Do Cooperative credit unions reduce or increase poverty in Cameroon?

Abstract

PurposeThis study looks at whether credit unions, a type of microfinance, increase or decrease poverty in Cameroon from 2004 Q1 to 2021 Q4.Method/designThe fully modified ordinary least square, dynamic ordinary least square, and conical co‐integration is applied.FindingsThe findings reveal a long‐term association between credit union measures and poverty levels. The results indicate that the number of credit unions, the number of commercial bank branches, and credit to the private sector negatively relate to poverty levels. This implies that as the number of credit unions increases, the poverty level increases as the credit unions tend to exploit the poor population. Outstanding deposits positively impact poverty levels, which imply that members’ deposits alleviate poverty.Research implicationsThe government should refurbish the existing programs to enhance credit unions' activities to focus more on banking the poor population especially in remote areas. The credit unions should increase deposit mobilization from the public to empower individuals and businesses. The government should regulate the number of credit unions being created to limit exploitation. The government should intervene to ensure that credit unions’ policy regarding lending, interest rates, and loan recovery procedures are mutually agreed upon by the parties.Originality/noveltyLimited studies used secondary data focusing on credit unions. The studies give conflicting results: Some studies reveal that microfinance banks positively affect poverty reduction. Some indicate negative effects of microfinance on poverty reduction. Others show that microfinance institutions do not significantly influence poverty reduction. Different opinions exist among depositors and borrowers of credit unions concerning poverty alleviation. Some credit union members hold that credit unions increase poverty, while others argue that credit unions alleviate poverty.

The Efficacy of VICOBA Intervention in Alleviating Poverty in Emerging Economies: A Study of the ORGUT SEDIT VICOBA Lending Scheme Project in Morogoro, Tanzania

“…This study contributes to the growing body of literature on microfinance and poverty reduction by demonstrating the significant impact of saving behaviour within VICOBA groups. The findings align with previous research by Ngong et al (2021), which discussed the role of financial inclusion in poverty alleviation, highlighting the contribution of saving behaviour to enhancing financial stability and reducing poverty levels. The current study's findings corroborate this perspective, indicating that the ability to save plays a pivotal role in empowering individuals to improve their economic conditions.…”

“…These results establish the importance of access to insurance services in poverty reduction efforts within microfinance interventions. Furthermore, Ngong et al (2021) discussed the microfinancial inclusion nexus and its role in poverty alleviation, supporting the idea that access to insurance services enhances financial stability and reduces poverty levels. Similarly, Khanam et al (2018) argued for the significant role of microfinance services, including insurance, in poverty reduction, further reinforcing the positive influence of insurance services on poverty reduction outcomes.…”

“…Education levels play a crucial role in shaping individuals' choices and participation in microfinance interventions, with higher levels of education enhancing entrepreneurial skills and income-generating opportunities. Ngong et al (2021) discuss the critical role of education in influencing entrepreneurial intentions, with universities and entrepreneurship education programmes seen as crucial for developing entrepreneurial skills, attitudes, and behaviours. Khanam et al (2018) argue that higher education levels are essential for developing entrepreneurial intentions and behaviours, highlighting the role of education in fostering entrepreneurial skills and attitudes.…”

“…Furthermore, Utonga and Ndoweka (2023) and Hussain et al (2018) emphasised the importance of microfinance in poverty alleviation, further supporting the notion that access to credit can lead to tangible outcomes in reducing poverty. Scholars such as Ngong (2023) also discussed the nexus between microfinance and poverty alleviation, reinforcing the significance of credit access for enhancing financial inclusion and reducing poverty levels. The convergence of findings from these scholars emphasises the critical role of access to credit in poverty alleviation efforts within microfinance institutions like VICOBA groups.…”

“…However, the effectiveness of microfinance initiatives in reducing poverty has been questioned, with some studies suggesting that they may only sometimes lead to poverty alleviation (Chikwira, 2022). Still, these institutions have been found to reduce household poverty by improving incomes through financial services (Ngong et al, 2021). Furthermore, institutions are recognised as essential tools for poverty reduction and are increasingly identified as critical and strategic initiatives for economic empowerment (Mamun et al, 2017;Ahmad, 2022).…”