Twenty-three per cent of banks in the Central African Economic and Monetary Commission, (CEMAC) have rejected Bank of Central African States (BEAC) recommendations to harden conditions for loans granted to businesses hard-hit by the COVID-19 pandemic during the third quarter of the 2020 fiscal year.
The CEMAC countries are Cameroon, Central African Republic, Republic of Congo (Brazzaville), Gabon, Equatorial Guinea and Chad.
According to just published results of a study commissioned by the BEAC, about 80 per cent of banks surveyed envisaged a hardening of conditions for the granting of credits (69 per cent of which opted for lighter conditions while 11 per cent were for harder conditions).
The study was conducted to find out the potential economic effects on the banking system by the COVID-19 crisis to best tackle them with the tools at the disposal of BEAC.
It was also to put fingers on the difficulties that the banks could experience.
The studies were on three principal thematic areas: the evolution of criteria for granting loans, the management of liquidity and the quality of portfolios.
According to the study, the institutional units most affected by these measures had to be individual enterprises, and those least impacted were the big companies.
“This perception of the banks has positively evolved during the course of the third quarter of 2020 with only 52 per cent of those sampled envisaging a hardening of their conditions for the granting of credits thus a little hardening for 52 per cent and hardening the conditions by 5 per cent,” the second BEAC investigation revealed.
Thus, between the two periods, 23 per cent of banks denounced the hardening of their conditions to grant COVID-19 related credits.
BEAC explained that this positive evolution was the result of “the putting in place of monetary relaxation conditions adopted by the Monetary Policy Committee of BEAC to reassure the productive sector and credit establishments in particular, of the indefatigable support of the central bank in maintaining the production chain within a context characterised by numerous uncertainties.”
Since March 2020, Bank of Central African States has had to reduce the principal interest rates.
To this effect, the interest rate for tenders was reduced by 25 points dropping from 3.5 to 3.25 per cent.
The rate for the facility for marginal loans has on its own been reduced by 100 points dropping from 6 per cent to 5 per cent.
There was also an increase in the amount of liquidity to be injected into the monetary market from 240 billion FCFA (about US$480 million) to 500 billion FCFA (about US$1 billion).
BEAC assured that it would increase this amount in case there arises the necessity to do so.
“The external finances received by the CEMAC states for the putting in place of their strategy for the fight against COVID-19 as well as the engagements of the different international backers could justify the evolution of the perception of the banks in relation to the hardening of the conditions for the granting of credits favour of the public administration sector,” the BEAC concluded.
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