Liquidity Management's Impact on MFI Profitability

THE IMPORTANCE OF LIQUIDITY MANAGEMENT ON THE PROFITABILITY OF
MICROFINANCE INSTITUTIONS: THE CASE OF FODEC S.A. DOUALA
CERTIFICATION
This is to certify that this internship report entitled “THE IMPORTANCE OF

LIQUIDITY MANAGEMENT ON THE PROFITABILITY OF MICRO
FINANCE INSTITUTIONS: THE CASE OF FODEC”, has been written by
FANSI DJIDJABEU CARINE FLEUR of the department of Banking and Finance
of the advanced school of management in partial fulfilment of the requirements for the
award of a HIGHER NATIONAL DIPLOMA (HND) in Banking and Finance, Under
the supervision of:
PROFESSIONAL SUPERVISOR: ACADEMIC SUPERVISOR:
Mrs. MEGNE MADELEINE

BRANCH MANAGER
SIGNATURE……………………... SIGNATURE…………...…………
DATE…………/………/…………. DATE………/………/…………
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagei

DEDICATION
tO mY
beLOVed paRentS:
mR. djidjabeu jean
&
mRS. ngeukam maRthe
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageii

ACKNOWLEDGEMENTS
This report could not have been reality without the efforts and support of a good
number of persons, and I would like to express my gratitude to all those who
contributed directly or indirectly in the realization of this report.
Our sincere gratitude to Mr LOUIS MARIE DJAMBOU proprietor of IUG:

ESG, ISTA, ISA for the initiative of creating a professional institution.
My academic supervisor, ……………………………. for his contributions and

proposals as I was working along.
My professional supervisor, Mrs MEGNE MADELEINE, who taught me

during my internship and other staff members such as Mr EBOULE
CONSTANT and Mrs YOUTA MIREILLE who also taught me how banking
operations are carried out
I acknowledge the contributions of all the lecturers of the Banking and Finance
department of IUG-ESG especially Dr. TEGWI PUIS, Mr DINKA’A A.
YEBIT, Mr NARCISSE FOTSO, for their support and assistance.
A special gratitude to my late father: Mr DJIDJABEU JEAN, my mother Mrs

NGEUKAM MARTHE, Mr MOUATCHOUA FRANCIS, Mrs MANIKIEU
BLANCHE, Mr YADEU IVAN for their advice, love, encouragement, support,
and financial assistance.
I acknowledge my friends and classmates and all others who i did not mentioned
their names for their attention, care and support in school and also for helping
realize this piece of work.
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageiii

ABSTRACT
This report focuses on the IMPORTANCE OF LIQUIDITY MANAGEMENT

ON THE PROFITABILITY OF MICRO FINANCE INSTITUTIONS. The
internship was carried out in FODEC DOUALA-NDOKOTI. The main objective
of this study was to evaluate problems associated with liquidity management and
its effects on the financial performance of MFIs. During my internship we worked
in different departments; we worked with the accountant to cash passbooks, bank
reconciliation etc. we also worked with the loan officer where we learnt how to
fill a loan form, and we also assisted in making phone calls to customers whose
loan request where approved or rejected, we worked at the customer service
department where we were taught how to interact with the customers. Also we
worked at the teller department where we were taught on the management of cash
inflow and cash outflows. Throughout our stay in FODEC, we encountered many
problems but we focused on two critical problems such as shortage of cash, lack
of segregation of duty. We recommended that on the issue of shortage of cash,
there must be current checks or serious internal control must be put in place to
prevent cash thefts. For the problem of lack of segregation of duty one person
should not be allowed to do a duty alone. Generally, THE IMPORTANCE OF
LIQUIDITY MANAGEMENT ON PROFITABILITY OF FODEC cannot be
under mind. There is a positive relationship between liquidity and profitability.
An increase in liquidity management will lead to an increase in profitability.
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageiv

RESUME
Ce rapport a été redige sur la base de L’IMPORTANCE DE LA GESTION DE

LIQUIDITE SUR LA RENTABILITE DES L’INSTITUTION DE
MICROFINANCE. J’ai effectué mon stage a FODEC S.A CAMEROUN.
L’objectif principal de cette étude était d’evaluer les problemes liés à la gestion
de liquidités et ses effets sur la performance financière des IMF. Pendant mon
stage, nous avons travaillé dans des départements ; nous avons travaillés avec le
comptable pour encaisser les carnets de collectes, le rapprochement bancaire, etc.
nous avons également travaillé avec le bureau de crédit ou nous avons appris à
remplir des formulaires de prets, et aussi assisté a des appeles telephonique avec
des clients dont les demandes de prets étaient approuvées. Nous avons travaillé
au departement du service client ou nous avons travaillé avec le chargé clientèle
pour accuillir les clients et repondre a leurs preoccupations, aussi leurs parlés des
differents produits de FODEC S.A CAMEROUN. Ensuite nous avons travaillés
à la caisse. Ici nous avons appris a bien gérer les entrées et les sorties de la
microfinance et aussi comment effectuer les versements et les retraits dans les
differents comptes. Tout au long de notre travail a FODEC, nous avons rencontrés
de nombreux problémes, mais nous nous sommes concentrés sur le problème de
manque de liquidités En génèral, L’IMPORTANCE DE LA GESTION DE
LIQUIDITES SUR LA RENTABILITE DE FODEC ne peut pas etre prise en
compte completement. Il existe une rélation positif entre la liquidité et la
rentabilité. Une augmentation de la liquidité conduire à une augmentation de la
rentabilité.
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagev

PREFACE
The goverment of Cameroon wishes to train youths in all field of vocational

training inorder to build their professional skills. It is becoming indispensable and
event urgent for the youths to acquire a professional training. It is in the
connection that the ministerial order No N 008/CAB/PR which was brought about
the creation of state universities and higher professional institute among which is
IUG.
For this reason, THE UNIVERSITY INSTITUTE OF THE GULF OF
GUINEA (IUG) was created by the ministerial order N05/0022 and 05/0038 of
January 2005 and has a mission to train youths for obtaining the HIGHER
NATIONAL DIPLOMAT (HND) in the field of study;
 ACCOUNTANCY
 BANKING AND FINANCE
 LOGISTICS AND TRANSPORT MANAGEMENT
 HUMAN RESOURCE MANAGEMENT
 MARKETING, TRADER AND SALES
 ASSISTANT MANAGEMENT
 TELECOMMUNICATION
At the enf of this cycle, it is tradition for all students to write a report in partial
fulfilment of their courses with a period of internship in any interprise. The
internship permits the student at the end of the training to have a clue about the
professional life and how to familiarize with the active life. It is in this light, in
order tp meet up this demand, I carried out an academic internship FODEC to find
out the impacts of liquidity mangement on the profitability of microfinance
institution.
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagevi

LIST OF ABBREVIATIONS
ABBREVIATIONS FULL MEANING

ATM Automated Teller Machine
CEMAC Central African Economic and Monetary Community
COBAC Banking Commission for Central African States
ESG Ecole Superieur de Gestion
FICAM Financier du Cameroun
FODEC Fonds de Developpement pour L’epargne et du credit du

Cameroun
HND Higher National Diploma
ISA Institut Superieur des Sciences Appliquees
ISTA Institut Superieur des Technologie Avancee
IUG Institut Universitaire du Gulfe de Guinee
MFIs Microfinance Institutions
MINFI Ministry Of Finance
S.A Societe anonyme

SME Small and Medium Size Enterprises
ANEMCAM National association of Cameroonian microfinance

institutions
Source: student personal efforts
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagevii

