(Business in Cameroon) - Interbank lending rose by 62.3% to XAF190.6 billion in June 2020 (after a 38.7% drop in May 2020) in the CEMAC region, according to the monthly market bulletin published by the central bank BEAC.

The bulletin indicates that this rise in lending was spurred by an increase in the use of repo mechanisms. During the period under review, “ten (10) repo operations were recorded, against four (4) a month earlier. They reached XAF102.5 billion in June 2020, representing 57.3% of the volume of funds exchanged on the interbank market,” the BEAC writes.

The repo mechanism is an interbank funding method consisting of an exchange of securities against cash for a set period. In the framework of the mechanisms, the parties sign a framework agreement according to which the lender will automatically become the owner of the securities deposited as collateral if the borrower does not pay before the deadline.

“There is no need to go to courts to obtain a transfer of ownership,”  explained Aboubakar Salao (a member of the BEAC audit commission) in September 2018 during a seminar organized by the International Finance Corporation (IFC) on the challenges and opportunities in the Central African capital market.

According to Aboubakar Salao, this mechanism is an assurance for lending banks that now lend more liquidity to their peers. The mechanism has corrected the various problems that used to affect the CEMAC interbank market, namely the inexistence of sound financial products.

Brice R. Mbodiam