Influencing Corporate Creditworthiness: Case Study in the Egyptian Banking Sector

Abstract

Granting loans to corporate clients is the main source of income for banks. However, those loans are associated with a certain level of credit risk that is the inability of clients to meet their obligations toward banks. The occurrence of credit risk can negatively affect banks' profitability and business continuity. Considering the fast-evolving environment, the competition between banks, and the asymmetry of information, mitigating credit risk becomes a main duty of banks. The aim of this qualitative study was to determine the financial and non-financial factors that have a significant impact on corporate clients' creditworthiness. The aim is to help credit risk assessors to enhance the quality of the credit risk assessment and to make timely and accurate credit decisions. The study was focused on the Egyptian banking sector and distinguished between large companies and small and medium enterprises. The study revealed a list of financial and non-financial factors that have a significant impact on the creditworthiness of each category of companies as judged by credit risk assessors. The study also found that there are similarities and differences between both sizes of companies in terms of the factors that affect their creditworthiness.