IDENTIFICATION TABLE
ACRONYM FODEC
BRANCH MANAGER Mme. MEGNE MADELEINE
DATE OF CREATION NOVEMBER 2006
DIRECTOR GENERAL Mr. ALAIN YOUTA KUINANG
E-MAIL Info@fodecam.net
FAX (237) 22222132
HEAD QUARTER YAOUNDE
LOCATION OPPOSITE TRADEX NDOKOTI
MAIN ACTIVITIES SAVINGS OF FUNDS AND LOAN GRANTING
MATRICULATION RC Yaounde No
NUMBER RC/YAO/2013/71/105/00089/COBAC/MINFI
Fonds de Developpement Pour L’Epargne et du Credit
NAME
du Cameroun
NUMBER OF BRANCHES 08
P.O BOX P.O box 4139 Douala
SOCIAL CAPITAL 2.5 Billion Francs CFA
SOURCE OF
FODEC’S PROCEDURAL MANUAL
INFORMATION
TAX REGIME ACTUAL CAPITAL
TELEPHONE NUMBER 333413345/690907669
WEBSITE www.fodecam.net
Source : FODEC ARCHIVE
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageviii

TABLE OF CONTENTS
CERTIFICATION ......................................................................................................... i
DEDICATION............................................................................................................... ii
ACKNOWLEDGEMENTS ........................................................................................ iii
ABSTRACT .................................................................................................................. iv
RESUME ....................................................................................................................... v
PREFACE ..................................................................................................................... vi
LIST OF ABBREVIATIONS .................................................................................... vii
IDENTIFICATION TABLE ..................................................................................... viii
TABLE OF CONTENTS ............................................................................................ ix
GENERAL INTRODUCTION .................................................................................... 1
PART ONE: THE INTERNSHIP ENVIRONMENT ............................................... 5
CHAPTER ONE: GENERAL PRES .......................................................................... 6
SECTION ONE: HISTORICAL EVOLUTION AND CREATION OF FODEC
.................................................................................................................................... 6
1.1.1: CREATION OF FODEC CAMEROON ..................................................... 6
1.1.2: THE HISTORICAL EVOLUTION OF FODEC ......................................... 7
1.1.3: FODEC OBJECTIVES, MISSION AND VISION ..................................... 7
1.1.4: PRODUCTS AND SERVICES OF FODEC ............................................... 8
SECTION TWO: STRUCTURAL ORGANIZATION AND OPERATIONS
OF FODEC .............................................................................................................. 11
1.2.1: ORGANIZATIONAL STRUCTURE OF FODEC ................................... 11
1.2.2 : THE BUSINESS ENVIRONMENT OF FODEC .................................. 14
CHAPTER TWO: EVOLUTION OF INTERNSHIP ACTIVITIES AT FODEC
S.A................................................................................................................................. 19
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageix

SECTION ONE: PRESENTATION OF THE SERVICE THAT RECEIVED

THE INTERN DURING THE INTERNSHIP PERIOD .................................... 19
2.1.1: RECEPTION AT FODEC ......................................................................... 19
2.1.2: PRESENTATION OF THE HOST DEPARTMENT ................................ 20
SECTION TWO: EVOLUTION OF INTERNSHIP ACTIVITIES ................. 21
2.2.1: DESCRIPTION OF THE INTERNSHIP ACTIVITIES ........................... 21
2.2.2: JUSTIFICATION OF THE RESEARCH TOPIC. .................................... 25
PART TWO: FRAME WORK OF LIQUIDITY MANAGEMENT AND ITS
EVALUATION AT FODEC S.A ............................................................................... 26
CHAPTER THREE: ANALYSIS OF LIQUIDITY MANAGEMENT AND ITS
IMPORTANCE ON THE PROFITABILITY OF A MICROFINANCE
INSTITUTION ............................................................................................................ 27
SECTION ONE: CONCEPTUAL AND THEORITICAL ANALYSIS ........... 27
3.1.1: CONCEPTUAL ANALYSIS AND LIQUIDITY MANAGEMENT
THEORIES ........................................................................................................... 27
3.1.2: THEORIES OF LIQUIDITY MANAGEMENT ....................................... 28
3.1.3: THE SOURCES OF LIQUIDITY TO FODEC ......................................... 30
3.1.4 : The liquidity profitability dilemma ........................................................... 31
3.1.5: IMPORTANCE OF LIQUIDITY MANAGEMENT TO FODEC ............ 31
3.1.6: LIQUIDITY AND PROFITABILITY MANAGEMENT ......................... 32
3.1.7: EFFECTS OF LIQUIDITY ON PROFITABILITY .................................. 33
SECTION TWO: MEANS OF DATA COLLECTION AND RESULTS......... 35
3.2.1: MEANS OF DATA COLLECTION ......................................................... 35
3.2.2: Outcome/ Results ....................................................................................... 36
CHAPTER FOUR: CRITICAL APPROACH TO LIQUIDITY MANAGEMENT
AND RECOMMENDATIONS .................................................................................. 37
SECTION ONE: SWOT ANALYSIS AND IDENTIFICATION OF LAPSES
IN FODEC S.A ........................................................................................................ 37
4.1.1: THE STRENGTHS OF FODEC ................................................................ 37
4.1.2: WEAKNESSES AND THREATS OF FODEC ........................................ 38
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagex

SECTION TWO: RECOMMENDATIONS ........................................................ 40

4.2.2: SUGGESTIONS RELATING TO LIQUIDITY MANAGEMENT OF
FODEC ........................................................................ Erreur ! Signet non défini.
4.2.2: SUGGESTIONS TO THE MANAGEMENT OF FODEC . Erreur ! Signet
non défini.
GENERAL CONCLUSION ....................................................................................... 41
BIBLIOGRAPHY ....................................................................................................... 41
APPENDICES ............................................................................................................. 41
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagexi

GENERAL INTRODUCTION
BACKGROUND OF THE STUDY

The main objective of banks and financial institutions are to be liquid, profitable
and safe. They oppose each other. Liquidity has power more than the power of
gun. Every businessman, organisation, institution at large will need to be liquid.
If there is no liquidity, none of the above persons can smile or chuckle. Liquidity
management is a point of focus for every financial institution, there is a trade-off
between liquidity and profitability. This means that financial institutions would
like to keep more cash to satisfy withdrawals and run their day to day operations
at the same time, they want to give out loans, which is their main source of
profitability. It should be recalled that the highest income of financial institutions
comes from lending. Liquidity is an ultimate test of business success. The ability
of a financial institution to meet the demand for deposit withdrawals and other
cash flows is a visible indicator of its viability. If a bank cannot meet depositors’
withdrawal requirements, general creditor expenses, or if it is forced to
significantly limit new lending, a lack of customer’ confidence can develop.
Liquidity is defined as the ease with which an asset or item can be converted into
cas. The fact that a bank is profitable does not mean that it is liquid, It should be
noted that profit is a theory and cash is actual.
We are going to evaluate the concept of liquidity in terms of its theories, identify
its source, importance, factors affecting liquidity and the dilemma that exist
between liquidity and profitability. We believe that, by evaluating this liquidity it
will be well managed.
Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page1

PROBLEM STATEMENT
During our internship at FODEC, we discovered that there were some difficulties
at the level of meeting customers’ deposit, that of irregular savings, lack of proper
assessment of the credit worthiness of borrowers, cash shortages, credit theft, loan
delinquency, insufficient skilled staff and they did not have a perfect mastering of
liquidity management and this went a long way to reduce the number of customers
in FODEC thereby reducing the profit of the micro finance institution. Following
our industrial training, we were urged by these and thus, decided to work on the
topic: THE IMPORTANCE OF LIQUIDITY MANAGEMENT ON THE
PROFITABILITY OF MICROFINANCE INSTITUTIONS:
OBJECTIVE OF THE STUDY
The main objective of this work is to evaluate the importance of liquidity

management on the profitability of microfinance institutions.
The specific objectives include:

1. To identify the sources of liquidity.
2. To ascertain how FODEC manages its liquidity.
3. To assess the effects of liquidity management on profitability of FODEC.
4. To make recommendations based on findings to enable FODEC improve
on it liquidity management.
SIGNIFICANCE OF THE STUDY

However, this work has helped me in particular by adding a plus on my
professional capacity as it has deep me into an intensive research and this has
consequently increase my know-how. It has enable me to know how the job
market operates.

