(Business in Cameroon) – The first half of 2025 has presented analysts with a striking dynamic in the Cameroonian banking sector. On the surface, the industry appears healthier than ever, awash with fresh liquidity, as total deposits surged to FCFA 8,843.3 billion, an 11.6% year-on-year increase. Yet, this abundance of capital has not translated into economic momentum.
Instead, the sector has entered a distinct “risk-off” cycle, characterized by a near-total freeze on private credit expansion and a strategic pivot toward government debt. This disconnect signals a profound break in the monetary transmission mechanism, where banks act less as financiers of the economy and more as vaults for liquidity and as sovereign intermediaries.
The Great Credit Freeze
The headline figure of the semester is not the billions in new deposits, but a microscopic percentage: +0.3%. This represents the negligible growth in household credit over the six months, a rate that, when adjusted for inflation, amounts to a contraction in real lending. Despite holding vast reserves, Cameroon’s banks have turned off the tap for the private sector. The total loan book expanded marginally to FCFA 6,162.3 billion, with growth almost entirely driven by the public sector.
This stagnation reveals a crisis of confidence. Banks are flush with cash from households and private firms—the primary contributors to the deposit base—but they are refusing to recycle this capital back into the same private sector. The reluctance is not merely cyclical; it is a calculated survival strategy in response to a deteriorating risk environment. The traditional banking model of “collect short, lend long” has been replaced by a “flight to safety,” in which institutions hoard cash or direct it solely to the lowest-risk counterparty available: the State.
Crowding Out: The Sovereign Magnet
The data explicitly confirms a classic “crowding out” effect. While commercial lending stalled, credit to public administrations skyrocketed by 41.3% in just six months, jumping from FCFA 240.5 billion to FCFA 340 billion. For a bank treasurer, the logic is compelling. In an environment where the private sector is struggling to repay, lending to the government offers a risk-free return that requires less capital under prudential regulations.
This shift has created a two-speed financial system. The State absorbs the bulk of the system’s lending capacity to finance its deficit, while businesses and households are left starved of the capital needed for investment and consumption. This massive reallocation of resources explains the paradox of high liquidity and low private credit growth: the money is there, but the public sector siphons it off before it reaches the real economy.
The Non-Performing Loans Trap and Balance Sheet Contraction
The primary driver of this risk aversion is the alarming deterioration of asset quality. Non-performing loans (NPLs) have surged by 17.5% year-on-year, hitting FCFA 910 billion. When nearly one trillion francs of assets turn toxic, banks inevitably contract their risk appetite. This surge in bad debt acts as a hard brake on new lending; banks are forced to provision heavily, eating into their profitability and making them extremely selective about new borrowers.
This defensive posture is further illustrated by the unusual contraction of the consolidated balance sheet, which shrank by 5.2% between December 2024 and June 2025. In a growing economy, bank balance sheets typically expand. A contraction suggests that banks are actively deleveraging—cleaning up their books, writing off bad debts, and reducing their exposure to the interbank or securities markets to preserve capital.
A Sector of Giants and Vulnerabilities
Structurally, the market remains an oligopoly where size dictates survival. The “Top 5” institutions—led by Afriland First Bank and Société Générale—now control 59% of deposits and 57% of assets. This concentration provides a stability buffer for the system, as these giants have diverse balance sheets to weather the storm. However, the fragility of the smaller players is becoming a systemic concern. With two banks already failing risk coverage ratios and three missing fixed-asset targets, the sector is showing cracks at its periphery.
Ultimately, the H1 2025 report describes a banking sector in a defensive crouch. Until the quality of loan portfolios improves and the appetite for sovereign debt moderates, the disconnect between Cameroon’s deep liquidity and its credit-starved private sector will likely widen, leaving the real economy to run on fumes despite the billions sitting in bank vaults.
Idriss Linge, Mercy Mercy Fosoh
