PRESENTATION OF THE SHESA MICROFINANCE INSTITUTION PROJECT

Definition of Microfinance Institutions

Microfinance institutions are organizations that offer financial services to the low population. Therefore, it’s a category of financial service that targets individuals and small businesses that lack access to conventional banking and related services for example; saving and checking accounts, payment systems and microcredit etc.

The Legal Framework of Microfinance in Cameroon

The conduct of the microfinance in Cameroon is regulated by a series of laws and regulations.

• CEMACregulation 01/17/ CEMAC/UMAC/COBAC of 27 September 2017, relating to the conditions and conduct of the microfinance activity in CEMAC
• OHADAUniform act on cooperative societies which deals with financial cooperatives (credit unions)
• OHADAUniform act on limited liability companies relating to micro credit financial institutions
• The 1992cooperative law

According to CEMAC regulation 01/17 of September 2017, microfinance institutions are divided into three main categories.

Category 1. These are institutions that collect savings and deposits from members and grant loans exclusively only to their members. (Art 30) No minimum capital requirement (art 32).

However, the capital constituted must permanently ensure compliance with all prudential standards set by the Banking Commission.

Category one institutions are required to constitute a solidarity fund to cover losses. The legal form of this category is cooperative societies (Art 31) and shall carry out their activity solely under a network art (33)

Categories 2.These are institutions with the legal form of limited liability companies with a capital requirement of 300 million FCFA. They collect savings/deposits from the general public and can grant loans and other services to members and non members alike.

Category 3.Theyconstitutes lending institutions that do not collect savings and deposits from the public, for examplemicro project funding institutions with a minimum capital of 150 million FCFA

NOTE: the legal status of microfinance institutions isdefined in COBAC regulationR 2017/01 of 24/10/2017. By this regulation,

Category 1 institutions shall operate under the legal form of cooperative societies with board of directors (Art 1).

Category 3 shall operate under the legal form of Limited Liability Company with board of directors (Art 3).

Steps to Create a Microfinance Institution.

To setup a microfinance institution in Cameroon will require a number of steps and processes.

Step one.

• The initiative to venture in the microfinance sector starts with the Conveying of a constituent General Assembly of members who decide to create a cooperative.
• Followed by the drafting and approval of the bylaws
• The shares constituted
• The election of  board members and other committees

Step two

Apply for matriculation of the cooperative society.

The following documents are submitted to the register of cooperatives:

• 5 copies of the Minutes of the Constituent General Assembly Meeting;
• 5 copies of the Article of association;
• 5 copies of the Declaration form;
• 5 copies of List of Board of Director;
• 5 copies of Certificates of non-conviction for Board and Supervisory Board;
• 3 copies of List of the Supervisory Board;
• 5 copies of the State of Subscription and payment of the initial Share Capital
• 5 copies of the Attestation of Deposit 25% of the initial Share Capital;
• 5 copies of the Location plan for the location of the Head office;
• 5 copies of the attendance list of the Constituent General Meeting;
• Photocopies of National Identity cards of Founding member;

Step three

Upon receipt of the registration certificate, the cooperative then submits a file to the monetary authority for accreditation as a Microfinance Institution.

The conduct of microfinance activity, as spelt out in Article 1 of the CEMAC Regulation is subject to the approval of the Monetary Authority, after obtaining the favorable opinion of the Banking Commission. The application for authorization as a Microfinance Institution shall be addressed to the Monetary Authority against a receipt and must specify the category requested.It shall be accompanied by a complete file of the Managers and Auditors.

File composition for the Institution

• A stamped application specifying the category requested
• A registration certificate into the register of cooperatives
• Minutes of the constituent assembly of creation
• List of founding members or share holders
• A three year development plan
• Minutes of general assembly approving the affiliation into a net work
• Minutes of the general assembly of the network accepting the affiliation.
• Document to justify the paid up capital or share
• Copy of the bylaws
• A list of board members

Note: the file shall be in two (02) copies,the original copy and a photocopy

The Accreditation of Managers and Auditors

The level of qualification and the required experience to be accredited as Managers in a Microfinance Institution are thoselaid down in Article 6 of COBAC Regulation MFI 2017/04 relating to corporate governance in Microfinance Institutions.

