6. Financial Sector
Capital Markets and Portfolio Investment
The Cameroonian government is open to portfolio investment. With the encouragement of IMF and BEAC, Cameroon and other members of the CEMAC region have designed policies that facilitate the free flow of financial resources into the product and factor markets.
The Financial Markets Commission (CMF) of Cameroon physically merged with the Libreville-based Central African Financial Market Supervisory Board (CONSUMAF) in February 2019. The merger has led to the establishment of a unique regional stock exchange called the Central African Stock Exchange (CASE). Cameroon’s financial sector is underdeveloped, and government policies have limited bearing on the free flow of financial resources into the product and factor markets. Foreign investors can get credit on the local market and the private sector has access to a variety of credit instruments. In 2016, Cameroon sought to encourage the development of capital markets through Law No 2016/010 of 12 July 2016, governing undertakings for collective investment in transferable securities in Cameroon.
Cameroon is connected to the international banking payment system. The country is a CEMAC member, which maintains a central bank, BEAC. The current governor of BEAC is Abbas Mahamat Tolli (from Chad). CEMAC’s central bank works with the IMF on monetary policies and public finance reform. BEAC respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Despite generally respecting Article VIII, BEAC has instituted several restrictions on payments to boost foreign exchange reserves. Throughout much of 2019-2020, financial institutions and importers complained of a backlog of requests for foreign exchange. BEAC is currently negotiating with several international oil companies on repatriation of revenues before external payments. While the situation has improved over the last six months, investors should be aware that timely repatriation of profits may be a stumbling block.
In 2020, with the support of the IMF, BEAC took steps to address the economic impact of COVID-19 in the region. The central bank eased monetary policy and introduced accommodative measures to ensure adequate liquidity in the banking system to supporting internal and external stability. Concomitantly, the regional banking sector controller (Commission Bancaire de l’Afrique Centrale or COBAC) eased prudential regulations to help banks delay pandemic-related losses.
Money and Banking System
Less than 15 percent of Cameroonians have access to formal banking services. The Cameroonian government has often spoken of increasing access, but no coherent policy or action has been taken to alleviate the problem. Mobile money, introduced by local and international telecom providers, is the closest tool to banking services that most Cameroonians can access.
The banking sector is generally healthy. Large, international commercial banks do most of the lending. One local bank, Afriland, operates in multiple other countries. Most smaller banks deal in small loans of short duration. Retail banking is not common. According to the World Bank, non-performing loans were 10.31 percent of total bank loans in 2016. The Cameroonian government does not keep statistics on non-performing assets. Cameroon’s largest banks are:
- Afriland First Bank ($3 billion)
- Société Générale Cameroon ($2.5 billion)
- Banque Internationale Du Cameroun Pour L’Epargne Et Le Crédit-BICEC ($2.1 billion)
- EcoBank ($1.4 billion)
- BGFI Bank Cameroon ($918 million)
- Union Bank of Africa Cameroon ($ 811 million)
(Source: Jeune Afrique, October 2020)
Foreign banks can establish operations in Cameroon. Most notably, Citibank and Standard Chartered Bank have operated in Cameroon for more than 20 years. They are subject to the same regulations as locally developed banks. Post is unaware of any lost correspondent banking relationships within the past three years. There are no restrictions on foreigners establishing bank accounts, credit instruments, business financing, or other such transactions.
The country has 412 registered microfinance institutions, 19 insurance companies, 4 electronic money institutions, and one Post Office bank. Two major money transfer operators are also present, essentially offering over-the-counter services. The Cameroon market is at the startup stage for its digital financial system. This emerging market segment is currently provided by banks in partnership with telecom operators. According to the World Bank (June 2020), in Cameroon, mobile money accounts are held by 15.1 percent of the adult population, which falls right after Gabon (43.6 percent). The specific market for e-payments is also less developed when compared to peer countries in the region such as Côte d’Ivoire (38.9 percent) and Senegal (31.8 percent).
Financial inclusion is low despite some progress brought about by mobile telephony. There were 21 million mobile telephony subscriptions at the end of 2019 in Cameroon (Agence de Regulation des Telecommunications – ART, 2018). Putting aside the multi-SIM effect, the penetration rate in terms of unique subscribers was about 50 percent at the end of 2019, which puts Cameroon in the lower end in the Central African region.
Foreign Exchange and Remittances
In May 2020, the BEAC reported that foreign reserves had increased by 30 percent compared to 2019. According to the central bank, this is the result of the tightening of regulations after foreign exchange reserves plummeted in the aftermath of the 2014 oil shock. At the time, the IMF estimated that the volume of foreign exchange assets illegally held outside the CEMAC zone by local firms and institutions was five trillion CFA ($8.3 billion).
On March 1, 2019, CEMAC members states through BEAC adopted a new foreign exchange currency regulation, which restricts payments in foreign currency by individuals and businesses. All sectors of the economy without exception will be subject to the new regulations. Given the importance of the oil sector in the economy of the region and the challenges in the implementation, BEAC allowed for an implementation period until December 31, 2020. In November 2020, this moratorium on implementing the foreign exchange regulations was extended until December 31, 2021. In addition, the bank has tightened administrative procedures. Each request for a foreign exchange transaction requires a “dossier” that would include various documents. The documents required vary based on the type of transaction to demonstrate the “legitimacy” of the planned purchase in foreign exchange that BEAC would approve. The formal list of required documents from BEAC includes a significant number of required supporting documents.
The IMF has stated that forex transactions of less than one million U.S. dollars only require approval by local BEAC representatives in each country and should take place in a matter of days. Forex transactions exceeding one million U.S. dollars require approval from BEAC headquarters in Yaoundé and should occur in less than 48 hours. Banks and other financial institutions complain that requests are often rejected on minor technical grounds. In practice, approved requests often take more than two weeks to process.
As of May 2020, BEAC is requiring international oil companies to repatriate 70 percent of proceeds from the sale of oil and gas and then apply to receive dollars or euros. Several Ministers of Finance and/or Energy in CEMAC countries have assured oil companies that they do not need to comply with the regulation, creating uncertainty for the operators. In theory, funds associated with any form of investment can be freely converted into any world currency, but the current BEAC restrictions are causing currency conversion concerns at financial institutions and oil companies.
The Central African CFA Franc is the currency of six independent states in Central Africa: Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon. It is administered by BEAC and is currently pegged at roughly 657.02 CFA to one Euro (April 08, 2021).
Remittance Policies and Sovereign Wealth Funds
According to the United Nations High Commissioner for Refugees, officially recorded inbounded remittances to Cameroon are estimated at $242 million and outbound remittances at $2.55 billion in 2017. Therefore, Cameroon is a net sender of remittances. Also according to UNHCR, ninety percent of the outbound remittances from Cameroon are sent to Nigeria.
Apart from the tightening of foreign exchange and remittance rules in 2019, Post is unaware of any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There are no time limitations on transactions beyond the classic banking transactions timeline. BEAC regulates remittance policies and banking transactions. Foreign investors can remit through convertible and negotiable instruments through legal channels recognized by BEAC, subject to the recent issues mentioned above. Cameroon does not have a sovereign wealth fund.