Asymmetric financial support and risk of non-repayment of bank loans: An analysis in the CEMAC context

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Abstract

The aim of this article is to determine the factors contributing to the increase in the risk of non-repayment of bank loans in financing relationships in the Central African Economic and Monetary Community (CEMAC) zone. Analysis of data from reports by the Central African Banking Commission (COBAC) has established these various factors. A summary of the analyses reveals that the presence of information asymmetry in the relationship leads the bank and the company to give priority to personal interests (Mbama, 2022). The proposed solution encourages both parties to promote reciprocal and benevolent behaviour in order to create mutual trust in the relationship and reduce the existing information asymmetry. Overall, solving the problem of loan default requires a multi-faceted approach (Porretta et al., 2020). This involves raising collective awareness, improving the regulatory framework, strengthening the financial management capabilities of businesses, and introducing more effective risk control systems by banks (Hertouch & Achibane, 2020). By taking these measures, it is possible to create a more favourable environment for businesses to prosper and contribute to the sub-region’s economic development.

Keywords: Financial Support, Credit Risk, Business, Unpaid Loans, Information Asymmetry

Authors’ individual contribution: Conceptualization — P.C.M. and M.T.N.; Methodology — P.C.M. and B.B.; Software — B.B.; Validation — P.C.M., M.T.N., and B.B.; Formal Analysis — B.B.; Investigation — B.B.; Resources — B.B.; Data Curation — P.C.M. and M.T.N.; Writing — Original Draft — P.C.M., M.T.N., and B.B.; Writing — Review & Editing — P.C.M.; Visualization — P.C.M. and M.T.N.; Supervision — P.C.M.; Funding Acquisition — M.T.N.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G24, G32

Received: 04.08.2023
Accepted: 06.11.2023
Published online: 09.11.2023

How to cite this paper: Mbama, P. C., Tchatchoua Nya, M., & Bekolo, B. (2023). Asymmetric financial support and risk of non-repayment of bank loans: An analysis in the CEMAC context. Risk Governance and Control: Financial Markets & Institutions, 13(4), 8–17. https://doi.org/10.22495/rgcv13i4p1