In west Africa as elsewhere, customer insolvency assessment techniques are rapidly developing. On the other hand, credit risk assessment is not common practice for African financial markets, while investors all over the world resort to financial rating to measure the insolvency risk of securities issuers. Banks also assess counterparty risks through credit rating, which has become a banking regulation tool since the introduction of “Basel 2“.
West and Central Africa are the only regions in the world where local finance operators do not conduct credit rating. Bond certificate issuers currently have to pay high fees as part of the guarantee prescribed by WAEMU regulation to have access to market, which increases borrowing costs and delays local market development. In addition, lack of information on borrowers’ risks makes it difficult for a number of economic operators to have access to credit and makes the region less attractive to foreign investors.
Now, credit rating would enable to eliminate or at least to reduce the need for a guarantee, thus leading to significant decrease in borrowing costs. In addition, this would improve information on bond certificate issuers’ credit risk, thus contributing to higher market efficiency.
As a response to the needs of financial markets and banks in Africa, Bloomfield Investment Corporation proposes a rating system for borrower and bond certificate issuer credit risks. Bloomfield Investment Corporation’s rating system shows the insolvency risk of companies, banks, public institutions or countries raising funds on the market or from banks. This enables to grade borrowers based on their credit worthiness, which is essential for the determination of interest margins – or risk premium – applied by lenders, whether these are banks or bond market investors. Therefore, Bloomfield Investment Corporation’s approach meets the needs of both bond market investors and financial institutions.
Bloomfield Investment different interventions :