Sudan’s CBoS orders banks to stop offering auto, real estate loans

May 13, 2014 (KHARTOUM) – The Central Bank of Sudan (CBoS) issued a circular on Tuesday directing banks to stop offering auto or real estate loans unless applicants were eligible for an exemption.

According to the directive, banks are not to extend loans for the purpose of buying any vehicle except commercial trucks, minibuses and buses with a capacity of at least 25 passengers.

The CBoS also prohibited banks from financing land purchases, land development, construction of buildings and apartment purchases.

Loans made for popular and economic housing through guarantees of the National Fund for Housing and to develop land for agricultural purposes is exempt from this new rule.

The central bank said this decision was made in order to channel resources to productive sectors to achieve economic balance.

But the move will have dire consequences on auto companies and mortgage lenders who for years financed consumers in return for a set profit margin.

Last year, the International Monetary Fund (IMF) called on Sudan to “closely coordinate its monetary policy with fiscal policy to make room for more credit to the private sector”.

It noted that figures in Sudan show credit to the private sector stands below the average for low-income countries.

“This gap reflects a broad range of factors, including the secession of South Sudan, bank concentration around the capital city (which leaves much of the country underbanked), outdated legal, regulatory, and institutional frameworks, and recent restrictions on foreign exchange operations introduced by CBOS,” the IMF said.

(ST)