It will help the organisation positively if the follow strictly the recommendation
that we suggested and this will go along to completely eradicate deliquency,
defaulting, and other mal functioning in the organisation.
This will help researchers to get practical experience on what is being studied in
classroom, It will also enable the researcher to expand his scope of reasoning and
acquire more knowledge both theoritically and practically. Thus making him more
competitivein the job market.
To the institution under investigation (FODEC), it will help the management of

FODEC in taking strict decisions relating to loan portfolio, It will help them to
increase thier profitability.
It will permit banks and other financial institutions to understand the fact that
customers are thier ‘’foundation stone’’ and ofcourse should be treated with care.
METHODOLOGY OF THE STUDY

This report is written based on two types of information which are qualitative and
quantitative information. The information from qualitative type is obtained from
primary data through, asking of questions to the supervisor and staffs from
different department, and observation of customers’ daily transactions. The
quantitative source obtained from secondary data obtained from textbooks, credit
documents, unpublished lecture notes received in class, research from the internet.
STRUCTURE OF THE WORK

This work is divided into two parts. Part one elaborate on the internship
framework and is made up of two chapters, chapter one and two. Chapter one has
two sections. Section one is about history, creation and evolution of tha
organization, mission and services offered. Section two deals with the
organizational structure of the company, business environment and operations.

Chapter two is divided into two sections, one deals with the presentation of the
host department, section two deals with the evolution and activities carryout,
justification of the topic. Part two is also divided into two, chapter three and four.
Chapter three will deal with practical framework. Section one of chapter three
deals with conceptual and theorical analysis. Section two deals with means of data
collection. Chapter four is also divided into two sections, section one deals with
critical analysis and section two deals with the recommendations and finally, with
the general conclusion. The work end with bibliography and appendix.

PART ONE: THE INTERNSHIP ENVIRONMENT
This part is made up of two chapters. Chapter one which is the general
presentation of FODEC and is divided into two sections; section one which is the
creation and historical evolution of FODEC and section two; structural
organization and operations of FODEC. Chapter two which is the evolution of
internship activities at FODEC. It is also divided into two sections; section one
which is presentation of the services that received the intern during internship and
section two; evolution of internship activities.

CHAPTER ONE:
GENERAL PRESENTATION OF FODEC
S.A
This chapter is made up of two sections. Section one which deals with the history
and evolution of FODEC, while section two deals with business environment,
organizational structure and means of action.
SECTION ONE: HISTORICAL EVOLUTION AND CREATION

OF FODEC
1.1.1: CREATION OF FODEC CAMEROON
Inorder to best understand the history of FODEC, it is necessary to have a base of
micro finance institutions. « Le fonds de developpement de l’erpargne et du credit
with it french acronym is a Cameroon micro finance institution whose main
mission is to collect funds and grant loan. Created in November 2006, under the
name FICAM (financier du Cameroun). FICAM started its activities and had at
the time only two agencies, the Yaounde center agency which is the head quarter
located opposite the house of the stadio station and another branch situated
opposite the camp sic Tsinga just like any other micro finance, its aim is to provide
the traditional banking services to people who are not financially viable, by
collecting funds from funding thier economic projects and granting them credit
when need occurs.
In accordance with article 2 relating to the condition of the creation and
functioning of a micro finance institution in Cameroon (CEMAC zones inclusive),
FODEC is regulated and operates under the approval NO 00089/COBAC/MINFI
and belongs to category two type of micro finance institution.

1.1.2: THE HISTORICAL EVOLUTION OF FODEC

FODEC has a remarkable evolution. In 2007, it became FODEC (Le fonds de
development de l epargne et du credit du cameroun), and new agencies have been
opened in six regions of the country. Amongst which, one in the western region,
one in the northwest region, one in the north, two in the center region and two in
the littoral During the 5 years following its creation, the former FICAM now
region with a share capital which has increased from 500000000FCFA in 2002 to
2500000000FCFA today. At the beginning, FODEC began with very few
customers but today the micro finance can boast of over 132000 customers. In
2002, most of its operations which involved the use of modern computers, cash
registers, telephone sets, just to name a few to increase on the efficiency and
effectiveness of thier day to day business. Also, its scope of activities has also
increased to include, transfers of money nationally and internationally, financing
projects, payment of salaries to public and private workers (employees), loan
granting and accounts management schemes, just to name a few. This evolution
explains that FODEC Cameroun S.A is growing up to standard, to meet the
increasing needs of its customers and the general public as a whole.
1.1.3: FODEC OBJECTIVES, MISSION AND VISION
1.1.3.1 : FODEC OBJECTIVES
FODEC financial objectives include :
1. Mobilization of savings
2. Financing economic activities of its customers and the general public
3. Offer financial services to its customers and general public complementary
to savings and credit.
4. Ameliorate the financial condition of customers and the public by putting
inplace, projects, increase thier stock, payment of thier supplier and
acquisition of small equipments.

5. To grant loans on a sound and collectible basis

6. To invest the bank’s funds profitable for the benefit of customers
7. To serve the legitimate credit needs of thier communities
1.1.3.2: FODEC MISSION
1. Provide financial services to poor individuals
2. To favour the access of our financial services to agricultural sector
3. Finance micro projects for the promotion of general activity for revenue
4. Promote savings and finance education
5. To improve the living standard of its customers
6. To grant long and medium-term loans with good repayment capacity to all
customers
7. To advice and educate customers toward the use of funds and how to gain
financial stability
1.1.3.3: FODEC VISION
To be an institution which posses the following characteristics
 Flexibility
 Intergrity
 Transparency
 Honnesty
 Fidelity
1.1.4: PRODUCTS AND SERVICES OF FODEC
Since the creation of FODEC, the number of services rendered have been
increasing drastically. They provide the following services to individuals.
A. Saving account
This is an account that enables individuals to keep thier money inorder to meet
programmed investment. The minimum amount at the opening of the account is
5000FCFA. Here the customer decides when and how to save in his/her account.
The account earns very little interest on savings and interest is paid yearly.

Withdrawal from this account can be done at any time for small amount of money
and requires a prior notification of days before effective withdrawal for huge
amounts. In case of failure of notification, the customer pays 2% charge of instant
withdrawal.
 The tontine saving account/Association saving account
The opening of this account is done with 25000FCFA minimum. The originality
is the treatment of it interest rate. An interest rest of 4.5% payable twice a year:
2.25% from january to june and 2.25 from july to december.
B. Current acount/checking account
It is a running or active account which is open for daily transactions mostly by
businessmen, employees, merchants, organizations by making initial deposits of
a minimum amount in rural areas and higher amount in urban areas. This amont
never become time barred because no interest is paid for the credit is paid for the
credit balance of the account. Maintainance fees is 3500FCFA per month. In
addition, the opening of this account is from a minimum wage rate of
25000FCFA. The benefit of this account is that it gives the right to an overdraft
which can go up to 50% of the monthly salary and no restrictions on the number
of time of withdrawal and also, cheques are readily accepted in the business for
making and receiving payment.
C. Group account
It is an account opened by two or people, association, institution for its financial
transactions. Group account are allowed to deal mainly with savings. The can
withdral from savings without prior notice. This savings yield an interest. Group
account can also obtain special withdrawal slip to use for withdrawal or payment.
D. Deposit account
It is an account which money is kept or deposited for a pre determine period and
withdrawal can only be done at the end of the maturity period or due date. This
account is assimilated to saving account.

