Abstract
Our study mainly focuses on the determinants of credit risk of Beninese banks. Theoretical and empirical literature teach us that both external and internal factors are the determinants of credit risk. From a sample of seven (07) commercial banks (only one of which is listed on the BRVM), we tested the simultaneous effect of external and internal factors on credit risk over the period 2004-2013. After an econometric analysis on panel data (fixed effect model estimated by the PCSE method), it appears that the "growth of GDP", "credit by signature", "interest margin" and the "proportion of institutional administrator "are the determinants of credit risk. Therefore, political authorities and bank officials could improve credit risk management by issuing policies on these factors.
Highlights
The main function of commercial banks is to finance the economy by granting credit to the different actors of economic life
A priori, the different variables of the model are stationary in level, with the exception of three variables "campaign credit (CrC), size of the board of directors (TCA) and the size of the independent directors (Aind)", which are stationary in first difference
When we detect the presence of individual effects, there is the problem of specification of its effects: are they fixed or random? To discriminate between these two models, we performed the Hausman specification test
Summary
The main function of commercial banks is to finance the economy by granting credit to the different actors of economic life. Despite innovations in the sector, the supply of this service exposes banks to many risks (Greuning & Bratanovic, 2004). One of these risks is the credit risk. Credit risk means the likelihood that the borrower will fail to honor the terms of the loan agreement. This risk is emphasized by the phenomenon of information asymmetry which creates adverse selection and moral hazard. 2012; Fofack, 2005) reveal that this risk is the source of banking crisis. In Benin Republic 80% of the bank loan portfolios were reported unproductive.16% for Burkina-Faso, 50% for Ivory-Coast, 75% for Mali, 50% for Niger and 50% for Senegal of loans from banks were reported unproductive (Powo 2000).This crisis cost the Central Bank of West African States 400 to 500 billion CFA francs, about one quarter of the money supply in circulation
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