some of Djoum’s results with the
results of the study are mainly due to two reasons: first, Djoum respondents were strictly
directors of micro-enterprises financed by the tontine while, our fieldwork respondents
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were made up of all categories of the tontine members described earlier in this paper. It is
not, therefore, surprising that, for example, easy access to loans is the most popular
variable in Djoum’s survey results followed by enterprising environment. Common
bond and mutual assistance are the most popular factors in the results of our study. More
importantly, easy access to loans is the third most popular variable in the results of our
study. Secondly, the main focus in the fieldwork is on saving incentives. On the other
hand, joining the tontine for credit purpose is the main concern of Djoum.
Although no published work on microfinance in Africa so far has focussed on the
association between microfinance assets and bank deposit interest rates in the financial
liberalisation debate, the present rank of saving determinants identified in the fieldwork
gives an alternative elucidation of saving behaviour of tontine members. In view of this
analysis, it may be argued that a significant portfolio shift from the tontine into the
banking system may be realised mainly as a result of the identified saving variables.

Conclusion
The development of the tontine reflects their evolution in Cameroon. Tontine savings are
associated to variables other than bank deposit interest rates. These variables offer an
alternative explanation of saving behaviour in the tontine. They show that liberalised
bank deposit interest rates in the financial sector are unlikely to reduce financial dualism
in Cameroon. The failure of liberalised bank deposit interest rates policy to cause a
significant portfolio shift from the tontine into the banking system does not support the
interest responsiveness of savings as advocated by the McKinnon-Shaw school.
This paper supports, therefore, the neostructuralist analysis of financial
development where microfinance institutions are an important structural feature of
financial systems in many developing countries. It is sceptical about the financial
liberalisation programme implemented in Cameroon that neglected Cameroon specific
factors such as microfinance institutions.

Variable Percentage of respondents

Easy access to loan 100

Enterprising environment 56
Forced savings 40
Table VII. Social-cultural services 37
Miro-enterprises Mutual assistance 17
incentives for joining
the tontine Source: Djoum (1999)
 Notes Microfinance
1. t-statistic is used due to its appropriateness for testing the difference between two population saving
means and their distribution.
2. x 2-Test is used because it is seen as a test of the goodness of fit between two distributions
in Cameroon
in terms of their frequency distribution.
3. USD ¼ 440 Franc de la Coopération Financière en Afrique Centrale (FCFA).
4. World Bank – World Development Indicators CD-ROM. 59
5. Until 1962, the abbreviation “Franc CFA” stood for Franc des colonies françaises de l’Afrique.
Today, this label is interpreted as Franc de la Communauté Financière Africaine in
West Africa and is legal tender in Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali,
Downloaded by Guru Gobind Singh Indraprastha University At 01:18 11 August 2015 (PT)

Niger, Senegal and Togo. In Central Africa the same label is interpreted as Franc de la
Coopération Financière en Afrique Centrale and is legal tender in Cameroon, Central African
Republic, Chad, Republic of the Congo (Brazzaville), Equatorial Guinea and Gabon. Both
currencies follow almost identical monetary arrangements.

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Corresponding author
Jacob Tche can be contacted at: jacobtche@yahoo.co.uk

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