Optimal ratio of credit guarantee in Senegal

Abstract

The establishment of a guarantee fund is an option allowing States to ensure sustainable financing for Small and Medium-sized Enterprises (SMEs). The asymmetry of information between lenders and borrowers and the lack of collateral are, among other things, the main causes of credit rationing. In this article, we first look at the factors that explain the optimal ratio of the credit guarantee. The analysis of the results of the theoretical model shows that the level of the optimal guarantee depends on the purpose of the government in terms of credit target, the financial stability of the banks and the economic environment. In addition, from an Error Correction Vector Model, we looked for the credit default risk response following an unanticipated shock of economic growth, public debt, inflation, monetary availability (money supply), interest rate, bank loans and banks ' own funds. The results showed a positive effect of the risk of default following a shock on inflation, on the growth of the money supply. The effect is negative following a shock on economic growth, equity, public debt and loans.