Composition of file for the accreditation of managers

            The application for the accreditation of a manager of a Microfinance Institution shall comprise the following:

• a curriculum vitae duly signed and dated
• certified true copies of diplomas/certificates;
• certified copies of work attestation and a list of the positions previously held, specifying the size, number of employees and nature of activities of the enterprises concerned;
• a certified true copy of the birth certificate;
• two passport-size photographs;
• a certified true copy of a valid official identification document (national identity card or passport);
• a certificate of non-conviction dating less than three months, issued by the competent authorities of the country of nationality and residence;
• a list of current board memberships held in other companies, including those of the group to which the Microfinance Institution is related or linked;
• a declaration on honor whereby the applicant certifies that he or she is not subject to any of the prohibitions or incompatibilities spelt out by the regulations in force;
• the list of equity investments in other enterprises detailing, for each of them, the number of equity investments, their nominal values and the corresponding percentage as well as equivalence in voting rights;
• a certificate or attestation of residence dating not more than three months;
• a valid residence permit for foreigners;
• a copy of the minutes of the Board of Directors appointing him/her as a manager;
• where applicable, copies of previous licenses for accredited managers in the financial sector outside CEMAC;
• a tax certificate issued by the tax administration of the tax assessment country;
• a certificate of non-bankruptcy or non-subject to a collective procedure for the settlement of liabilities.

As for the auditors in Microfinance Institutions, they may be natural persons «chartered accountants », or legal persons «accounting firms» approved by CEMAC.

The make-up documents are those provided for in articles 25, 26 and 27 of regulation-05

Composition of file for the accreditation of Statutory Auditors

Art 26 The accreditation file of an External Auditor who is a natural person shall comprise the following:

• a certified true copy of a valid official identification document (national identity card or passport);
• a certificate of non-conviction dating not more than three months, issued by the judicial authorities of the country of his nationality and residence;
• two passport-size photographs;
• a certified true copy of the license issued by CEMAC as a chartered accountant;
• a certificate of registration on the roll of the National Institute of Chartered Accountants for countries with such a body;
• a duly signed and dated curriculum vitae, alongside a statement of services or missions completed, highlighting the periods of intervention, clients, sectors of activity supported, where applicable, by attestations issued by clients;
• where applicable, copies of previous accreditations for External Auditors already accredited in the banking sector outside CEMAC;
• a declaration on honor whereby the External Auditor certifies that he or she is not subject to any of the prohibitions or incompatibilities provided for by the regulations in force;
• a declaration on honor whereby the External Auditor indicates the direct or indirect social, financial or business links he has with the microfinance institution he is called upon to control or any related company and the family links with managers, shareholders or cooperative members holding at least 5% of the capital of the microfinance institution;
• a tax certificate issued by the tax administration of the tax assessment country;
• a certificate of non-indebtedness issued by the social security institution of the taxing country;
• a certificate of non-bankruptcy or non-subject to a collective procedure for the settlement of liabilities;
• Professional liability insurance policy.

The board of directors                                                    

Qualities of board members.

Board members designated by the Ordinary General Assembly, shall be sufficiently knowledgeable in economics, banking, finance, law or management, and have experience in corporate management.

Note:No person shall be elected in the board if he or she is politically exposed.

Quality of managers

1. Persons accredited as managers shall be holders of at least a bachelor’s degree in economics, banking, finance, law or management or all other certificates recognized as equivalent;
2. a minimum of five years professional experience in a senior level of management;

 

1. in the absence of the aforementioned certificates, be a holder of an advanced level certificate;

 

1. at least 10 years of professional experience in a senior level of management.

