Consumer Credit (Daily Purchases) in Cameroon

 The formal Cameroon lending system is made up of 15 commercial banks, 8 financial institutions, and 412 microfinance institutions (“formal sector”) [1]. Credit for consumer goods is the primary type of loan for banks and microfinance institutions in Cameroon. In fact, almost 90% of the total loans given by banks and microfinance institutions in Cameroon are for consumer goods. They do not include real estate and are usually short-term loans (less than 48 months).

In Cameroon, the principal consumer credit for banks is commonly called “crédit scolaire” or a back-to-school loan. This loan allows individuals to send their children to school and constitutes almost 70% of the total loans banks give to their clients. For microfinance institutions, the loans are typically given to clients to equip or furnish their interior, or to prepare for a special event.

In 2018, only 10% of Cameroonians aged 15 and older had bank accounts according to the minister of finance in a “FinScope” survey, which aimed at assessing the levels of access to and use of financial services across the country. According to the document, financial inclusion in the formal sector is relatively low in Cameroon. Indeed, people widely preferred informal credit, including (1) lending groups called “njangui groups” or “tontines groups”, pooling community funds together to lend to each other, and (2) borrowing from relatives or friends. Of those surveyed, almost 11% utilized njangui groups, 10% received credit from friends and family, and only 3% utilized formal sector funding.

This preference for the informal sector is due to the difficulty of obtaining a formal sector loan. Formal sector loans come with more stringent conditions that are prohibitive to most borrowers. For instance, borrowers are required to have a bank account in the bank they want to take the loan and employer guaranties. More recently, there has been a preference for microfinance over banks because the conditions for microfinance are much more flexible at the level of the job guaranty and income.

Financial sophistication is a serious concern in Cameroon. For consumers, many lack the understanding of saving and the benefits of financial products. Most individuals are not aware of the fact there are conditions and qualifications for obtaining a loan. Additionally, Cameroon lacks traditional funding mechanisms, such as credit cards, that are available globally.  

The average interest rates for consumer lending:

·         Formal Sector

o   Banks: varies according to banks and clients but most of them fixed the rate of interest at 14% annually including taxes (capped at 15% annually)

o   Microfinance: (varies from 1.5% to 4% monthly depending on the microfinance institution)

o   Financial Institutions: the interest rate of financial institutions such as Credit Foncier du Cameroun varies from 3% to 6% annually depending on the client.

·         Informal Sector

o   Njangui groups: the interest rate varies depending on the group. It can go from 10% monthly upwards but has more lenient conditions.

o   Friends and family: varies but it is not uncommon for a relative to give loans without any interest. 

[1] CNC (Conseil National de Credit), report on money and credit 2019