Cameroon: Financial Sector Profile

Cameroon has experienced stable economic growth over much of the past decade and now features a relatively diversified economy, with services representing about 46.4 percent of GDP in 2011. Real GDP growth averaged 3.4 percent a year between 2002 and 2007. However, economic performance has been negatively affected by the global economic and financial crisis which led to disruptions in mining and energy investments and falling global demand and prices for many of the country's main exports (particularly in oil, timber and rubber). As a result GDP growth decreased from 3.4 percent in 2007 to 2.6 percent in 2008 and 2 percent in 2009. Economic activity has however picked up in 2009 and 2010 with GDP growth of 2.9 and 4.2 percent respectively with positive projection (4.7 and 5.0 percent) for 2012 and 2013.

Cameroon's financial system is the largest in the Economic and Monetary Community of Central Africa (CEMAC) accounting for about half of regional financial assets. The financial sector, characterized by excess liquidity, heavy concentration of loan and deposit activity and a low level of financial innovation is largely dominated by foreign banks. Non-bank financial institutions play a minor role, with the public insurance and pension systems in difficulties, and the publicly owned postal bank and real estate finance institution both struggling with insolvency. Problems in the legal enforcement of guarantees and the land tenure system also hamper the utilization of real estate as collateral, further constraining the expansion of the financial sector.

There are currently 15 banks operating in the country; banking sector soundness has deteriorated in recent years, stemming from protracted violations of prudential regulations, and further exacerbated by the global economic and financial downturn. While banks generally hold excess reserves and large levels of unutilized liquidity, capitalization is low and the ratio of non-performing loans (NPLs) to total loans has increased. While six out of the eleven largest banks remain foreign owned, the sector has experienced a gradual retrenchment of foreign banks over the past 10 years due to excess domestic bank liquidity, lack of bankable projects, and bouts of social unrest.

Private credit by deposit money bank remains limited and well below CEMAC average, despite having increased from 9.3 in 2008 to 11 percent in 2011 (as a percentage of GDP). Although bank credit to the non-government sector increased, representing about 65 percent of all lending, the economy is dominated by short-term loans, which account for approximately 65 percent of the total, with medium-term loans accounting for 32 percent and long-term loans for only 3 percent. Overall access to credit remains very low, and below CEMAC average. The penetration rate, defined as number of borrowers per 1,000 adults has almost doubled in 2009, reaching almost 17 percent but it it still below SSA average (excluding South Africa).While the microfinance sector has gradually expanded in recent years, penetration levels remain relatively low and the sector's development is constrained by a loose regulatory and supervisory framework for microfinance institutions (MFIs). $

Due to the integration of Cameroon in the CEMAC region, regional laws govern most of the country's financial system, often rendering legal procedures cumbersome. Accounting requirements are not yet fully in line with International Financial Reporting Standards (IFRS). Authorities have however recently stated intentions to reform the country's banking and financial sectors in efforts to deepen financial intermediation, and intend to finalize the implementation of a central credit registry, introduce new financial instruments targeted towards SMEs, and set up a judicial court to tackle commercial matter and improve the enforcement of contracts.

While CEMAC countries jointly launched a common regional Stock exchange in 2008, Cameroon has also set up its own stock market, the Douala Stock Exchange. However, market infrastructure development to support the expansion of capital markets lags behind issuing plans and regional auction mechanisms and dealer-type systems to support both the primary and secondary market are not yet fully in place. Furthermore, a cash and debt management framework is not yet established at the Treasury, hampering budget financing through government debt securities. The stock market capitalization reached XAF 97 billion in 2011, with only three companies active on it.

As a member of the CEMAC, Cameroon shares a common currency, Central Bank-the Bank of Central African States (BEAC), and joint monetary policy with other member states. The fixed income market is also regionally integrated. Under CEMAC, national treasuries are allowed to issue Treasury bills and bonds through weekly and monthly auctions. But government securities markets have yet to take off in the region; as of mid-2010 there was no significant track record of bond issuance, with no recent issuance of treasury instruments, and only one outstanding government bond on the market (issued by the Republic of Gabon). Cameroon has however announced plans to start issuing government securities in the domestic market in the near future. As of March 2013, Fitch and Standard and Poor's each gave Cameroon long-term sovereign debt ratings of B- and B, and B and B for local and foreign currency respectively.

Primary subscription to government instruments (with the exception of bonds syndication, where all investors have free access) is restricted to primary dealers with registered depository accounts and sufficient reserves at the BEAC. Since 2004, a few brokerage houses have become active in the region, 11 of which are located in Cameroon. However, all investors can access the market via primary dealers, and foreign investors can access the market through local banks. Activity on the corporate debt market has recently been increasing, but the number of non-government securities traded remains rather limited. The secondary market is also still very small, with transactions restricted to certified intermediaries. At present there is no active derivatives market in the region.

Financial Sector Development Indicators
  2007 2008 2009 Average Africa 2009
Liquid Liabilities /GDP 0,181 0,191 0,201 0,412
Deposit Money Bank Assets / GDP 0,11 0,106 0,103 0,32
Other Financial Institutions Assets / GDP n.a. n.a. n.a. 0,288
Private Credit By Deposit Money Banks and Other Financial Institutions / GDP 0,089 0,087 0,084 0,272
Bank Credit / Bank Deposits 0,595 0,567 0,542 0,728
Net Interest Margin 0,041 0,037 0,033 0,069
Bank Concentration 0,72 0,89 1 0,841
Stock Market Capitalization / GDP n.a. n.a. n.a. 0,947
Remittance Inflows / GDP 0,005 0,004 0,004 0,237
Mobile Cellular Subscriptions (Per 100 People) 24,309 32,276 - 40,33
Private Credit Bureau Coverage (% Of Adults) 0 0 0 4,539
Public Credit Registry Coverge (% Of Adults) 1 4,9 1,8 2,575
Number of commercial bank branches per 100,000 adults 1,205 1,307 1,432 6
Depositors with commercial banks per 1000 adults 41,602 44,952 71,81 311
Borrowers from commercial banks per 1000 adults 6,401 8,137 17,069 87