The Effect of Risk Mitigation Practices on the Asset Quality of Some Selected Member-Owned Microfinance Institutions in the North West Region of Cameroon

Authors

  • Ngoh Christopher Sam The University of Bamenda
  • Fonkam Mongwa Nkam The University of Bamenda
  • Njekang Dieudonne Nkwati The University of Bamenda
  • Ngong Kelvin Sam The University of Bamenda
  • Humphred Watard The University of Bamenda

DOI:

https://doi.org/10.47941/ijf.3032

Keywords:

Asset Quality, Internal Risk Management Schemes, Loan Insurance, Loan Mortgages, Risk Mitigation

Abstract

Purpose: The high level of non-performing loans (NPLs) at approximately 49.44% among member-owned microfinance institutions (MFIs) in the North West Region of Cameroon presents a serious challenge to the sector’s asset quality. This study aims to evaluate the effect of loan insurance, loan mortgages, internal risk management schemes, social responsibility activities and the number of branches on asset quality, measured by net outstanding loans across 40 MFIs.

Methodology: A cross-sectional research design and robust multiple regression analysis on secondary financial data collected in June 2024, was used to examine the relationships between variables of the study.

Findings: The findings reveal that loan insurance positively affects asset quality with a coefficient of 0.456, significant at the 1% level of significance, indicating a very high likelihood that this effect is not due to chance. Loan mortgages also positively impact asset quality with a coefficient of 0.789, significant at the 1% level, confirming their role in reducing credit risk. Internal risk management schemes exhibit a negative effect with a coefficient of -0.321, significant at the 1% level, implying that overly rigid controls may hinder asset quality.

Contribution to Theory, Policy and Practice: Based on these findings, recommendations include developing context-specific insurance products, promoting transparent collateral valuation, and adopting flexible risk management practices tailored to institutional capacities. Implementing these strategies can improve asset quality, foster sector sustainability, and strengthen financial inclusion in the region.

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Author Biographies

Ngoh Christopher Sam, The University of Bamenda

Ph.D Lecturer in the Department of Accounting and Finance, Higher Institutts of Commerce and Management

Fonkam Mongwa Nkam, The University of Bamenda

PhD Senior Lecturer and Head of Department in the Department of Money and Banking

Njekang Dieudonne Nkwati, The University of Bamenda

PhD Researcher and Graduate Teaching Assistant, Department of Banking and Finance, Faculty of Economics and Management Sciences

Ngong Kelvin Sam, The University of Bamenda

PhD Researcher and Graduate Teaching Assistant, Department of Banking and Finance, Faculty of Economics and Management Sciences

Humphred Watard, The University of Bamenda

PhD Researcher and Graduate Teaching Assistant, Department of Banking and Finance, Faculty of Economics and Management Sciences

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Published

2025-07-27

How to Cite

Sam, N. C., Nkam, F. M., Nkwati, N. D., Sam, N. K., & Watard, H. (2025). The Effect of Risk Mitigation Practices on the Asset Quality of Some Selected Member-Owned Microfinance Institutions in the North West Region of Cameroon. International Journal of Finance, 10(5), 52–70. https://doi.org/10.47941/ijf.3032

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