Historically sidelined by bank financing, SMEs in WAEMU are now seeing credit flows shift more in their favor. Will this change mark a lasting trend?

In Q2 2024, small and medium-sized enterprises (SMEs) across the West African Economic and Monetary Union (WAEMU) received more loans than large companies. According to the Central Bank of West African States (BCEAO), SMEs took 51% of the total loans, a 9-point jump from previous quarters. Meanwhile, large companies saw their share fall to 49%.

This isn’t the first time SMEs have outpaced big businesses in getting loans. In Q3 2022, they received 51.8% of loans, and by Q4, that number had climbed to 53.5%. However, in early 2023, large companies regained some ground, securing 53.85% of the loans in Q1, leaving SMEs with 46.15%. Despite this dip, the overall trend shows SMEs gaining more traction, as reflected in their recent rise in Q2 2024.

Even though SMEs are now receiving more loans, they are still considered underfunded. WAEMU authorities have been working for years to boost funding for these businesses, which represent over 90% of the region’s economy. BCEAO’s special SME program encourages banks to broaden their lending portfolios while limiting risk through guarantees and refinancing support.

SMEs in Côte d'Ivoire and Senegal have played a key role in this shift. These two economic powerhouses account for a significant share of bank loans in the region. In Q2 2024, large companies in Côte d'Ivoire and Senegal took a smaller portion of the loans compared to other WAEMU countries, with only 25.5% and 25.6%, respectively. On the other hand, countries like Guinea-Bissau saw 64% of loans going to large businesses, followed by Niger (49.5%), Mali (39.2%), Togo (36.8%), Benin (34.1%), and Burkina Faso (30.1%).

This shift in loan distribution is happening as banks face rising costs. BCEAO’s weekly refinancing rate, which banks rely on to get funding, jumped from 3.5% to 5.5%, making it more expensive for them to borrow. Still, the total amount of loans to the economy grew by CFA1,752.2 billion (roughly $3 billion), an increase of 5.3%. Loans to private businesses grew by 5.5%, and loans to households and non-profits went up by 6.7%. Amid these changes, interest rates for SME loans nudged up slightly, from 8.40% to 8.47%, while rates for large companies rose more sharply to 6.51%, up by 0.18%.