Cameroon’s average bank loan rate decreased to 8.29% by Q3 2024, largely benefiting SMEs, whose rates fell from 12.24% to 8.98%. In contrast, individual borrowers faced rising rates at 15.75%, and other businesses increased to 18.88%. The changes are attributed to international funding sources aiding SMEs and the BEAC’s monetary policy aimed at controlling inflation.
The average bank loan rate in Cameroon declined to 8.29% by the end of Q3 2024, down from 8.91% a year prior, as reported by the Bank of Central African States (BEAC). This 62-basis-point reduction was significantly influenced by lower rates for small and medium enterprises (SMEs), which comprise 80% of businesses in the country.
While most borrowing costs increased, SMEs and large corporations were exceptions. Large companies maintained stable rates at 6.88%, while SMEs saw their rates sharply drop from 12.24% in September 2023 to 8.98% a year later, a notable decline of 3.26 percentage points.
The BEAC did not specify the reasons for the credit conditions easing for SMEs, which usually have limited access to financing. However, international financial institutions like the International Finance Corporation (IFC), Proparco, and the European Investment Bank (EIB) have injected capital into Cameroon’s banking sector, assisting local banks in offering favorable loan terms for SMEs.
In contrast, individual borrowers have experienced rising costs, with average personal loan rates climbing to 15.75% by late September 2024 from 14.98% the previous year. This places personal borrowing costs 6.77 percentage points higher than those for SMEs.
Other businesses outside SMEs and large corporations have also felt the burden of increased rates, with average loan rates surging from 14.18% to 18.88%, marking a drastic 470-basis-point rise. Additionally, public sector borrowers and local governments faced rate increases from 14.81% to 16.54%.
The rise in borrowing costs can be attributed to the BEAC’s stringent monetary policy implemented since late 2021, which has included elevated key interest rates and tighter bank funding conditions. These measures aim to curb inflation; however, SMEs have secured better financing terms due to support from international lenders, highlighting their economic importance in Cameroon.
In summary, SMEs in Cameroon are currently benefiting from reduced loan rates, falling to 8.98% compared to higher rates for individual borrowers and other businesses. This favorable financial environment for SMEs is primarily due to support from international financial institutions, in contrast to the tightening monetary policy aimed at controlling inflation affecting other sectors. This highlights the significant role SMEs play in the local economy.
Original Source: www.businessincameroon.com
