Sudan: Central bank tells financial institutions not to offer auto and real estate loans

May 16, 2014

The Central Bank of Sudan (CBoS) issued a circular on Tuesday (13 May) asking banks to stop offering auto or real estate loans.

The Central Bank of Sudan (CBoS) issued a circular on Tuesday (13 May) asking banks to stop offering auto or real estate loans.

"Banks are not to extend loans for the purpose of buying any vehicle except commercial trucks, minibuses and buses with a capacity of at least 25 passengers", the directive stated.

The CBoS also prohibited banks from financing land purchases, land development, construction of buildings and apartment
purchases, the
Sudan Tribune reports.

However, loans granted to fund popular and economic housing guaranteed by the National Fund for Housing, as well as loans to develop land for agricultural purposes, are exempt from this new rule.

The central bank said this decision was made in order to channel resources to productive sectors to achieve economic balance.

The adopted regressive credit policy after secession and the liquidation of six banks belonging to South Sudan had squeezed banks’ balance sheets and exposed the sector to greater vulnerability, according to the 2013 African Economic Outlook report.

A recent IMF assessment of the sector revealed a mixed performance due to
the adverse effects of the devaluation of the Sudanese pound on committed foreign denominated loans, as well as
escalating inflation.

The BoS urged the banks to allocate at least 12 percent of their portfolio to microfinance in order to increase
access of small producers to credit. Nevertheless, bank lending to agriculture and social development decreased by 6.7 percentage points by
the end of 2011,
down from 17.5 per cent in 2010. Lending to trade increased by 3.8 per cent in 2011,
up from 27 per cent in 2010,
and contributed an additional five per cent in 2012.ADNFCR-2976-ID-801720763-ADNFCR