Cameroon’s SMEs have experienced a decline in loan rates, with average rates dropping to 8.98%. This is contrasted by rising rates for individual borrowers and other businesses. The relaxation of credit conditions for SMEs is supported by international lenders, while tight monetary policies have led to increased costs for others, demonstrating the significance of SMEs in the economy.
The average bank loan rate in Cameroon has decreased to 8.29% by the end of the third quarter of 2024, down from 8.91% the previous year, as reported by the Bank of Central African States (BEAC). This 62-basis-point reduction primarily benefits small and medium-sized enterprises (SMEs), which comprise 80% of businesses in the country.
While borrowing costs have risen for most sectors, SMEs have enjoyed significantly lower rates. The average loan rate for these enterprises declined from 12.24% in September 2023 to 8.98% over the course of a year, marking a substantial 3.26-percentage-point drop. In contrast, large corporations have experienced stable borrowing costs, maintaining an average rate of 6.88%.
The BEAC’s report does not clarify the reasons behind the eased credit conditions for SMEs, which are often viewed as facing challenges in securing financing. However, international financial institutions, including the International Finance Corporation (IFC), Proparco, and the European Investment Bank (EIB), have bolstered the banking sector through credit lines and guarantees, allowing local banks to provide more favorable terms for SMEs.
Conversely, individual borrowers are encountering increased loan costs, with the average personal loan rate rising to 15.75% by the end of September 2024. This represents an increase from 14.98% a year prior, placing personal borrowing costs significantly above the rates available to SMEs.
Additionally, other businesses outside of the SME category are feeling the strain, as their average loan rates surged from 14.18% to 18.88%. Public sector borrowers and local governments have also seen increases, with their rates moving from 14.81% to 16.54%.
The overall uptick in borrowing costs can be attributed to BEAC’s stringent monetary policies established since late 2021, which encompass higher key interest rates and tighter liquidity. While these measures aim to combat inflation, the support from international lenders has enabled SMEs to access improved financing conditions, thus reinforcing their pivotal role in the Cameroonian economy.
In conclusion, Cameroon’s SMEs have secured a favorable position in the lending landscape amid rising borrowing costs for other entities. Enhanced support from international financial institutions has allowed SMEs to benefit from significantly reduced loan rates. Conversely, individual borrowers and other businesses are experiencing increasing financial burdens due to stringent monetary policies. The situation underscores the importance of SMEs in the nation’s economy and the impact of external funding on their growth.
Original Source: www.businessincameroon.com