E. Fixed term deposit account

Money in this account enables customers ranging from one to five years. The
money deposited can’t be withdrawn before the due date. The rate of interest on
this account is greater than any other account. The longer the period of savings,
the greater the interest. Thou been the most profitable it got some short coming
that’s restriction is place on withdrawal that restriction is place on withdrawal and
payment before due dates is paid with little interest as could be paid on due date.
F. Account for CNPS pensioners
This is an account own by retire goverment workers. The government send
pension funds to thier retire workers through this account. No fee is charge at the
opening of this account. A small amount is paid on account care monthly.
G. Minor account
This account takes care of future needs in education, healthcare and others need
for children less than 18 years. A minimum account of 25000fcfa is required at
opening and withdrawal is free and without any prior notification. This account
also yield interest rate.
H. Daily collection
Here, special collecting agents are sent by the micro finance to parade the streets
of the town to collect money from thier customers on daily bases and for which
the total shall be calculated and paid at the end of the month.
I. School credit
School credit is granted to parents of students inorder to better prepare thier
children for the start of the school year. It is reimbursed according to the schedule
established by the company
J. Money transfer facilities
FODEC offers the fastest and affordable money transfer services to the customers
and the general public within the network in all the towns. Some services are

extended to other part of the world through western union. Other money transfer
services offered include; Orange money, square union, and the exchange of
euro currencies.
K. Payment of bills
This institution ease the payment of bills of individuals such as the payment of
customer’s electricity bill through smobil pay.
L. Payment of salaries
FODEC has been conveniently carrying out the payment of worker’s salaries for
the past years without any problem. Workers of both the public and private sectors
enjoy the express processing and payment of thier salaries before the month ends.
 Other services
1. Micro insurance (Allianz and Assiah)
2. Visa cards (basic, privilege, premium)
3. Overdraft facilities.
SECTION TWO: STRUCTURAL ORGANIZATION AND

OPERATIONS OF FODEC
1.2.1: ORGANIZATIONAL STRUCTURE OF FODEC
In our modern organization these days, inorder to facilitate communication and
good management of the company, there exist an organizational chart. An
organizational structure consists of activities such as task allocation, coordination
and supervision which are directed toward achievements of organizational goals
that is to determine which individual gets to participate in which decision making
process and thus to what extend thier decision making process and thus to what
extend thier views are shared in the organizational action. For an organization to
suceed, it ought to have a good structure to be followed so as to obtain its

objectives. FODEC Cameroon is just like any other micro finance institution is
structured as follows.
1. Board of Directors (BOD)

This an organ which ensures the smooth running of the micro finance and adopts
the internal rules and regulations. The BOD is composed of not less than three or
not more than 9 members of the organ and must be elected after 3 years by the
general assembly during annual meetings. Thier 3 years term is renewable twice.
The board consist of the presidents, vice presidents, treasurer, and secretary.
Some of the functions carried out by the board are as follows;
 Help in evaluating customers accounts
 It takes decisions after giving vital device to customers
 It has the right to sit quarterly or 4 times a year in meeting
 It sits atleast 3 times on board meetings before general meeting.
2. The General Manager
The general manager has the duty to cordinate the activities of the entire micro
finance and aversee the branches which are head by the branch managers inorder
to give a good image of the micro finance to the public.
3. The Branch Manager
The branch manager is directly answerable to the general manager, assistant
general manager as well as the BOD. He is in control of the staff under him for
thier day to day activities. He is also in a position to approve loan above the
competence of the loan officer.
4. Accounting department
This department is charged with the responsibility of compiling and recording all
transactions carried out in the micro finance and also in charge of analysing the
cash situation of the micro finance that is receiving cheques and presenting them

for encashment, drawing up statement of accounts and also putting in place the
property treated statements of accounts of the institution.
5. Credit department
The loan officer is the main assets of the micro finance. He approves loans to
members taking into consideration collateral securities for mortgage and other
landed property which is by assessing all the conditions under which the loans are
granted before any repayment. He analyses, prepare, and accepts loans after
consulting them through the canons of lending and sends to the manager. He also
prepares the amortization schedule of loan to know customers’ situation
concerning repayment.
6. Human resource department
The human resource department is responsible for hiring employees, interns,
maintaining employee well being and dismissing employees when neccessary.
This department handle many tasks related directly to employment issues such as
payroll, insurance, benefits and taxes, and it is responsible for staying up to date
on legal issues affecting employment.
7. Cashier
The cashier is responsible for cash in and out of the micro finance. Money
collected by the cashier is saved in the coffers. They also reconcile daily cash in
and out of thier cash account and present to the manager for signing
8. Secretary
The secretary keeps records, takes down minutes, and prepares agenda during
meetings. The secretary together with the manager also represents the micro
finance in any aspect. The secretary pays the taxes, transmits information in and
out of the enterprise and also types all the neccessary documents of the micro
finance.

9. Security guard
They are responsible for the security of the micro finance. They ensure safety of
the staffs and customers of the micro finance by good measures.
1.2.2 : THE BUSINESS ENVIRONMENT OF FODEC

1.2.2 : INTERNAL ENVIROMENT
Back office
This part of the office is made up of the branch manager, loan officer and the
accountant who are out to manage the affairs of the micro finance institution and
give reports to the head office. The manager has in his power to supervise the
workers and ensure that they are on the right track so as to meet thier objective
while the accountant see to it that all the transactions of customers are entered and
record with care and the loan officer takes special care in giving out loans to
customers and seeing to it that they are refunded
Front office
The front office which is made of the cashier, the receptionist and the security
guard who have upon themselves to satisfy the customers of the company. The
cashier is very important in a financial institution for they are the ones who help
and guide the customers on what to do when filling thier forms in case they are
unable to do it. Also she is supposed to take special care of the money when
making payment to customers. As for the receptionist she is to be very vigilant
and welcoming to the customers, for she has upon herself to direct them where
they are to go in the company and to notify in case the person to offer the service
they are asking for and most especially make the customer feel comfortable, they
reflect the company reputation. As for the guard he is out there to ensure that the
customers don’t come in with unwanted items prohibited by the institution and
the environment is secured.

 Organizational objectives
These are the factors that the organization intends to achieve. An organizational
objective has a major influence on a firm marketing plan and decisions. Every
organizational objective is to maximise profit. FODEC Cameroon S.A offers
financial services to people who have been excluded from the conventional
banking system.
 Organizational culture and resources
The myth of FODEC is based on the idea of a large family, its directors general
since it’s creation who has almost build the business during this passed years of
continue labour. The values with FODEC are flexibility, pride and innovation, the
spirit of request, performance, respect and intergrity. It is now common in the
institutions to trust young people representing a large majority of work force. The
key to the efficient work is to avoid any excess, and any mismanagement. Thus,
the rationality is the basis of all important decisions made within FODEC.
On the other hand, the resources that FODEC has at it disposal plays a very
important role in her marketing decisions. For instance, material, financial and
human resources refer to a set of individuals who make up the work force of an
organisation.
1.2.2.2: EXTERNAL ENVIRONMENT

The external environment which is also known as the uncontrollable factors.
These are those factors out of the organisation which affects the marketing
decision of FODEC. The external environment is divided into two that is ; the
macro and micro factors which affects it marketing decisions.
I. Micro Environment
A company’s micro environment consists of factors founf in the external
environment but closer to the the organisation which are capable of affecting
marketing management in it’s effort to provide value and satisfaction to it’s

customers. The micro environment of FODEC is made up of customers, suppliers,

partners, and competitors.
1. Customers
A FODEC’s clientele is anyone who is entitled to the products and services of the
institution. These are individuals, legal entities, SMEs, professional civil
societies. The originality of FODEC is that it target its clientele in a segment
ranging from low income people to huge companies.
2. Suppliers
These are other businesses (firm or individuals) who provide FODEC with the
required resources. Notably, raw materials, equipment or machines and
maintenance service. ANEMCAM supply’s FODEC with forms and others
stationaries, they buy office equipment like pens, staplers, papers, booklets,
perforators and so on from Mboppi market.
3. Partners
To carry out its activity, FODEC uses partners in various fields. Thus, for
financial activities, it uses, among others, ECO BANK, BICEC, AFRILAND
FIRST BANK. And then, for the health insurance of its employees, it turns to
PRUDENCIAL (ASSIAH): but for loan insurance to ALLIANZ. In addition, the
partnership with the FODEC is consolidated by an exchange of services. Suppliers
benefiting from their services must in turn subscribe to a product from the
institution. Thus, they are helping each other.
4. Competitors
The success of FODEC MFI will depend on its ability to satisfy customers’ needs
better than its competitors. The competitors are located on two levels. They are
on the one hand all the EMFs such as COMECI, CREDIT POPULAIRE,
FINANCIAL HOUSE, FIRST TRUST, NPACCUL, BAPCCUL, AZZICUL etc.

