Economic and social context
Cameroon’s economy was regarded as fairly dynamic compared to other countries in Sub-Saharan Africa. Economic output, mainly driven by the only real manufacturing sector in Central Africa, the port of Douala which serves as a transport hub for the region, oil revenues and an important agricultural potential, had been growing steadily since 1996. In this favourable context, Cameroon reached the completion point of the Heavily Indebted Poor Countries (HIPC) initiative in May 2006.
Cameroon still suffers from high poverty and unemployment, particularly in urban areas: 48% of its population lives below the poverty line, unemployment runs at 18% in Douala.
Dynamic MSME sector with limited access to finance
In this context, the MSME sector, which employs around 4.5 million people including 1.4 million in urban areas, plays a vital role in the economy. In addition to its contribution to employment and income generation, this sector is the largest provider of basic goods and services for most households. Despite their importance in the economy, these enterprises have limited access to financial services and in particular productive loans. Although MSMEs have access to informal sources of financial services, these have their own limitations and cannot substitute for an efficient formal financial sector. This lack of access to financial services is a major constraint for the sustainability and development of small businesses.
Banking and Microfinance sector
Bank credit to the private sector accounts for only 8.7% of GDP in 2008 compared to an average rate for Sub Saharan countries of 15%. The banking sector finances the Cameroonian economy to a limited, although increasing, extent. In this environment MSMEs have limited access to credit. Productive loans below EUR 15,000 are almost inexistent in commercial banks’ portfolio.
Officially there are nearly 500 MFIs in Cameroon. This number looks impressive but a field study conducted in 2007 showed that the MFI industry served only 4.6% of the population (850,000 customers). The existing MFIs’ offer is focused on deposit-taking and money transfer services to MSMEs in major urban areas, including Douala and Yaoundé. Most MFIs do not focus on credit and have a poor portfolio at risk ratio which illustrates their fragility in this domain.
In this context, Advans decided to create Advans Cameroun, a financial institution targeting MSMEs, offering reliable financial services focusing on productive loans.
