Cameroon’s average bank loan rate decreased to 8.29%, primarily driven by lower rates for SMEs, which dropped from 12.24% to 8.98%. In contrast, personal loan rates surged to 15.75%, and other businesses faced increased rates as well. International financial support has enabled SMEs to secure better terms despite rising overall borrowing costs due to the BEAC’s stringent monetary policy.
By the end of the third quarter of 2024, the average bank loan rate in Cameroon declined to 8.29%, down from 8.91% the previous year, as reported by the Bank of Central African States (BEAC). This 62-basis-point reduction was primarily attributed to significantly lower rates for Small and Medium Enterprises (SMEs), which represent 80% of the nation’s businesses.
While borrowing costs increased for many borrowers, SMEs and large corporations managed to circumvent this trend. Large firms maintained stable loan rates at 6.88%, whereas SMEs experienced a reduction in their average loan rates from 12.24% in September 2023 to 8.98% a year later, marking a substantial decline of 3.26 percentage points.
The BEAC report did not clarify the reasons behind the banks’ decision to relax credit conditions for SMEs, historically viewed as having limited access to financing. Nevertheless, support from international financial institutions such as the International Finance Corporation (IFC), Proparco, and the European Investment Bank (EIB) has played a crucial role in providing funds to the banking sector, enabling more favorable loan terms for SMEs.
In contrast to SMEs, individual borrowers faced increased loan costs, with the average personal loan rate rising to 15.75% by late September 2024 from 14.98% the year before. This development places individual borrowing costs 6.77 percentage points above those of SMEs.
Moreover, businesses outside the SME and large corporation categories reported significant increases in loan rates, with an average jump from 14.18% to 18.88%, reflecting a 470-basis-point rise. Public sector borrowers and local governments also experienced heightened costs, with rates climbing from 14.81% to 16.54%.
The overall increase in borrowing costs has been attributed to the BEAC’s stringent monetary policy implemented since late 2021. This includes elevated key interest rates, a reduction in liquidity injections, and stricter bank funding conditions aimed at controlling inflation. Despite such challenges, SMEs have capitalized on enhanced financing terms facilitated by international support, thereby bolstering their significance in Cameroon’s economic landscape.
In summary, Cameroon’s SMEs have benefited from reduced loan rates amid rising borrowing costs for other sectors. The average bank loan rate fell to 8.29% primarily due to favorable conditions for SMEs, which saw their rates decline significantly. Larger corporations maintained stable rates, while individual borrowers and other businesses faced increased loan costs. This divergence is primarily a result of international financial support for SMEs, coupled with the BEAC’s stringent monetary policies aimed at managing inflation.
Original Source: www.businessincameroon.com