II. Macro Environment

Macro environment are forces in the external environment, which have a more
general impact on the organisations. They consistof large societa forces that affect
the whole micro environment. Here, the company is faced with a complex set of
uncontrollable variables that collectively shape the market. The success of a
company depends on its ability to adapt. The macro environment is usually
described using a charter called PESTEL which is made up of political, economic,
socio cultural, technological, ecological (natural) and legal factors.
1. The political and legal forces
This consists of government rules and regulations that apply to organisation such
as policies operations. The political and legal forces to be considered by FODEC’s
marketing manager include; taxation policies, political instability, monopoly
control, unfair competition, consumer exploitation etc.
2. Economic Environment
The economic environment deals with how much we have to spend and how we
like to spend. It includes factors and trends related to the production of goods and
services and income levels. It should be noted that the economy is a total system
with which material and energy inputs and processed and converted to finished
goods and services for distribution and final use. The marketing manager of
FODEC should know that available purchasing power in an economy depends on
the current income, prices, savings, and debt and credit availabity. He has to
consider the state at which the economy is, whether it is at recession, recovery or
even inflation.
3. The socio cultural environment
The socio cultural environment consists of society which forces and influences
the way individuals translate thier needs into specific products and services that
they desire. It is made up of customers’ demography and other customer attributes
such as customs; beliefs, attitude, value, norms and the lifestyle that guide thier

behaviour toward products and services. The demographic environment is of

major importance to marketers because because it is concerned with people who
are customers. FODEC is being surrounded by different types of cultures like the
Dualas, Bamilekes, Betis, Ewondo, etc. these tribes are also made up of different
age groupd, educational level and gender. They also have different behaviours
that FODEC has to take into consideration.
4. The technological Environment
The term technology is derived from the word techniques, which means the
generation of ideals through scientific research. The invention of tools that are
required to transform these ideals into tangible as well as intangible products that
are needed to satisfy human wants ; technological innovation therefore embodies
all the activities involved in translating technical knowledge into physical reality
(products). FODEC’s technological changes include the use of computers,
phones, internet to interact with the customers and inter branch transactions.
5. Ecological Environment
Ecological environment consists of factors found within the natural surroundings.
It is also concerned with the influence of natural disaster such as; flood, eruption,
hurricane, etc on the marketing and business activities.

CHAPTER TWO:
EVOLUTION OF INTERNSHIP ACTIVITIES AT
FODEC S.A
In this chqpter, we shall see the presentation of the host service that we were
introduced and the internship activities we carried out during our stay in FODEC.
This chapter is divided into two sections; section one talk about the internship
course in FODEC, while section two is about the internship chronogram of
activities.
SECTION ONE: PRESENTATION OF THE SERVICE THAT

RECEIVED THE INTERN DURING THE INTERNSHIP PERIOD
2.1.1: RECEPTION AT FODEC
Our internship was carried out at FODEC DOUALA NDOKOTI for a period of
one month; from the 22 of july to the 23 of August 2021.
We started pricesely at 8 :00am; we were welcome by the branch manager mrs.
MEGNE MADELEINE with whom we had an interview for some minutes during
which we were questioned on our field of study and the reason why we choose
FODEC for our internship. At the end of the interview, we were presented to the
other staff members in the company. We were given a tour to the various
departments and those of the guard service. We were requested to be of good
behaviour, confidential, and most especially of high intergrity and decency in our
dressing code. Also we were ask to read the brochure, by law and the loan policy
inorder to know the products and services render by the company, the overall
objectives of the company, in addition we were inform of the working hours, when
to step out for break and our internship program was handed to us. Most especially

we were told on what to do and what not to do and we ought to abide by the rules
and regulations.
2.1.2: PRESENTATION OF THE HOST DEPARTMENT

The branch manager took us to the reception zone, where the receptionist told us
what is all about the reception zone. It is a place where we orient customers. It is
also a zone where most of the customers complain are been laid. Most importantly
it is the area where the company’s products are being presented to the customers.
This is a very important zone in the company for reasons that its reflects the
company; it is the company’s mirror. If customers are not welcome as it is due in
this place, they will be unconfortable and they will not come back so emphasis
should be laid on this post.
Account manager
Then we moved to the account manager’s office were she tried to spell out what
her duties were all about. She is in charge of developing strong relationship with
customers, making sure that customer’s information is up to date. More to that the
account manager has the responsibility to answer to customer’s queries. Finally,
also in charge of attracting new customers in the institution and prepare sales
report.
The loan officer
Finally, we went to the loan officer, he equally spelled out his duties. He is
responsible for given loans to customers according to the loan policy, verify if the
documents provided by the customers are complete and authentic.

SECTION TWO: EVOLUTION OF INTERNSHIP ACTIVITIES

2.2.1: DESCRIPTION OF THE INTERNSHIP ACTIVITIES
FODEC is a category 2 microfinance institution and the activities carried out there
are centered on continous improve and enhance the likehood of its customers and
their communities through provision of proximate and efficient microfinance
services. Our internship in FODEC lasted for a period of 1 month and a week.
Below are the departments in which we passed through while on internship;
 WEEK ONE : RECEPTION DEPARTMENT

At the reception department, It’s concerned with the receiving of customers and
non customers who enters into the institution to see a particular staff or to acquire
some relevant information. Under this department we wre told to welcome
customers into the institution and ask what might be thier problem in a very polite
way. In case the customer has any problem, he will be directed to the department
that can provide solutions to the problems. Below are some of the transactions we
carried out in this department;
We learned how to fill the pay slips, savings withdrawal deposit form and advance
salary form.
We were also taught on how to create new accounts for members manually.
We also helped members to fill their saving passbook, western union withdrawal
and deposit forms, cheque remitance form as well as other forms.
Lastly, its at this department that we presented the different services and products
of FODEC to customers and non customers, for example the life insurance Assiah
(prudencial).
 WEEK TWO : ACCOUNTING DEPARTMENT

This department is concerned with financial transaction between branches or other
micro finance institutions and customers. As intern, we carried out the following
at the department;

Assist the workers in recording, preparing monthly cash books for small expenses
of the month, treatment of salaries, controlling loan files to know if customers had
the required procedure before sending for approval by the manager. We also saw
how he prepared the balance at the end of the month.
 WEEK THREE : TELLER DEPARTMENT

This department is concerned with the receiving of money from customers and
payment of fund to customers. Here, we were told on how to receive cash
deposited by customers on their various accounts and also making payment to
them, prepare pay in and pay out receipt to customers. Finally at the end of each
day, we control all the pay in slips and cheques paid out in relation to the stated
cash of the day and the balance at the end of the day to see if the is any shortage
or surplus.
 WEEK FOUR : ACCOUNT MANAGER

The account manager is the one incharge of building strong relationship with
customers making sure that her customers especially pensioners from CNPS open
account where thier pensions can be transfered, workers from VIGICAM and
other private workers to open accounts where their salaries can be transfered.
Here, she taught us how to go about giving an overdraft. An overdraft is an
agreement between the bank and the customer which allows the customer to
withdraw an amount which is more than what is in his/her current account over a
period. If a customer comes for an overdraft, they will divide his salary in to two
and if he owes the company the will deduct the amount he owes the bank. For
example, if a customer ask for an overdraft and he is earning 80,000frs then, they
will divide 80,000/2= 40,000frs as overdraft if he is not owing the bank but if he
is owning the bank 10000frs, then he will receive 40,000-10,000=30,000frs as
overdraft.
She equally taught us how to manage passbook transactions and they include;

 Treatment of salaries
 How to balance daily cash and journals
 Monitor members’ accounts and know the cash situation of the bank.
 Maintain accuracy of inventory
 WEEK FIVE : LOAN DEPARTMENT
This week was the last week of our internship at the interprise, we worked with
the loan officer. We learnt the different types of loans given in FODEC and we
were told to apply the 5Cs of loan analysis before given out loans. The types of
loan include productive loans, school fees loans, and mortgage loans.
Productive loans are loans given to investors or businessmen wishing to invest
into new or existing investment but lack the funds to do this. The interest rate on
this type of loan is 13% per annum. They include business loans, real estate loans.
The minimum period for repayment of this loan is 3 years.
School fees loan is a loan granted from the month of August to January ending.
It is mostly granted to civil servant, retired people of CNPS, and also to those
working in the private sector. They offer loans not more than thrice the amount
received and the interest rate is 12% per annum. The maximum period of payment
is 12 months. For these workers, the bank only takes 1/3 of the salary to repay
back the loan and the rest is given to the customer.
Mortgage loan is a loan given to those who want to buy a house. In this type of
loan, the bank grants the loan to the customer and when the hou sis bought the
micro finance institution takes possession of the assest (house) and if you fail to
repay the mortgage, the bank will repose the house. But if he pays back the loan,
he will take back his asset. The minimum period of rapayment ranges from 2 to 5
years.

