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ARTICLE · 28 SEPTEMBER 2016

De-Risking Lending Through The Use Of Credit Derivative Instruments

Perchstone & Graeys
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Although the CDI has been criticized by many due to its ability to engender systemic risk; especially the more exotic types.

NigeriaFinance and Banking
Perchstone & Graeys
Perchstone & Graeys
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The invention of Credit Derivate Instruments (CDI) has created a mechanism by which Banks and other credit-giving institutions are able to mitigate the risks associated with the loans they give to their customers. There has been talk of bringing this innovation to Nigeria via the use of Insurance Companies. That is, to have the Insurance Companies provide insurance to lenders against the default risk of borrowers; especially the small and medium scale business borrowers. The premise for this idea being a belief that once the credit risk is removed, the lenders would be more willing to advance loans to businesses. Thus spurring increased economic activities and ultimately, economic growth.

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