 

MINUTES OF THE CONSTITUENT GENERAL ASSEMBLY MEETING OF XXXX COOPERATIVE HOLDING AT XXXX ON THE XXXX 2019

Meeting at XXXX with the sole intension of forming a Cooperative with a Board of Directors in conformity with the provisions of the OHADA Uniform Act on the Rights of Cooperative Societies, we the members present, signatories to these minutes and founding members, have adopted the following resolutions:

Resolution 1:

1.1 NAME AND FORM

1.1.1 The name of the Credit Union is XXXX Cooperative Credit Union Limited-cat 1 (COOP- BOD) Microfinance Institution being a Cooperative Society with Board of Directors and abbreviated as XXXXX MFI – (COOP. BOD) hereinafter referred to as the “CREDIT UNION”.

1.2.2 This Cooperative Society is established under the form of a Cooperative Society with a Board of Directors.

1.3.3 The Name of the Cooperative Society may be amended under the conditions set forth for the amendment of the by-laws.

 

1. 2 HEAD OFFICE, JURISDICTION, AND ADDRESS
2. The registered Head Office is located at XXXX, in XXXX Sub Division, XXXX Division XXX of the XXX Region of the Republic of Cameroon.
3. The Credit Union’s area of operation shall be the National Territory of Cameroon.
4. Its address shall be P.O. Box ___, XXXXSub-Division,XXXXDivision, XXXXX Region of the Republic of Cameroon.

1.3 LIFE SPAN

The duration of this Credit Union shall be 99 years and may be extended by a decision of an extraordinary general meeting called for this purpose.

Resolution 2: Objectives

In addition to statutory provisions, the objectives of the credit union which is not profit oriented shall be:

• To encourage its members to make regular savings by providing them with possibilities of investing their money.
• To provide members with loans for purposes of providence or production, or both.
• To foster the economic and social interest of its members.
• To ensure the progress of its members by educating them continuously on the proper use of money.
• To offer to the members, complementary savings, credit and financial services as stipulated by these bylaws.
• To provide other Credit Union services, such as Risk Management, Checking System, Education and Training, Money Transfer, Salary Payment, and any other services that do not conflict with the objectives of this Credit Union, state and international laws.
• Striving for the satisfaction of the economic, but also social and cultural aspirations of its members, the cooperative society may take any other actions cohesive with the accomplishment of its corporate purpose, including the betterment of its community. Such actions must be approved by the General Assembly.

Resolution 3: SHARE CAPITAL

1. The share capital of the Credit Union is made up of financial contributions from its members and presently stands at amount in words CFA (figures)
2. The nominal value of a share shall be (XXXX) FCFA. The minimum number of shares held by every member shall be XXX. This number shall vary from time to time as per the decision of the General Meeting provided that no one member can hold more than 20% of the share capital.
3. Upon admission each member shall subscribe at least XXXX shares, and pay up at least 25% of the shares subscribed. The remainder shall be paid within three years according to a schedule fixed by the Board of Directors;
4. Shares are personal, non-negotiable, non-transferable and cannot be seized by distress or used as collateral.
5. Shares may bear dividends.
6. Members’ liability shall be limited to XXXX times the number of their shares.
7. Further capital/equity funds can be raised from time to time as approved by the general meeting through the allocation of additional shares to members, increase in the nominal value of the share-capital or the incorporation of free reserves.
8. Debts owed to members by the credit union may be converted to additional shares for the member through mutual negotiations and agreement.

Resolution 4:

During the meeting, the articles of bye laws of the Credit Union were adopted by —–out of ——members present.

Members were committed to:

• Sensitize and win new members.
• Respect the bylaws and all texts governing cooperatives and the Micro Finance sector.
• Be faithful and loyal to the Credit Union

Resolution 5:

A register of members is opened to anyone who is interested to join the cooperative society and fulfils the membership requirements as in the bylaws.

Resolution 6:

The Credit Union declares its intention to become a member of a NETWORKLimited.