TABLE SHOWING THE SUMMARY OF THE INTERNSHIP

ACTIVITIES
Weeks Post Problem Solution

Week 1 Reception Some customers especially Help and assist these
zone the old do not know how to customers in filling thier
fill forms. forms.
Late delivering of saving
passbook to customers. Banks should follow up
The receptionist speaks only thier customers’ passbooks
french making it difficult for and order for new ones in
english speaking customers. case there are finished.
The bank should employ a
bilingual receptionist.
Week 2 Accounting During the internship, we We were corrected and
department made a mistake in recording shown how it was
the journal entry. supposed to be done.
Week 3 Teller Some customers who They should always keep
department wanted to withdraw huge 10% of their liquidity at the
amount of money where ask bank and in case of
to wait at the premises or to illiquidity they should seek
go and come back after some for help in other banks.
times due to lack of
liquidity, others could not
carryout the transaction at
all.
Week 4 Account Customers from different Worked with the main
manager companies complaining that branch so that thier salaries

they receive thier salaries should be transfered to

late when others have thier branch in thier
received thiers week before. accounts as soon as they
Incomplete file deposited to are send by thier various
obtain a loan. companies. Recall them
about the incomplete file
before the loan is granted
Week 5 Loan Loan delinquency by Try to recover the loan by
department customers making side visit, and
making phone calls to
remind the customer of his
obligation
2.2.2: JUSTIFICATION OF THE RESEARCH TOPIC.

During our internship we came up with this topic because, we noticed that
FODEC S.A, had difficulties in meeting up customers’ demands for withdrawals
and irregular savings. There was poor liquidity management and it also affected
them in making profit since they could not determine the amount of liquidity
needed by the microfinance. Thus, after our internship, we decided to come out
with the topic “THE IMPORTANCE OF LIQUIDITY MANAGEMENT ON
THE PROFITABILITY OF MICRO FINANCE INSTITUTIONS case of
FODEC S.A ¨

PART TWO: FRAME WORK OF LIQUIDITY

MANAGEMENT AND ITS EVALUATION AT FODEC
S.A
This part of work is divided into two chapters (chapter three and four), each chapter is
made up of two sections. Chapter three explains in details the analysis of liquidity
management and its effects on the profitability of microfinance institution and chapter
four talks on the critical analysis that is the problem faced, recommendations and the
general conclusion.

CHAPTER THREE:
ANALYSIS OF LIQUIDITY MANAGEMENT AND
ITS IMPORTANCE ON THE PROFITABILITY OF
A MICROFINANCE INSTITUTION INSTITUTION
SECTION ONE: CONCEPTUAL AND THEORITICAL

ANALYSIS
Here, we would deal on concepts that will give a clearer view on our work and
hence, enhance understanding.
3.1.1: CONCEPTUAL ANALYSIS AND LIQUIDITY MANAGEMENT

THEORIES
1. Liquidity
Liquidity is the ease with which an asset or item can be converted into cash. It is
the ability of an organisation to have assets in liquid form(cash) to enable the
organisation carry out its day-to-day operations or pay its debts when they fall
due.
2. Liquidity management
Liquidity management is a point of focus of every financial institution. Thus, it
involves the evaluation of liquidity condition in an institution so as to determine
liquidity needs and meet up with the day-to-day transactions of institution.
Therefore, liquidity management describes the efforts taken to reduce liquidity
risk.

3. Profitability
The major assets of profitability to financial institutions are loans to its customers.
They make profit through the interest charge on these loans and offer services
such as, the sales of some its products like visa cards and interest charge on
customer’s current deposits.
4. Cash
Cash is made up of coins and notes on hand and the balances held with the bank.
It also includes legal reserves help with the central bank.
5. Bank
A bank is a business entity or a financial institution that collects, accepts deposits
from the general public, safeguards them, makes them available to the customers
on demand, lends to them and renders other services.
3.1.2: THEORIES OF LIQUIDITY MANAGEMENT

The following are some theories of liquidity management.
A. The Liquidity Asset Theory
According to this theory, banks most hold an enormous amount of liquid assets
and reserves against possible demands for payments. The original aim was to hold
sufficient gold in the safe to pay any notes presented for payment. In this modern
times, there is the need for holding short term assets as a precaution because the
future is surrounded by uncertainty.
The limitation which make this theory to be defective is that it is not easy to
determine the accurate quantity of notes and coins that might be kept at any time
thus making it difficult for financial institutions to know the quantity of deposits
that may be retained as liquidity and the proportion that can be given out as loan.
B. The Commercial Bills Theory
This theory states that bank funds should principally be invested in short term self
liquidation loans for working capital purposes. This means that bank funds should

be invested in loans that can easily be repaid and are used foe the day to day
operations of the business and not to finance long term investments.
A. Shiftability Theory
This theory holds that, market liquidity could be provided if, the percentage of
save deposits were used to acquire assets (long term and short term) that are
saleable in the secondary market. The theory was postulated to take of defect of
commercial bill theory that was limited to short term assets and thier maturity. It
extended to the holding of long term stocks and bonds that are marketable.
However, it also has limitations
 The theory depends on third party to buy assets to make for liquidity.
 It is also based on the assets side of the bank’s balance sheet ignoring the
liability source of liquidity
B. Anticipated Income Theory
This theory acknowledges that banks should give out self amortising loans so as
to enhence systemic payment schedules on such types of loans. With this, banks
will come around liquidity from repayment based on the capacity of the borrower.
However, this theory has some limations like
 The theory was too rigid as its prohibited the financing of fixed assets.
 It’s also did not take into consideration seasonal changes and loans.
C. The Liability Management Theory
This theory states that there is no need to store liquidity on assets side of the
balance sheet. It focuses on the liability side. This theory assumes that increasing
the interest rate on loans will pluck increase supply and provide for liquidity
needs. The theory cancelled out unavailability of funds at any price and assumes
stable nominal rate and a stable confidence of the market on the creditworthiness,
viability and intergrity of borrowers. The limitation of this theory is that when
interset rate on loans increases, there will be a low demand for loans and hence,
there will be a decrease in income, and hence decreases in liquidity.

3.1.3: THE SOURCES OF LIQUIDITY TO FODEC

1. Saving accounts
This is the main account of the micro finance. It is the means by which credit
union mobilize its funds to give out as loans. Withdrawals from the saving account
are restricted. This is because all saving accounts are insured under CAMCCUL
insurance policy. If a customer wishes to withdraw money from his/her saving
account, a time prior notice has to be given to the micro finance. This is to enable
the customer not to pay charges on the amount to be withdraw and also make the
bank to prepare enough liquidity for the withdrawal. If a customer comes to
withdraw from the saving account without this prior notice, he/she will loss 2%
charges which goes to cover the insurance premium that the micro finance paid
on that proportion of savings that is being withdraw. This saving account yields
interest and this is calculated annually.
2. Deposits Account
The deposit account also known as current account. Withdrawals from this
account are not restricted but cash deposits into this account are charged according
to the amount being deposited.
3. Loan account
This account enables members to take loans. Loans are granted in two categories;
loans above savings and loans within savings. A member taking a loan in excess
of his/her savings is levied 2% on the portion of the loan of his/her savings for
physical pesons and 3% for moral persons (entity). The interest rate on loans
within savings is 1.5% per month loans are expected to be reimbursed in monthly
instalment the maximum duration for a loan is sixthy month. This account is also
a source of liquidity to FODEC because; cash is raised from loan repayment. That
is, both the principal and the interest.

