''. As such the issue of diversification in terms of sector , issuer , maturity, type and geographical locations are usually included in the investment policies.

A bank may decide to embark on aggressive , liberal or a conservative investment policy. The type to be adopted will depend on the bank's objective , income and the level of the bank's present and expected risk exposure. For instance , a bank that is already much exposed to liquidity risks in loans and other assets will definitely pursue a conservative investment policy.

Preferably , investment policy should be in writing. This will help to ensure uniformity and consistency in its application. However, it should be flexible enough to give room for the use of initiatives , and for easy adaptation to changes in the environment.

Finally , to

Security trading can be very profitable either by way of dividend or interest income, or by capital gains from sale of securities to third parties. However, it also carries alot of risks. If these risks are not properly handled , security trading can turn out to be very unprofitable. This study was carried out in order to provide information to the growing micro finances in the economic capital of Cameroon, Douala, drawn from the COFINEST S.A experience in the investment sector (partnership with Western Union, USA ) The major risks uncovered include the Credit risk, Market risk and interest rate risk.

The credit risk involved is the probability that the user of the security may fail to honour his financial obligations. This may take the form of failure to redeem the security or failure to pay the interest or dividend as agreed. In most cases, credit risk arise as a result of a decline in the financial position of the company. Credit risk is very minimal or non-existent for government securities. However , the returns from such securities are also very low.

The market risk is the risk that some developments may arise , either in the securities in market or the economy that makes it difficult for the bank to market the security, because it has become less appealing to investors. For instance, unforeseen distress of a particular sector can cause a sharp decline in the demand for securities issued by companies in that sector. This is what happened to the securities of most Cameroonian banks and microfinances in the late 1990s , because of perceived distress in the financial sector. In such a case, securities can only be sold at a discount.

The interest rate risk arises because of the variation in interest rate. It is the probability that the market value of securities may fall as a result of interest rate increases. Past theories by Keynes have proven that the value of financial assets vary inversely with interest rates. Therefore ,the higher the interest rate the less the value of the security held. This is also because while the coupon rate (contractual rate) of securities is fixed , market rate may vary. As such the current yield, which is obtained by dividing the coupon rate by the market price, varies.

Thus looking at the framework policy , just like the board of directors of banks formulate general policies covering its areas of operation , including prices for the loan , there is equally a need for the definite policies to be put in place for the bank's investment. Such policy will among other things , help the investment officers in deciding the type, maturity , quality and size of securities to invest in. The proportion of bank funds to be allocated to the investment account will depend on the assets allocation approach. But the investment policy will give the investment officer a more specific guide.

Apart from guiding the officers on the selection of securities in the bank portfolio, it helps to guide them on the diversification of securities in the investment portfolio. A well-diversified investment portfolio reduce the risk inherent in investment. In this case we think of the COFINEST S.A diversified investment in the ''Cofinix auto, prudentia, compte particulier, traveler's cheque , western union etc''. As such the issue of diversification in terms of sector , issuer , maturity, type and geographical locations are usually included in the investment policies.

A bank may decide to embark on aggressive , liberal or a conservative investment policy. The type to be adopted will depend on the bank's objective , income and the level of the bank's present and expected risk exposure. For instance , a bank that is already much exposed to liquidity risks in loans and other assets will definitely pursue a conservative investment policy.

Preferably , investment policy should be in writing. This will help to ensure uniformity and consistency in its application. However, it should be flexible enough to give room for the use of initiatives , and for easy adaptation to changes in the environment.

Finally , to

dividend as agreed. In most cases, credit risk arise as a result of a decline in the financial position of the company. Credit risk is very minimal or non-existent for government securities. However , the returns from such securities are also very low.

The market risk is the risk that some developments may arise , either in the securities in market or the economy that makes it difficult for the bank to market the security, because it has become less appealing to investors. For instance, unforeseen distress of a particular sector can cause a sharp decline in the demand for securities issued by companies in that sector. This is what happened to the securities of most Cameroonian banks and microfinances in the late 1990s , because of perceived distress in the financial sector. In such a case, securities can only be sold at a discount.

The interest rate risk arises because of the variation in interest rate. It is the probability that the market value of securities may fall as a result of interest rate increases. Past theories by Keynes have proven that the value of financial assets vary inversely with interest rates. Therefore ,the higher the interest rate the less the value of the security held. This is also because while the coupon rate (contractual rate) of securities is fixed , market rate may vary. As such the current yield, which is obtained by dividing the coupon rate by the market price, varies.

Thus looking at the framework policy , just like the board of directors of banks formulate general policies covering its areas of operation , including prices for the loan , there is equally a need for the definite policies to be put in place for the bank's investment. Such policy will among other things , help the investment officers in deciding the type, maturity , quality and size of securities to invest in. The proportion of bank funds to be allocated to the investment account will depend on the assets allocation approach. But the investment policy will give the investment officer a more specific guide.

