Following the 'good' results
observed recently in term of inflation, 1.48% p.a at the end of January 2013
according to the Central Bank of Congo (BCC), the BCC has decided to reduce its
prime rate by 1% to 3%.
As a Result, the government has
requested from the 'independent' BCC to request the commercial banks to reduce
the interest rates they charge customers on loans and/or overdraft
facilities... Indeed, the government is blaming the commercial banks for
charging interest rates that discourage investments and consumption. They do
not understand why commercial banks can refinance themselves at the Central
Bank @ 3% p.a. and charge customers 15% and plus...
MY ANSWER: banks are essentially
lending in USD. Therefore, they do not have recourse to the BCC for
refinancing!!! Thus, those rates do not apply to them. The only way this could
work would be if commercial banks were indebted to the BCC which is not the
case!!!
When commercial banks set their
interest rates they take into consideration several other criteria such as the
counterpart and country risks, the cost of funding (here in USD), the
securities provided...
I argue that it is not the role
of the government to dictate the market prices; the competition is more
efficient in doing so... As an example the interest rates on a car loan could
go up to 36 % p.a. few years ago. Today, banks are ready to charge as little as
10% p.a. for the same loan thanks to the competition...
The government should be focusing
on one of its only 'business duty' which is creating a favorable business
environment for investors...
