ABSTRACT
This study is asking UEMOA Heads to consider securitisation as
a way to support the financing of SME, mainly as another way to grant them
middle and long terms loans. The proposal has been welcomed by several
professionals from the banking and financial world. The objective of
the study is to well understand:
· To what extent UEMOA could use more
securization to reinforce the medium and long term financing of the UNION.
· The benefit of such a market for UEMOA
Companies to get medium and long term funds.
· And the conditions necessary for establishing a
vast securitization market.
Immediately, securitization operations have no direct impact
on companies whose loans are sold. Although, they can have some consequences on
Banks which can then grant more loans. Thus, securitization can have many
positive effects on banks customers.
- Securitization helps banks to properly measure and price
credit risk. The advantage for companies is not at first to get a lower credit
cost but to obtain more easily medium and long term loans, mainly for both the
riskier and more profitable companies.
- Securitization allows banks to grant SME more and more loans
according to their return and risk profile.
- Since securitization means risk transfer to investors, it
gives banks opportunity to grant new medium and long terms loans. Banks are
able to follow each day the financial evolution of companies so securitization
can lead to a better relationship between Banks, Development and investment
Banks and Financial Markets. Securitization provide Development Banks better
investment vehicle than direct credits to companies they are not able to follow
up easily.
It is possible to enhance securitization advantages by public
support and assistance like in USA, Germany, Spain, Tunisia and Maroc and South
Africa...
Today there is nearly no securitization program in
WAEMU area. The main reason is that securitization is not already implemented
and allowed. The other reason is the weak knowledge of risks on companies and
the difficulty to show obviously securitization return.
Government Intervention to reduce first losses in
securitizations operations can help central bank, Bank Commission and banks to
agree starting securitization programs. Governments can for example face losses
on the less risky assets.
- On the other hand, « BCEAO », WAEMU
Central Bank must find how play its lender of last resort function with
financial markets enhanced by securitization.
These public policies, regularly followed up, must force banks
to invest in more medium and long maturity loans.
If these recommendations are without any doubt the most
important, other ones can also be named for the easy event of a large medium
and long term loans securitization in WAEMU area:
- A very good cooperation between Banks and Rating
Agencies under Central Bank and Bank Commission leadership so as to help Rating
Agencies to have enough information on credit risks. First of all,
international Rating Agencies experience will be needed before establishing
regional rating agencies in partnership with the first ones.
- WAEMU Banks Professional Association, Central Bank
« BCEAO », Bank Commission can start together a vast
campaign to explain to every Bank Heads the interest to run securitization
programs and how to run them successfully. The total outstanding amount of
medium and long maturity loans in WAEMU area is about 1 500 billions of
CFA at end of August 2006:
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Loans structure in WAMU
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(Source: Annual Report 2006 Bank Commission, Table n°8, Page
36)
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(millions of F CFA)
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2005
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2006
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Short Term Loans
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2 663 923
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61,45%
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2 926 107
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59,90%
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Medium Term Loans
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1 168 850
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26,96%
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1 384 058
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28,33%
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Long Term Loans
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140 487
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3,24%
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153 964
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3,15%
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Crédit Bail
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32 292
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0,74%
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38 913
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0,80%
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Bad Loans
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329 320
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7,60%
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381 820
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7,82%
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Total
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4 334 872
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100,00%
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4 884 862
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100,00%
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The amount of medium and long term loans is quite enough for
starting securitization market and thus making our financial place more
attractive.
Surely the above proposals can need additional
technical considerations before their application. Anyway, I do hope that with
this study we went far with the idea and the opportunity that medium and long
term securitization is a powerful tool for achieving the « Regional
Economic Program » and the «Growth and Poverty Reduction
Strategy ».
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