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 44 percent of GDP and agriculture and manufacturing each accounting for about 19 percent of GDP in 2009. However, the Cameroonian economy remains vulnerable to fluctuations in commodity prices and demand; while activity in the oil and mining sectors represented 7 percent of GDP in 2009, oil production accounted for about 40 percent of fiscal revenues and 50 percent of export earnings. Despite significant economic progress, poverty alleviation appears to have stagnated since 2001 and close to 40 percent of the population still live below the poverty line.
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 is expected to pick up, as real GDP growth increased to 3 percent in 2010 and is projected to reach 3.5 percent in 2011 and 4.5 percent in 2012, as external demand, public investments in major infrastructure projects and foreign investment inflows rise.
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, 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.
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. One local bank experienced a deposit run in November 2009, requiring the injection of emergency liquidity, while a total of three banks were put under temporary administration in 2009. 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, reaching 12.9 percent in 2009. Bank lending activities tend to be concentrated in a small number of key borrowers, with the 5 largest exposures accounting for almost 30 percent of total bank loans portfolios in late 2009, and the banking system has become heavily exposed to a common borrower. 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.
Although bank credit to the non-government sector increased by 15 percent in 2008-2009, financial intermediation and access to financial services remains limited. The expansion of lending activities continues to be hampered by limited capacities to collect information on the credit worthiness of borrowers, while heavy taxation and a 15 percent interest rate cap on loans to Small and Medium Enterprises (SMEs) present further disincentives for banks which have traditionally preferred dealing with large well-established firms. At the retail level, less than 5 percent of Cameroonians have access to a bank account. Access to housing finance is equally difficult; although Cameroon hosts the leading real estate fund in the CEMAC region disbursements are not made for housing loans and the fund suffers from high NPL levels, remains heavily subsidized by the government, and has faced insolvency for several years.
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.
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 april 2011, 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.
|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|
|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|
For statistical coherence and comparability purposes, the FSDIs are extrapolated from a limited number of sources (AfDB, IMF, OECD, WB), where a common data collection methodology was applied to all countries surveyed. For additional data from other sources, please refer to the Documents section.