THE ROLE OF MOBILE BANKING IN PROMOTING FINANCIAL INCLUSION AMONG SMALL AND MEDIUM ENTERPRISES IN YAOUNDÉ, CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

The development and acceptance of internet banking as the new standard for commerce can reduce the cost of conducting banking transactions. It is user-friendly, cheaper, offers flexibility of time and space, provides better customer services, and offers a variety of services (Nazaritehrani & Mashali 2020). All such benefits can facilitate customers’mobile banking experience. Mobile banking is an electronic innovation in the banking sector that leverages mobile networks and mobile technology to connect mobile phones and other digital devices, enabling a banking system that offers various financial services via mobile interfaces such as short messaging services (SMS) (Shaikh & Karjaluoto, 2018). This new mode allows customers to access financial assistance at any place, time, and situation, thereby altering the dynamics of inter-bank competition. However, banks now prioritize providing professional and personalized services over expanding coverage and increasing the number of outlets. The rapid advancement in technology-based systems, particularly those connected to the internet, has significantly changed customer interaction within companies (Baptista & Oliveira, 2019). The adoption of mobile banking impacts the performance of small and medium enterprises (SMEs), which involves developing enterprises that consistently show improvements in overall performance, including revenue, sales volume, profit, and asset growth, or maintain steady development quality and level (Tidd & Bessant, 2018). Furthermore, an enterprise's ability to grow rapidly, healthily, and continuously indicates its potential for economic success. Any organized effort intended to generate profit or economic outcome by providing services or products to an external group is referred to as an enterprise, requiring capital and time investment to develop, grow, or improve business activities (Hillary, 2017). In sub-Saharan Africa, specifically Cameroon, SMEs are recognized as engines of economic growth and key contributors to the sustainable gross domestic product (GDP) of all countries. In Cameroon, the performance of SMEs has significantly improved due to mobile banking services, attributed to high-tech innovations in a competitive environment. According to Islam, Muzi & Meza (2018), mobile banking services have experienced massive development and unprecedented growth in recent years, becoming a primary catalyst for economic and social growth. Despite some reported cases of mobile money transfer theft, there is a solid foundation of innovations ensuring the success of SMEs through the mobile banking sector. Many SME operators find traditional bank accounts inconvenient, as they require leaving their businesses to make transactions at the bank. This necessity has led to the adoption of mobile banking among SME operators. Since the launch of the mobile money transfer system in 2007, the mobile payment system has become popular with both the unbanked and the banked populations (Martin & Kinoti, 2017). Additionally, mobile banking has significantly contributed to the economic development of countries through innovative technology, consistently cited as one of the greatest challenges faced by SMEs worldwide (Akeem, 2019). Technology is recognized for improving efficiency, accuracy, increasing outreach, and reducing costs. However, many SMEs lack sufficient funds to invest in suitable backend technologies or operate in regions with limited access to critical infrastructure such as the internet. Others invest in poor technology choices or choose not to invest, limiting their ability to grow and compete (Khalique, Bontis, Abdul Nassir bin Shaari & Hassan, 2015). Nevertheless, the success of small and medium enterprises (SMEs) is essential for achieving greater economic equality and distributing the benefits of economic growth. It is crucial to develop innovative solutions to address their financing challenges. Financial inclusion for disadvantaged groups, including SMEs, has become a key priority for many countries worldwide (Chakrabarty, 2018). While, digital technologies provide a powerful solution for financial inclusion, potentially benefiting an estimated two billion adults globally by enabling innovative business models. The World Bank (2022) notes that access to bank accounts is limited globally, with only a small proportion of people owning bank accounts. Consequently, many countries have implemented comprehensive measures to enhance fund accessibility, often by focusing on the adoption of technology to innovate financial products. Therefore, a survey will be conducted in order to assess the role of mobile banking in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon.

1.2 Statement of the Problem

Small and medium-sized enterprises (SMEs) have significantly contributed to employment creation, poverty reduction, and global economic development. However, despite these achievements, 25% of SMEs in Cameroon have been unable to secure financial funding (Bank of Central African States, 2019). According to Dermiguc and Klapper (2016), around 20% of SMEs remain without a bank account, indicating exclusion from the banking system. A World Bank report (2022) revealed that although 80% of SMEs have bank accounts, they still cannot access financial services. This highlights the ongoing need for solutions to financial inclusion, as a majority of SMEs worldwide face financial exclusion (Grandolini, 2015). Additionally, many SMEs in Cameroon fail to reach the growth stage of their lifecycle due to a lack of timely and affordable access to financial services, which is a key issue affecting their output performance (Argamo,2016). Additionally, Mwania (2018) explored technology adoption but did not consider agency banking and a moderator. Similarly, Njagi and Njoka (2021) researched financial inclusion within microfinance institutions. These gaps in the literature indicate a need for further research and comprehensive solutions. Hence, it is in the light of these that the study seeks to assess the role of mobile banking in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon.

 1.3  Objectives of the Study

The main purpose of this study is to assess the role of mobile banking in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon. Specifically, the study will;

Determine the extent of mobile banking adoption and usage among SMEs in Yaoundé.

Investigate the factors associated with the adoption of  mobile banking among SMEs in Yaoundé.

Assess the impact of mobile banking on the performance of SMEs in Yaoundé.

Evaluate the strategies to enhance the adoption and effective use of mobile banking among SMEs in Yaoundé.

1.4  Research Questions

The following questions have been prepared for the study:

What is the extent of mobile banking adoption and usage among SMEs in Yaoundé?

What factors are associated with the adoption of mobile banking among SMEs in Yaoundé?

What is the impact of mobile banking on the performance of SMEs in Yaoundé?

What strategies can enhance the adoption and effective use of mobile banking among SMEs in Yaoundé?

1.5 Research Hypotheses

H0: Mobile banking has no significant role in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon.

Ha: Mobile banking has a significant role in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon.

1.6 Significance of the Study

The government will use the research findings to formulate policies that encourage the adoption of digital banking and support financial inclusion initiatives. Moreover, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the role of mobile banking in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon.

1.6 Scope of the study   

The scope of this study is boarded on the role of mobile banking in promoting financial inclusion among small and medium enterprises in Yaoundé, Cameroon. Empirically, this study will determine the extent of mobile banking adoption and usage,investigate the factors associated with the adoption of  mobile banking, assess the impact of mobile banking on the performance  and evaluate the strategies to enhance the adoption and effective use of mobile banking.

Geographically, the study will be delimited to some selected in Yaoundé, Cameroon.

1.7 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Mobile banking: refers to financial services handled through the use of mobile phones, such as executing savings, deposits, and withdrawals of funds (Oburu, 2018).