Cameroon has recorded a drop in average bank loan rates to 8.29% by Q3 2024, with SMEs experiencing substantial rate cuts. Large corporations maintained stability, while personal borrowing rates increased significantly. The BEAC’s tight monetary policies are responsible for overall cost pressures, although SMEs received support from international investors, enhancing their financial accessibility.
The Bank of Central African States (BEAC) reports that Cameroon has achieved a decline in average bank loan rates, which decreased to 8.29% by the end of Q3 2024, down from 8.91% a year prior. This reduction of 62 basis points is primarily attributed to lowered interest rates for small and medium-sized enterprises (SMEs), which constitute 80% of the nation’s businesses.
In contrast to the rising costs faced by most borrowers, SMEs and large corporations benefit from stable borrowing conditions. Large firms retained an average loan rate of 6.88%, while SMEs experienced a notable drop, with rates plummeting from 12.24% in September 2023 to 8.98%, marking a significant 3.26-percentage-point decline.
Despite the lack of a clear explanation from the BEAC regarding the easing of credit conditions for SMEs, international financial institutions, including the International Finance Corporation (IFC), Proparco, and the European Investment Bank (EIB), are contributing capital into Cameroon’s banking sector. Their involvement has empowered local banks to offer more favorable loan conditions to SMEs.
On the other hand, individual borrowers are facing increasing loan costs, with average personal loan rates rising to 15.75% by late September 2024, up from 14.98% the previous year. This phenomenon has resulted in personal borrowing rates being 6.77 percentage points higher than those available to SMEs.
Other businesses beyond SMEs and large corporations are also impacted negatively; their average loan rate escalated from 14.18% to 18.88%, which represents a 470-basis-point increases. Furthermore, public sector borrowers and local government entities observed their rates increase from 14.81% to 16.54%.
The overarching increase in borrowing costs is linked to the BEAC’s stringent monetary policies, initiated in late 2021, which include elevated key interest rates, limited liquidity, and tightened bank funding. Although these strategies are intended to manage inflation, SMEs have managed to secure more advantageous financing terms, underscoring their pivotal role within Cameroon’s economy.
In summary, Cameroon’s SMEs are benefiting from reduced loan rates, contrasting sharply with the rising borrowing costs faced by individual borrowers and other businesses. The involvement of international financial institutions has facilitated these favorable terms. Overall, while the BEAC’s monetary policies strive to control inflation, they have inadvertently improved the financial position of SMEs, reflecting their significance in the nation’s economic landscape.
Original Source: www.businessincameroon.com
