In Cameroon, average bank loan rates have declined to 8.29%, primarily benefitting SMEs, which saw their rates drop to 8.98%. In contrast, individual borrowers face rising rates of 15.75%. The disparity is due to international financial institutions supporting SME financing, while the BEAC’s monetary policies tighten credit for others.
As of the conclusion of the third quarter in 2024, the average bank loan rate in Cameroon has decreased to 8.29%, down from 8.91% in the previous year, according to the Bank of Central African States (BEAC). This decline of 62 basis points is primarily attributed to lower borrowing costs for small and medium enterprises (SMEs), which comprise 80% of the nation’s business ecosystem.
In contrast to the general increase in borrowing costs, SMEs and larger corporations benefited from more favorable loan conditions. While larger companies maintained a stable average rate of 6.88%, SMEs experienced a significant reduction, with their loan rates dropping from 12.24% in September 2023 to 8.98% by the following year, representing a decline of 3.26 percentage points.
Although the BEAC report does not clarify the reasons for improved credit conditions for SMEs, it highlights the role of international financial institutions, including the International Finance Corporation (IFC), Proparco, and the European Investment Bank (EIB). These organizations have been injecting capital into the Cameroonian banking sector through credit lines and guarantees, allowing lenders to offer more competitive terms to SMEs.
Conversely, individual borrowers have faced increased costs, with the average personal loan rate rising to 15.75% by late September 2024, up from 14.98% the previous year. This change indicates that personal loan rates are now 6.77 percentage points higher than those available to SMEs.
Moreover, other businesses not categorized as SMEs or large corporations have also experienced significant increases in borrowing costs, with their average loan rate surging from 14.18% to 18.88%, marking a 470-basis-point rise. Similarly, public sector borrowers and local governments observed their rates increase from 14.81% to 16.54%.
The overall increase in borrowing costs is a result of the BEAC’s stringent monetary policy enacted since late 2021, which includes higher key interest rates and restricted bank funding conditions. Although these measures aim to combat inflation, they have paradoxically allowed SMEs to secure better financing terms, thanks to the support from international lenders, thereby emphasizing their essential contribution to Cameroon’s economy.
The average bank loan rate in Cameroon has decreased significantly for SMEs, reflecting a proactive response from international financial institutions. However, individual borrowers and other business sectors continue to experience rising costs amid tight monetary policies. The disparity in borrowing costs highlights the growing importance of SMEs in the national economy, underlined by enhanced access to favorable financing conditions. Overall, while monetary policies are affecting some negatively, they have provided an opportunity for SMEs to thrive.
Original Source: www.businessincameroon.com