Factors influencing customers’ decision to save with microfinance institutions: the case of Advans Cameroon

Abstract

Savings are an indispensable resource for Microfinance Institutions (MFIs). They must mobilise sufficient savings to meet their commitments and become independent from grants providers. They must therefore convince customers, which in this paper include the public in general and micro and small-sized enterprises, to entrust their savings. This requires an understanding of these customers’ characteristics, as well as their needs and expectations. This leads us to the following research question: what are the factors affecting customers’ decision to save with a MFI? The analyses conducted with Advans Cameroon customers show that the Customer life cycle, the MFI characteristics and the MFI–Customer relationship have a direct influence on the decision to save. Specifically, age and revenue have a positive influence on savings. Conversely, the number of person in charge negatively affects savings. An increase in the number of branches leads to an increase in savings, while services quality are very important.

Keywords:

• Savings factors
• savings collection strategies
• microfinance institutions
• Advans
• Cameroon

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In this paper, customers refer to people and enterprises who use the services of MFIs for their savings, loans and other daily banking activities. These include the public in general, Micro and Small-sized Enterprises, as well as Small and Medium size Enterprises’ managers. Micro and Small-sized Enterprises, as well as Small and Medium-sized Enterprises are a good target for MFIs, because of the business potential that they represent, beyond their deposits. Among the challenges that SME face [limited access to finance; lack of managerial competency and capability; negative perception by the public; difficult access to reliable information; limited government support; as well as unfriendly and unstable business environment to name few (Muriithi, 2017)] access to finance is one that MFIs can fill and therefore, increase their loan portfolio.

2 The failure of these two recognized institutions could have raised the fear of a systemic risk in the Cameroonian financial system. Facing this, the government and the regulator reacted consistently. Major shareholders of COFINEST were arrested for mal-practices and mismanagement. The supervisory authority COBAC became actively involved in the control and supervision of MFIs activities. It became increasingly present in major MFIs to scrutinize their activities with respect to prudential norms (Totabong, 2012).

3 This could change in the future, with the proliferation of mobile banking by phone.

4 This article is based on the life cycle theory (Modigliani and Brumberg, 1954), the buffer-stock theory of savings (Carroll, 1992) and the theory of financial intermediation (Allen and Santomero, 1996). The buffer-stock theory of savings stipulates that consumers accumulate assets so that they can protect their consumption from unpredictable income fluctuations. The model implies the existence of a target wealth stock. From the theory of financial intermediation perspective, MFIs which are financial intermediaries collect deposits and use them to make loans to their clients. To thrive, they must retain their depositors, to ensure a permanent base of deposits.

5 The decision to save goes beyond this paper. Rather, it addresses the choice of a financial institution to make the deposits, once the decision to save has been made. Note also that in the Cameroonian context, savings are not always made in the form of deposits with financial institutions. For long-term investments, many savers prefer alternative vehicles such as land and income properties, which, in addition to being physical and therefore palpable, have the particularity of being sheltered from potential bankruptcies of financial institutions.

6 A copy of the questionnaire is available upon request. Items are borrowed from the literature and are designed to cover all the dimensions relevant of the research, namely: the customer life cycle, the MFI characteristics and the relationship between the MFI and its customers.

7 Sphinx Survey is a fully integrated software package for survey management and data analysis. It provides a full range of functions from survey design, data collection and data entry to extensive quantitative and qualitative analysis. For the purpose of this study, Sphinx was used solely for the purpose of counting the questionnaires completed by Advans customers. Once processed, an Excel file in CVS format was produced as the database for the analyses made in SmartPLS (v. 3.2.8).

8 The Partial Least Squares method is a nonparametric approach to modeling that allows comparison between multiple response variables and multiple explanatory variables. It allows a simultaneous estimation of several dependency relationships: from measurement items to constructs and between latent constructs. PLS makes no distributional assumptions in the data and is often recommended when the focus of research is prediction rather than hypothesis testing, when sample size is not large, or in the presence of noisy data. It is particularly useful in the presence of unobservable, hard-to-measure latent variables and/or constructs which are measured by a very large number of indicators. PLS is widely used in many fields of research: economics, marketing, human resources management, sociology, psychology, education, to name few (Hair, Risher, Sarstedt & Ringle, 2019).

9 As suggested by an anonymous referee, customer’s trust in the institution must be added to MFI reputation.

Additional information

Notes on contributors

Jean Robert Kala Kamdjoug

Prof. Jean Robert Kala Kamdjoug is currently the Head of the Management Department at the Faculty of Social Science and Management (FSSM) at Catholic University of Central Africa (CUCA), Cameroon. His current research interests focus on the business value of IT, Information System, microfinance, and Decision Support System. He has published in several journals, including Computational Economic, International Journal of Medical Informatics, Production Planning & Control, Business Process Management Journal, International Journal of Information Management, Annals of Operations Research, International Journal of Technology Diffusion, and Journal of Small Business & Entrepreneurship.

Jean Pierre Gueyie

Jean-Pierre Gueyié is a full professor in the School of Management, University of Quebec in Montreal. His research interests are on financial institutions management (including banks, financial cooperatives and microfinance institutions), financial risk management, corporate governance, development economics and alternative investments. He has published several articles and has edited books in several areas in finance.

Landri Etienne Kengne

Landri Etienne Kengne is a graduate from the catholic university of Central Africa, where he studied banking and finance. His professional experience include working in Microfinance for ADVANS Cameroon as a customer representative. It is during this spell that his outstanding skills in marketing where revealed and led him to his current position as the head of the marketing, communication and placement department of PIGIER High school of Marketing and management, Cameroon.