3.1.4: The liquidity profitability dilemma

The is a trade off between liquidity and profitability. Liquidity requires having
enough money in the form of cash inorder to meet up with its obligations.
Profitability requires giving out more funds in the form of loans inorder to realize
more profits. If FODEC has more liquidity, i twill lead to less profitability and
more profitability will lead to less liquidity. Thus, there is the need for them to
strike a proper balance between liquidity and profitability. Somr of its asset hed
in liquid form such as cash. While some profit generating assets like advances
should be held to maintain profitability
3.1.5: IMPORTANCE OF LIQUIDITY MANAGEMENT TO FODEC

The need for liquidity by the business is just like blood for the human system.
Thus has the following importance.
1. Good and sufficient liquidity management will help FODEC meet up with
its customer’s deposits as well as pay short term obligations when due.
2. Adequate liquidity management will enable FODEC to find new funds to
honour the maturing obligations such as sudden rise or upsurge in
borrowing under agreed lines of credits. It will also enable them to meet up
with thier contractual obligations.
3. A good amount of liquidity will limit the micro finance institution to
borrow from the central bank and other financial institutions.
4. Adequate liquidity prevents banks to be involved in force sale of assets that
is the sale of assts at unfavourable conditions making losses.
5. Adequate amount of liquidity is needed to hedge cash flow problems. It is
important to make revenue repayment when they fall due.
6. Lastly, this will anable FODEC to meet up with funding risk which is risk
arising from calls, hedge credit risk which is the probability that the
borrower will fail to repay the loan, market risk which is risk that the market

of a paticular financial instument will dry up and to honour request of funds

from customers.
3.1.6: LIQUIDITY AND PROFITABILITY MANAGEMENT

Liquidity is define as the ease with which an asset or item can be converted into
cash without a fall in its value. It is the ability of an organisation to have assets in
liquid form to enable the organisation carry out it’s day to day operations or pay
its debts when they fall fall due. The principal objective of the bank is to earn
more profit, it is essential for the purpose of paying interest to the depositors,
wages or salaries to the staff etc.
Financial institution most do appropriate training and anticipate on the amount of
deposit that would come in and the amount of loans that would be given out, so
as to maintain a particular level of liquidity. Financial managers must understant
the trade off that exist between liquidity and profitability and should be able to
minimise the gap between them. Conscious managers most know that the liquidity
needs of financial institutions vary with time, area, economic stability etc. and as
such profitability also varies with time. The amount of loan that is been demanded
in september when children are going to school and in December for the feast will
be different from the amount that will be needed during some ordinary months
where there is no feast. We should not forget that an increase in the demand for
loans will lead to an increase in interest rates and therefore banks will make high
profits during this same period and therefore, the liquidity to be maintained is a
matter of professional judgement. The liquidity needs of b&anks depends on
many factors such as the period of the year, the state of the econonomy, credit
policy, profitability objectives etc.
It is difficult to determine the amount of liquidity needed by a bank, at any point
in time. So, liquidity managers should use the following guidelines in liquidity
management:

 The liquidity manager most keep tracks of the activities of all departments
using and/or supplying funds.
 He should know in advance when the biggest credit or funds supplying
customers plan to withdraw their funds or add funds to their accounts.
 He must make sure that financial firm’s priorities and objectives for
liquidity management are clear.
 Liquidity needs most be analysed on a continuing basis to avoid both excess
and deficit liquidity positions.
3.1.7: EFFECTS OF LIQUIDITY ON PROFITABILITY

There are many factors that affect liquidity in micro finance institutions which
also affects profitability. These factor scan be distinguished as follows ;
1. Amount of deposits
An increase in deposits that is under saving and deposit account will lead to an
increase in liquidity and a decrease in deposits will lead to a decrease in
withdrawals, liquidity increase. For instance, during month end in FODEC, there
is a fall in liquidity due to payment of salaries to private workers and pension
funds to the old.
2. The level of savings
When the is an increase in savings, liquidity increases and when there is a decrease
in savings, liquidity also falls as well as profitability.
3. The level of lending
This is the most profitable activity of the bank an increase in lending will lead to
a decrease in liquidity and an increase in profitability. And a fall in lending will
lead to an increase in liquidity and thus, a fall in profitability.
4. The level of withdrawals
An increase in withdrawals will lead to a decrease in liquidity and when there is
a decrease in the level of withdrawals there will be an increase in liquidity.

5. The level of profitability

An increase in profitability will mean that more loans have been given out. This
is done to the detriment of liquidity. This means that an increase in profitability
will lead to a decrease in liquidity.
6. The level of economic activities
When economic activities increase, this means that there are more borrowings
from the banks to finance those activities and hence, there will be a decrease in
the level of liquidity. If the activities are profitable, there will be an increase in
deposits from the activities and hence, increase in liquidity.
7. The level of investments
Investments in highly liquid investments such as goverment bonds will increase
liquidity and investment in the long term illiquid investments will reduce the level
of liquidity.
8. Operating costs
An increase in operating cost such as increase in wages, salaries, banks interest
and administrative cos twill lead to a decrease in liquidity, and a fall in them will
lead to an increase in liquidity.
Other factors that affects the level of liquidity are; the level of loan default and
deliquency, the level of bad debts on loans, the level of inflation, bank runs,
government policy.

SECTION TWO: MEANS OF DATA COLLECTION AND

RESULTS
3.2.1: MEANS OF DATA COLLECTION
In order to successfully write this report, we had to make use of certain tool and
means. They can be classified under two main headings that is, the primary and
the secondary source of data :
1. Primary source
 Interview
We had the opportunity to question the manager as well as the various staffs of
the micro finance institution on the subject matter.
2. Secondary source
 Text books and past reports
Text books and past reports where used to gather information about the subject
matter of this topic.
 The internet
This is an inter connection of systems of networks that connect computers around
the world. Some of our reference was done through websites such as wikipedia,
Google chrome to ensure that information gotten from the source could be
compared with other sources from the rest of the world.
 Notes books
Considering the fact that our subject matte ris part of our course in the HND
syllabus, reference were done in notes given to us by our lecturers
 Computers
This was another tool that was used to process data collection into useful
information’s. Tools like A4 papers, printers, scanners, pens, rulers, erasers,
amongst others were used to finalize this process.

3.2.2: Outcome/ Results

Based on findings of this study, we discoverd that appropriate liquidity
management will have a positive effect on the profitability of FODEC. This is
because, its management is based on professional requirements which is in
accordance with the professional ethics of bankers as well as in accordance with
the international accepted standard.

CHAPTER FOUR:
CRITICAL APPROACH TO LIQUIDITY
MANAGEMENT AND RECOMMENDATIONS
This chapter has to do with the strengths, weaknesses, opportunities, and threats.
SECTION ONE: SWOT ANALYSIS OF FODEC S.A

4.1.1: THE STRENGTHS OF FODEC
1. Highly trained staff
FODEC has a pull of highly trained staff. This result to a good management of
the micro finance institution
2. The number of branches
FODEC has a large number of branches. This permits her to withstand stress; that
is the loss of one branch can be covered by the other branch.
3. Reputation (goodwill)
FODEC is a MFI which has being existing for more than 10 years, this means the
have a strong foundation in reliability in the provision of financial services.
4. Capital base
FODEC has a capital base of 2.5 billion Francs which enable them to operate
smoothly.
5. Experience
FODEC has been in operation for long and experience of staff is of some
importance, for it is the best teacher. The staff have skills as a result of this
experience.
6. Symmetric information

The managers and the staff have identical information about the institutions
prospects, they are reasoning in the same direction and hence, FODEC will
succeed.
7. Large customer base
FODEC has more than 10,000 accounts operational which are own by their
customers. This will enhance large volumes of deposits and savings.
4.1.2: WEAKNESSES OF FODEC

