This metric quantifies the proportion of loans that necessitate collateral as a condition for financing approval by formal financial institutions. It reflects the
risk assessment strategies employed by lenders, as they often seek assurance in the form of assets to mitigate potential defaults. A higher percentage may indicate a more cautious lending environment, where institutions are incentivized to protect their investments, especially in volatile economic conditions. Conversely, a lower ratio could suggest a more accessible credit market, potentially fostering economic growth and supporting entrepreneurial ventures. Understanding this indicator helps stakeholders evaluate the overall credit landscape and gauge the level of trust within the financial system, offering insights into lending behaviors and conditions that could impact borrowers' access to capital.
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