Banking’s uneven development in Cameroon
Cameroon’s banks are growing steadily, but they have been slow to introduce services to bring in the country’s large unbanked population. The banking sector remains highly concentrated, with three banks controlling 50.1% of the loan market and 52.2% of deposits, according to the finance ministry.
Of the three, only Afriland First Bank (#144), owned by Afriland First Group (#65), is a local bank. The other two – Société Générale Cameroun (#147) and the Banque Internationale du Cameroun pour l’Epargne et le Crédit (BICEC, #153) – are owned by French banks.
Afriland First Bank has grown more rapidly than its peers and became Cameroon’s largest bank in 2014. Its deposits grew 1.4% to 578.8bn CFA francs ($963m), which is much slower than the 23.4% annual growth rate recorded in 2013. Its assets grew at an annual rate of 2.1% in 2014.
Afriland is offering new services and boosting its growth with the help of foreign banks. On 18 June, it signed a deal with the China Development Bank worth 26.2bn CFA francs to finance local small and medium-sized enterprises. The agreement was negotiated through Afriland’s representative office in Beijing.
In February, the Cameroonian bank also opened a branch dedicated to Islamic finance, making it a pioneer in the field in Central Africa. Afriland estimates that it will issue 2bn CFA francs in loans and collect 3bn CFA francs in deposits through its Islamic finance window in the first year of its operation. Muslims make up about 20% of Cameroon’s estimated population of 20 million people.
Société Générale Cameroun is one of Afriland’s direct competitors and held the spot as top bank in Cameroon until last year. Deputy general manager Georges Wega tells The Africa Report that the bank “recorded a good performance in 2014, allowing us to maintain our position as leader in terms of financing to the Cameroonian economy. Our net interest income grew by almost 10% as compared to 2013 and is around 50bn CFA francs.”
State refinery loan
Wega says that his bank is making a push for corporate clients and government projects. “We are one of the few banks that offers a national cash pooling service today – which will be regional shortly – to respond to the need for central treasury management on a country or monetary-zone level,” he says.
In February, Société Générale Cameroun and three other banks – BGFIBank Cameroun, Ecobank Cameroun (#192) and Afriland First Bank – signed an agreement with the government to supply a 143.5bn CFA loan for the Société Nationale de Raffinage du Cameroun, the largest state enterprise and a company going through financial difficulties.
Cameroon’s third-largest bank, BICEC, is becoming more active in the field of agriculture. In March, BICEC and the International Finance Corporation, the private-sector arm of the World Bank, signed a risk-sharing deal worth 2.5bn CFA francs to help farmers through the government’s Projet d’Investissement et de Développement des Marchés Agricoles.
Robert Tangakou, an economics professor and former banker, explains: “The banking sector is globally performing well because deposits and loans are growing regularly and most of the banks are earning sizeable annual profits.” Last year, the International Monetary Fund (IMF) reported that the total assets of the financial sector rose by about 31% between 2010 and 2014.
It said that the Cameroonian banking sector was “under-capitalised, but profitable and liquid.” The IMF report said “access to finance and financial depth have improved but are hitting structural bottlenecks.” It says that the principal obstacles are a lack of information, a weak judicial system and poorly developed laws on property and loans.
To address the first problem, the Banque des Etats de l’Afrique Centrale and the World Bank have been working together to develop a credit bureau since January. It will help banks to determine the creditworthiness of their clients and reduce the risk of non-performing loans, which should encourage them to lend more.
The share of the population using banks has certainly been rising, but it stood at just 13.8% in 2011 according to the Association Professionnelle des Etablissements de Crédit du Cameroun. Société Générale’s Wega says the high percentage of unbanked people is “due to several factors, including the average salary of Cameroonians, the number of bank branches across the country, the level of education and the structure of the economy, which needs to speed up its modernisation.”
Around 1.5 million customers use microfinance institutions while one million use the big banks
He calls on banks to innovate “in the rapid development of simple methods for opening bank accounts that are technologically adapted to Africa’s current realities.” He adds: “The government and the central bank also have a role to play in the creation of an environment and a regulatory framework that promotes these innovations.”
According to financial auditor Pierre Numkam, the current requirements for opening an account do not encourage poor people to join the formal economy. Numkam says banks routinely overcharge their clients and describes a system that “finances the rich to the detriment of the poor”.
Excluded from the traditional banking sector, many Cameroonians are using microfinance institutions. There are more than 400 of them in the country. They have about 1.5 million customers, which is higher than the one million clients at the big banks according to the finance ministry.
Critics complain that there is a lack of transparency in Cameroon’s banking sector and that this encourages corruption. A 2011 report by the Commission Nationale Anti-Corruption said that the government found transactions worth 395bn CFA francs linked to money laundering between 2006 and 2011.
Despite the financial sector’s governance problems, it holds a lot of promise for the years ahead. The government has launched major construction projects across the country and is turning to financial institutions for funds. Foreign firms are also interested in Cameroon, and Kenya’s Equity Bank announced in March that it would expand into 10 countries including Cameroon.