Resolution 7: the credit union proceeds to appoint XXXXX as its statutory external auditor(s) who is call to upon to submit his file for onward transmission to COBAC.

Resolution 8: the credit union proceeded with elections and the following persons were elected to the various organs and positions as here below indicated.

Resolution 8: the constituent assembly of SHESA credit union ltd raps up its deliberations by officially commissioning into office the governing organs and its elected officials, exhorting them to commit themselves to working diligently for the continues  growth and success of the this great venture.

 

 

Done this same day XXXXXX in the year of our lord two thousand and nineteen and

Signed by all constituent members present as shown on the attendance sheet herewith annexed.

 

 

SHESA Cooperative Credit Union Constituent Assembly: Attendance and share subscription Sheet

S.N	NAMES	POSITION	PROFESSION	NIC  N°	SHARE	SUBSCRIPTINS	CONTACT	SIGNED
1
2
3
4
5
6
7

 

 

 

BOARD OF DIRECTORS: Elected members

S.N	NAMES	POSITION	PROFESSION	NATIONALITY	NIC No. DATE/PLACE	RESIDENCE	CONTACT	SIGNATURE
1
2
3
4
5
6
7

 

 

                        SUPERVISORY BOARD:  Elected members

S.N	NAMES	POSITION	PROFESSION	NATIONALITY	NIC No. DATE/PLACE	RESIDENCE	CONTACT	SIGNATURE
1
2
3

 

_______________________                                                 _____________________________

Scrutineer                                                                                                Scrutineer

            _____________________                                          ____________________________

           

Secretary of the Constituent Assembly                                                     President

GOUVERNANCE OF THE MICROFINANCE INSTITUTION

Corporate governance within the microfinance institution is ensured through best practices established by internal rules and regulations adopted by the MFI in accordance with the dispositions of COBAC Regulation EMFR-2017/04 on corporate governance in microfinance institution.

The governing bodies are: the General Assembly, the Board of Directors, the Supervisory Board and the Executive/Management Team.

1. The General Assembly,

It is made up of all the share holders/members and is the highest decision-making organ.

 

1. The board of Directors,

It is the organ in charge of directing and supervising the activities of the institution on behalf the cooperative members/share holders.

• Board members are designated by the Ordinary General Assembly and are thus answerable to same. They must show sufficient proof that they are knowledgeable in economics, banking, finance, law or management and have experience in cooperate management.
• The composition of the board shall be in line with the share holder structure, the size of the MFI, the nature of its activities and any specific circumstances. Generally between 5 and 12 members.
• Persons who are politically exposed or benefit from jurisdictional immunity shall not become board members.
• To prevent conflict of interest, board members cannot be:
• Workers or corporate executives in the same MFI
• Corporate executive of an enterprise in which the MFI is a board member or has vested interests
• A client, supplier, banker of the MFI or even directly related to any such persons.
• Or have family ties with a corporate executive of the MFI
• Or have been an internal or external auditor of the MFI in the past five years.

 

• The board and its chair person shall maintain their independence from the executive, and there shall be a clear separation of the functions of the BOD chair and those of the General Manager.

 

• The allowances of board members shall take into consideration the size and financial situation of the MFI.

 

• The prerogatives, rights and obligations as well as the functioning of the board is enshrined in articles 26-61 of the afore mentioned COBAC regulation.

 

• The management team or executive

 

• It is a group of persons who ensure the day to day management of the MFI in line with sections 28 and 29 of Regulation n°01/17/CEMAC/UMAC/COBAC on the conditions for the exercise and control of MFI in the CEMAC.
• The executive shall:

1. Implement the strategies and policies approved by the board
2. Develop process which help to identify, measure, monitor and control risk by the MFI;
3. Maintain and organizational structure which clearly outliners reporting relations and define hierarchical and functional links;
4. Ensure that delegated responsibilities are effectively carried out;
5. Put in place appropriate internal control policies
6. Monitor the adequacy and efficiency of the internal control system

• The general manager and assistant (where applicable) shall be appointed by board and they are answerable to same.
• They shall be holders of at least a bachelor’s degree in economics, banking, finance, law or management or equivalents with an experience of at least 5 years in senior management positions.
• Their functions are incompatible with those of corporate (Board) executives.