1. Loan deliquency problem
The level of loan delinquency in FODEC is relatively high. This is due to the fact
that, they do use the canons of lending effectively which is used to assess
customers credit worthiness which intends increases cost of operation because the
loan officer has to move from office to office and from house to house in trying
to recover the loan which as a result reduces liquidity as well as profitability.
2. Irregular savings
During our internship, we realized that FODEC had some account which were
still idle. This was because customers were not constantly saving and it reduces
liquidity as well as profitability.
3. Difficulties in meeting up customer’s demand for their deposits
During our stay in FODEC, we discovered that customers could not withdraw a
huge sum of money from his/her saving account instantly in a day and also, some
private workers could not receive their salaries on time due to insufficient cash.
4. Insufficient numbers of skilled staff
The number of employees was not enough as compared to the number of
department. There was no marketing manager and employee to work at the
customer service department which is one of the most important department in
the enterprise. This resulted to some staffs carrying out more than one task. The

effect of this was that it resulted to queuing as customers had to wait on lines
before they are finally saved
5. Monotony of language
All employees in FODEC as well as most of their documents were printed in
French. They all had mastery of French language. This made it very difficult for
English customersto carry out thier transactions or read documents relating to the
MFIs.
6. Inadequate computers and printers
The number of computers in FODEC is not sufficient for the staff. The human
resource departement do not have computers nor printer. Thus, they record all
their information manually before they are send to the branch manager to be enter
in the computers.
7. Inadequate network
The level of internet connection in FODEC was very poor. Some customers
especially those whose transactions needed internet connection like western union
transaction could not be carryout on time. They were often told that they could
not be served and this made customer end up quarrelling with the staffs.
8. Absence of transportation facilities
This slowed down work as commissions could not be carried out at the pace of
the institution but at that of taxis and motor bikes rendering services.
9. The small nature of FODEC
It is a very big problem especially in periods like month end where there is often
over congestion at the office.
10.The problem faced by the intern
The problem we faced especially at the reception zone was that customers
especially retired customers when coming to fill the cheque and they are unable

to fill, they will speak in their dialect (bassa, bulu) which was complicated to
speak when we do not understand the language or speak it.
4.1.3: Threats of FODEC

1. The development of money transfers such as MTN and ORANGE mobile
money has developed more heat on FODEC.
2. Competition from other financial institutions at home and abroad.
3. Default of some borrowers due to political changes.
4. The growth of other micro financial institutions is a source of threat and
would compete more effectively to handicap FODEC.
5. Improvement in technology like the lack of ATM is a threat in FODEC.
SECTION TWO: RECOMMENDATIONS

1. FODEC credit commitee and loan officer should access the credit
worthiness of the borrower very well by using the canons of lending
effectively before granting loans.
2. FODEC can encourage customer’s savings by increasing interest on
savings and also giving prizes to their best customers at the end of the year.
3. They should renovate their product so as to encourage customers to
suscribe to them and also reduce their cost of operations. Hence liquidity
will increase.
4. FODEC should employ more skilled and competent staffs for the
departments with insufficient staffs. This will make work easier and
efficient.
5. The staffs should learn how to speak English language so as to ease
transactions with the anglophones customers inorder to save time and the
human resource department should endeavors to recruit only bilingual
personnels.

6. FODEC should buy more computers and printers for their departments and
if possible have an ATM machine. This will help to save time.
7. Recruit qualified technicians for the maintainance of their banking software
which is cloud bank.
8. FODEC should use a more efficient internet services provider for their
operations
9. Transportation facilities should be made available for commissions
10.FODEC should find a way to increase their premises inorder to avoid
congestion at month end and also to make the staffs and customers
confortable.
11.For those customers who are old, they should always be assisted in filling
forms and for those who can’t fill it should be done for them.

GENERAL CONCLUSION
This report focuses on the topic IMPORTANCE OF LIQUIDITY

MANAGEMENT ON THE PROFITABILITY OF MICROFINANCE
INSTITUTIONS.
The main objective was to evaluate the importance of liquidity management on

the profitability of microfinance institutions. Through my intership we saw that
FODEC gets its liquidity from savings, deposits, interest on loans etc.
To know more on how microfinance institutions manage thier liquidity. They

manage their liquidity by respecting the COBAC rule of keeping 10% of their
liquidity, they can also invest in some liquid investments that can easily realise
cash, they should avoid investments all their liquidity on loans.
We discovered that the methods that FODEC use to manage liquidity is that; they
respect the loan to deposit ratio, the cash ratio, the COBAC rules percentages, and
they also invest in liquid investments, and they should avoid long term
investments.
Followed by how liquidity is affecting the profitability; we discovered that an

increase in liquidity will lead to an increase in profitability and also a decrease in
the profitability will lead to a decrease in liquidity. The liquidity and profitability
concepts are inversely proportional to each other.
Generally, liquidity management in FODEC is good. No microfinance can operate

without liquidity because it is the core of micro finance institutions and most be
handle with deligence.

BIBLIOGRAPHY
PUBLISHED WORKS
AARON NDENKA. (2013). Banking management: 2nd Edition.
ABURIMET U. (2008). Determinant of bank profitability: 1st Edition.
BRIAN and DAVID BUTLER. (1997). Banking and finance Dictionary: 2nd
Edition.
P.N TEGWI. (2010). Banking and Finance for Professionals: 1st Edition.
P.N TEGWI. (2012). Banking and finance for professionals: 2nd edition. publishad
in CAMEROON.

APPENDICES
Appendix 01: Organizational Chart
Appendix 02: Withdrawal Slip
Appendix 03: Deposit Slip
Appendix 04: Cheque Remittance
Appendix 05: Speedmoney deposit form

Liquidity Management's Impact on MFI Profitability

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THE IMPORTANCE OF LIQUIDITY MANAGEMENT ON THE PROFITABILITY OF

MICROFINANCE INSTITUTIONS: THE CASE OF FODEC S.A. DOUALA

This is to certify that this internship report entitled “THE IMPORTANCE OF

PROFESSIONAL SUPERVISOR: ACADEMIC SUPERVISOR:

Mrs. MEGNE MADELEINE

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagei

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageii

Our sincere gratitude to Mr LOUIS MARIE DJAMBOU proprietor of IUG:

My academic supervisor, ……………………………. for his contributions and

My professional supervisor, Mrs MEGNE MADELEINE, who taught me

A special gratitude to my late father: Mr DJIDJABEU JEAN, my mother Mrs

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageiii

This report focuses on the IMPORTANCE OF LIQUIDITY MANAGEMENT

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageiv

Ce rapport a été redige sur la base de L’IMPORTANCE DE LA GESTION DE

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagev

The goverment of Cameroon wishes to train youths in all field of vocational

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagevi

ABBREVIATIONS FULL MEANING

CEMAC Central African Economic and Monetary Community

COBAC Banking Commission for Central African States

ESG Ecole Superieur de Gestion

FICAM Financier du Cameroun

FODEC Fonds de Developpement pour L’epargne et du credit du

ISA Institut Superieur des Sciences Appliquees

ISTA Institut Superieur des Technologie Avancee

IUG Institut Universitaire du Gulfe de Guinee

MFIs Microfinance Institutions

MINFI Ministry Of Finance

S.A Societe anonyme

ANEMCAM National association of Cameroonian microfinance

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagevii

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageviii

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pageix

SECTION ONE: PRESENTATION OF THE SERVICE THAT RECEIVED

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagex

SECTION TWO: RECOMMENDATIONS ........................................................ 40

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Pagexi

BACKGROUND OF THE STUDY

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page1

OBJECTIVE OF THE STUDY

The main objective of this work is to evaluate the importance of liquidity

The specific objectives include:

SIGNIFICANCE OF THE STUDY

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page2

To the institution under investigation (FODEC), it will help the management of

METHODOLOGY OF THE STUDY

STRUCTURE OF THE WORK

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page3

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page4

PART ONE: THE INTERNSHIP ENVIRONMENT

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page5

SECTION ONE: HISTORICAL EVOLUTION AND CREATION

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page6

1.1.2: THE HISTORICAL EVOLUTION OF FODEC

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page7

5. To grant loans on a sound and collectible basis

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page8

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page9

E. Fixed term deposit account

Written and presented by: FANSI DJIDJABEU CARINE FLEUR Page10

SECTION TWO: STRUCTURAL ORGANIZATION AND