(Business in Cameroon) - Banks and financial institutions operating in Cameroon provided businesses in the country with loans totaling CFA1,311.6 billion between April and June 2023. According to data from the Bank of Central African States (BEAC), this volume represents an increase of nearly CFA424 billion (47.7%) compared to the same period in 2022, when businesses only received CFA887.9 billion in bank loans.

This significant rise in bank lending to businesses suggests that the restrictive monetary policy implemented by the central bank since 2022 to combat inflation in the CEMAC zone has been ineffective. Characterized by repeated increases in the central bank's key interest rates, suspension of liquidity injection operations into the banking system, and higher volumes of liquidity withdrawals from banks, this strategy aimed to dry up credit institutions to restrict bank financing.

However, as the then Governor of the BEAC, Abbas Mahamat Tolli, admitted, banks found a way to bypass the tightening of monetary policy. Speaking on June 23, 2023, after a session of the BEAC's monetary policy committee, Tolli revealed that in response to the restrictive monetary policy, banks had turned to the secondary market for public securities, where interbank transactions through repurchase agreements (repos) had surged.

Repos allow banks to lend money to each other using public securities held by the borrower as collateral. This transaction requires a master agreement between the parties, allowing the lender to automatically gain ownership of the collateralized securities once the debt repayment date has passed. “You don’t even need to go to court to get this transfer of ownership,” noted a central bank official.

The security provided by repos allows banks to circumvent the liquidity restrictions imposed by the central bank's monetary policy, supporting each other in the process. This enables them to continue financing economic agents, contrary to the objectives of the restrictive monetary policy put in place by the central bank.