Details of the attributions duties, rights and obligations as well as the functioning of the management team are well spelt out in the CEMAC/COBAC regulations.

 

IV- The Supervisory Board

It is an organ of elected members, usually between 3 and 5, incharge of supervising the activities of the Board of Directors and management Team and Thus the wellbeing of the entire MFI.

 

Its functioning, duties, rights and obligations are spelt out in the relevant texts here in mentioned.

 

 

 

SOME CLARIFICATIONS ON THE SHESA CREDIT UNION/ MFI PROJECT

The SHESA Credit Union project like any other credit union is a business investment project. But unlike many other business it is built on the cooperative model as opposed to the capitalist model. In this light, it is not essentially geared towards making huge profits to be shared among the few shareholders in the form of dividends. Rather, it a business model based on the masses with the main aim of improving the wellbeing of its members by empowering them through making access directly possible for savings and obtaining credits for consumption and investment projects. Furthermore, it lays emphasis on solidarity and self-help activities. We found this model appropriate for SHESA in that it has a high propensity for strengthening the bonds that bind us together and also the spirit of giving back to Alma-Ata, SHESA and the society at large which is the hallmark of the Shesan.

Concerning the startup capital, it important to state clearly that the regulations in force do not stipulate any amount for the minimum capital. However, from expert opinion, anything below 50 million CFA frs as our statutory capital would not only be a non starter in terms of the business dynamics but it would also never get through the Accreditation Committee in the Ministry of Finance.

Again there is no legal limit to the number of shares an individual can own for the Category 1 MFI, but it limited to 20% of the total capital for cat 2, 3 and Apex Organs. However the internal dynamics of one man one vote and not one share one vote couple with the number of members (at least 100 persons) required to obtain accreditation makes it very unlikely for any one individual to ambition to take over control of the business.

Concerning the sustainability and especially the security of your investment, I can say without any doubt that it is the safest business model not only because all credit unions are obliged to function within a net work of at least 5 other credit unions sustaining one another with an umbrella organ acting as a surety or guarantee to all of them. Also, the internal governance mechanism is a veritable school for democratic governance, transparency, healthy competition in performance, accountability and excellence.

The diaspora and indeed every other persons just need to come in massively by subscribing as many shares as possible and then choosing and formally indicating those to represent them during General Assembly and other statutory meetings if the cannot do so in person. I hurry to add that even though it is primarily for Shesans, in practice it will be open to our families and friends provided that they are duly recommended, this especially as numbers and masses are also our targets.

I hope this throws more light on our project. In any case we are working on the business project (not the business plan which will only start after the adoption of project and commissioning by the constituent assembly) which we will present at the AGM to sell the project.

 

THE WAY FORWARD/CHRONOGRAM FOR THE OBTENTION OF A MFI LICENCE

 

– This process begins with the adoption of the Statutes of the cooperative clearly stating the intention to carry out microfinance activities.

– After the adoption of Statutes the cooperative is officially created by registering it with the Regional Service of Cooperative and Mutuality of the Ministry of Agriculture and Rural Development.

– The registration thus establishes the statutory capital and this now provides the essential element for the drawing up of a business plan which is the projection of the functioning of the Credit Union for the next 3 to 5 years. This business plan is the main object of Study of the Accreditation Committee of the Ministry of Finance together with all the other required documents.

– The compilation of the complete documents required in the Licensing request file to be deposited at the Ministry of Finance.

 

NB:

– Since the MFI must adhere to a network of MFI it might be necessary to invite the representative of any projected network we intend to adhere to right from the level of the Constituent Assembly for guidance and eventual assistance.

– The period between the depositing of the request file with the Ministry of Finance and the obtaining of the license oscillates between 3 months and 1 year.