Obtaining Credit in Cameroon: Problems and Prospects

In keeping with its mission, and in this report, entitled, “Obtaining Credit in Cameroon: Problems and Prospects” the Institute undertakes the third in a series of its six thematic reports dedicated to the Doing Business Index Project (DBIP). The report examines the business environment in Cameroon, specifically about how prospective investors could obtain credit from financial institutions in the country. It proposes useful suggestions to the Government of Cameroon (GOC) for improving its monetary and fiscal policies, especially, those which revolve around the micro- and macro-economic issues, and which are articulated in the financial sector of the national economy. The central purpose of this report is to offer informed knowledge in public policy-making, to public policy-maker in Cameroon, as the mandatory catalysts for improving or easing the Doing Business Concept in Cameroon’s business, economic, social and political landscapes.

Hitherto, it had been observed in several quarters that, obtaining credit in Cameroon is compounded by several bureaucratic teething issues. These issues appear to emanate from policies inadequacies, which create the difficulties encountered by potential investors at various levels in the course of their quest to obtain credit to finance their intended economic ventures. These difficulties include but are not limited to:

1. Information Asymmetry: Cameroon’s records in the “obtaining credit indicator” show extensively low level performance. This is due to weak credit reporting systems and the poor implementation of effective collateral and bankruptcy laws that help to facilitate the process of lending. The latitude and openness of credit information disseminated by credit agencies compared with the number of individuals and firms registered in the credit registry as a percentage of the adult population are asymmetric. Despite the presence of collateral and bankruptcy laws meant to facilitate lending in Cameroon, it does not still lead to timeous credit delivery. Therefore, there is a need to improve the information credit bureau in terms of openness and rationality in information dissemination. This can be done by producing reliable accounting documents that can help to reduce asymmetric information between banks and clients.
2. Conditions for Obtaining Credit: There exist several conditions to be met by potential credit seekers in Cameroon. These conditions do not only vary from one credit institution to another, but they also contrast from one form of loan to another; and this renders getting credit extremely paradoxical. On one hand, there exist close to twenty (20) licensed commercial banks and some micro-financial institutions with offices across the national territory. On the other hand, there is very limited access to credit, particularly for an average Cameroonian, all of which lead to a low average rate of investment and growth (less than 3%) over the past years. But why is there limited access to credit? Apparently, the main problem is the procedures and conditions required for obtaining credit which are too cumbersome to a spectrum of ordinary citizens most of whom are employed in the informal sector. This is highly detrimental to investment and economic growth for an economy that envisages emergence by 2035. Part of the solution, therefore is to articulate appropriate monetary and fiscal policies measures, imbue transparency and equity, review and harmonise the conditions, documentations, cost, and procedures for obtaining loans in Cameroon.
3. Accessing Credits by Foreign Investors in Cameroon: Accessing credit facilities is a major challenge, especially in emerging and developing economies. In this direction, one impediment is the persistence of information unevenness between lenders and borrowers in terms of adverse selection and moral hazard. It is relatively complex for foreign investors to obtain concrete information on the conditions, procedures, duration, and required documents in getting credit from formal financial institutions in Cameroon. The range of financial institutions visited by data collectors in this study evoked similar conditions such as the fact that they only issue a credit to already existing companies and the credit amount is based on business turnover and profit. Therefore, for Cameroon to positively impact its position on the ease of getting credit and attract more foreign investors; there is need to create a Public Credit Bureau (PCB) which will operate effectively and provide banks and prospective credit seekers with validly adequate information.
4. Women and Credit Facilities in Cameroon: The challenges women face in accessing credit are even more numerous. Such challenges are not only related to the laws governing credit facilities, but also to the socio-economic milieu in which they function. This milieu reflects issues such as:

(i) The lack of guarantees,

(ii) The legal and cultural barriers limiting access to land and property ownership,

(iii) The discriminatory regulations,

(iv) The scarcity of employment in the formal sector, and

(v) The lack of financial products adapted to their needs.

Above all, the situation of women’s access to credit depends on the general situation of financial inclusion in Cameroon and even within the CEMAC region. Women suffer more from unemployment, life and employment insecurity. Part of the solution is therefore, to improve their access to the labour market, and to encourage banks to develop products specific to women’s needs, in particular by activating their civic responsibility. Above all, it is important to see women as equal and capable development partners in society.