Record increase in bank loans in the third quarter of 2020

(Agence Ecofin) – In the midst of a post-Covid-19 recovery, the Cameroonian private and public sectors have obtained a good return from local commercial banks. Bank credit is essential to support growth in the country, but faces delicate trade-offs.

During the months of August and September 2020, the loans granted by Cameroonian commercial banks to the private sector increased by 54% and 50.5% respectively, we learn from information shared by the Institute of International Finance (IFF ) with the Ecofin agency. These are the strongest monthly increases for this indicator since these data were analyzed, i.e. January 2017.

At the same time, we note that in 2020, banks’ commitments to the non-financial public sector increased by 1.7%. This is the strongest increase since 2014. Also, the outstanding commitments to the benefit of general government in the balance sheet of commercial banks reached 18% in 2020, its highest level since 2014 as well.

This increase in bank credit is a positive thing for the revival of the Cameroonian economy, according to the analyzes of the IFF, an institution based in Washington, and which is positioned as a world association of central banks. ” The previous experience of declining credit to the private sector in 2018 led to a subsequent decline in economic activity », Can we read in the document.

The public sector is coming back to favor with the banks after a rather tense period, marked by significant non-reimbursements noted in particular on the side of parastatal companies. The most emblematic of the problematic public sector debts is that of the National Refining Company (Sonara). The State had to find a refinancing agreement with the three largest banks in the country to ease the atmosphere.

With the private sector there are other types of problems. It is often squeezed out of the credit market when lending to the public sector increases. This was once again observed between December 2019 and June 2020, when months of rising credit to public entities went hand in hand with a subsequent drop in lending to the private sector. The return of a positive sentiment vis-à-vis the economy was also accompanied by an increase in credit to the private sector and a slowdown in the public sector.

Arbitrations for commercial banks operating in Cameroon contain small complexities. They have a stock of additional reserves of idle resources, but prefer to keep them without any remuneration in the coffers of the Central Bank (BEAC). As of September 30, 2020, these additional resources were 933.75 billion of FCFA. But experience shows that financing the public sector does not always guarantee stable profitability. As for the private sector, especially that of large companies which absorb 60% of this bank loan, the outstanding bad debts are 20%.

Idriss Linen

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