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Interest rate cap: WAEMU's MFIs are concerned about repercussions on access to finance

12.03.2014

West African microfinance institutions (MFIs) are concerned about the consequences of lowering the cap on interest rates they can apply on their loans from 27 percent to 24 percent.

West African microfinance institutions (MFIs) are concerned about the consequences of lowering the cap on interest rates they can apply on their loans from 27 percent to 24 percent.

The January 2014 decision of the West African Economic and Monetary Union (WAEMU) aims to protect consumers. But according to MFIs, it could hamper access to credit.

They believe that if the ceiling is too low, financial services providers may have difficulties covering their operating costs and be forced to reduce their coverage of the poorest, especially in rural areas.

The director of a West African MFI told Jeune Afrique he believes that "governments have a political approach to microfinance. They use it so that the poorest have access to finance without trying to create a sustainable model ".

The newspaper also quotes Julie Hearne, Specialist at the IFC, who considers it more appropriate to liberalize the system to bring down costs. It also cites the example of Uganda, which "developed a multilayer regulation creating tailored rules adapted to different types of financial institutions and the risks they pose to the sector."

Some 759 microfinance institutions have been identified within the WAEMU region. At the end of December 2011, Deposits stood at Cfaf616.7 billion (€ 940.1 million) and outstanding loans at Cfaf589.9 billion, according to figures from the BCEAO.ADNFCR-2976-ID-801702445-ADNFCR