Apart from guiding the officers on the selection of securities in the bank portfolio, it helps to guide them on the diversification of securities in the investment portfolio. A well-diversified investment portfolio reduce the risk inherent in investment. In this case we think of the COFINEST S.A diversified investment in the ''Cofinix auto, prudentia, compte particulier, traveler's cheque , western union etc''. As such the issue of diversification in terms of sector , issuer , maturity, type and geographical locations are usually included in the investment policies.

A bank may decide to embark on aggressive , liberal or a conservative investment policy. The type to be adopted will depend on the bank's objective , income and the level of the bank's present and expected risk exposure. For instance , a bank that is already much exposed to liquidity risks in loans and other assets will definitely pursue a conservative investment policy.

Preferably , investment policy should be in writing. This will help to ensure uniformity and consistency in its application. However, it should be flexible enough to give room for the use of initiatives , and for easy adaptation to changes in the environment.

Finally , to

nly be sold at a discount.

The interest rate risk arises because of the variation in interest rate. It is the probability that the market value of securities may fall as a result of interest rate increases. Past theories by Keynes have proven that the value of financial assets vary inversely with interest rates. Therefore ,the higher the interest rate the less the value of the security held. This is also because while the coupon rate (contractual rate) of securities is fixed , market rate may vary. As such the current yield, which is obtained by dividing the coupon rate by the market price, varies.

Thus looking at the framework policy , just like the board of directors of banks formulate general policies covering its areas of operation , including prices for the loan , there is equally a need for the definite policies to be put in place for the bank's investment. Such policy will among other things , help the investment officers in deciding the type, maturity , quality and size of securities to invest in. The proportion of bank funds to be allocated to the investment account will depend on the assets allocation approach. But the investment policy will give the investment officer a more specific guide.

Apart from guiding the officers on the selection of securities in the bank portfolio, it helps to guide them on the diversification of securities in the investment portfolio. A well-diversified investment portfolio reduce the risk inherent in investment. In this case we think of the COFINEST S.A diversified investment in the ''Cofinix auto, prudentia, compte particulier, traveler's cheque , western union etc''. As such the issue of diversification in terms of sector , issuer , maturity, type and geographical locations are usually included in the investment policies.

A bank may decide to embark on aggressive , liberal or a conservative investment policy. The type to be adopted will depend on the bank's objective , income and the level of the bank's present and expected risk exposure. For instance , a bank that is already much exposed to liquidity risks in loans and other assets will definitely pursue a conservative investment policy.

Preferably , investment policy should be in writing. This will help to ensure uniformity and consistency in its application. However, it should be flexible enough to give room for the use of initiatives , and for easy adaptation to changes in the environment.

Finally , to

definite policies to be put in place for the bank's investment. Such policy will among other things , help the investment officers in deciding the type, maturity , quality and size of securities to invest in. The proportion of bank funds to be allocated to the investment account will depend on the assets allocation approach. But the investment policy will give the investment officer a more specific guide.

Apart from guiding the officers on the selection of securities in the bank portfolio, it helps to guide them on the diversification of securities in the investment portfolio. A well-diversified investment portfolio reduce the risk inherent in investment. In this case we think of the COFINEST S.A diversified investment in the ''Cofinix auto, prudentia, compte particulier, traveler's cheque , western union etc''. As such the issue of diversification in terms of sector , issuer , maturity, type and geographical locations are usually included in the investment policies.

A bank may decide to embark on aggressive , liberal or a conservative investment policy. The type to be adopted will depend on the bank's objective , income and the level of the bank's present and expected risk exposure. For instance , a bank that is already much exposed to liquidity risks in loans and other assets will definitely pursue a conservative investment policy.

Preferably , investment policy should be in writing. This will help to ensure uniformity and consistency in its application. However, it should be flexible enough to give room for the use of initiatives , and for easy adaptation to changes in the environment.

Finally , to

''. As such the issue of diversification in terms of sector , issuer , maturity, type and geographical locations are usually included in the investment policies.

A bank may decide to embark on aggressive , liberal or a conservative investment policy. The type to be adopted will depend on the bank's objective , income and the level of the bank's present and expected risk exposure. For instance , a bank that is already much exposed to liquidity risks in loans and other assets will definitely pursue a conservative investment policy.

Preferably , investment policy should be in writing. This will help to ensure uniformity and consistency in its application. However, it should be flexible enough to give room for the use of initiatives , and for easy adaptation to changes in the environment.

Finally , to ensure that the investment policy does not end up as a mere paperwork, appropriate machinery must be set on motion for its implementation. Authorities should be defined , and responsibilities assigned to specific officers or departments. There should be a provision for the appraisal and review of such policy