The average bank loan rate in Cameroon decreased to 8.29% by Q3 2024, largely due to lower rates for SMEs. While individual borrowers faced rising costs, SMEs enjoyed substantial reductions in borrowing rates thanks to international financial support. The contrast highlights the differentiated impacts of monetary policy across various sectors in the economy.
As of the end of the third quarter of 2024, the average bank loan rate in Cameroon decreased to 8.29%, a reduction from 8.91% the previous year, as reported by the Bank of Central African States (BEAC). This decline of 62 basis points is primarily attributed to lower interest rates for small and medium-sized enterprises (SMEs), which make up 80% of the nation’s businesses.
While borrowing costs have generally risen for many, SMEs and large corporations enjoyed stable or reduced rates. Large enterprises maintained a steady average rate of 6.88%, but SMEs experienced a significant decline in their average loan rate from 12.24% in September 2023 to 8.98%, a reduction of 3.26 percentage points.
The BEAC report does not clarify the reasons for the banks’ relaxed credit conditions towards SMEs, which have historically struggled to access funding. However, international financial organizations such as the International Finance Corporation (IFC), Proparco, and the European Investment Bank (EIB) have been providing resources to Cameroon’s banking sector, enhancing the lending terms for SMEs.
In contrast, individual borrowers have faced escalating costs, with the average personal loan rate rising from 14.98% to 15.75% by late September 2024. This means that individuals are subjected to borrowing costs that are 6.77 percentage points higher than those for SMEs.
Moreover, non-SME businesses and various public sector entities have encountered higher borrowing costs as well, with rates increasing from 14.18% to 18.88%. Local government borrowing rates also surged from 14.81% to 16.54%.
The overall rise in borrowing costs can be connected to BEAC’s stringent monetary policy, initiated in late 2021, which encompasses higher key interest rates and tighter funding conditions. This policy aims to manage inflation while simultaneously enabling SMEs to access improved financing options facilitated by international lenders, thus enhancing their contribution to the Cameroonian economy.
In conclusion, while SMEs in Cameroon benefit from reduced borrowing costs, individual borrowers and non-SME entities are experiencing significant interest rate increases. The pivotal support from international financial institutions has evidently strengthened the financing landscape for SMEs, allowing them to thrive despite tighter monetary conditions imposed by the central bank. This dual trend underscores the evolving dynamics of lending in the Cameroonian economy and emphasizes the critical role of SMEs.
Original Source: www.businessincameroon.com
