The Impact of Loan Guarantees on Bank Loan Risks: An Applied Study on the Social Development Bank

Abstract

This study focuses on a different approach to understanding the impact of loan guarantees on bank risks.  In it, utility theory and the descriptive analytical approach are used appropriately to analyze various data and determine the relationship between guarantees and the level of risk. The findings of the study are important, as they show that guarantees contribute effectively to reducing bank risks and provide additional protection for banks when borrowers default. It also enhances financial stability and improves banking decisions. These conclusions also reinforce the importance of loan guarantees in the banking system. It is good that the study recommends the need to improve safeguards policies and implement innovative risk management strategies. Therefore, this will help in enhancing maximum utilization of collateral and improving the performance of banks. However, the study could benefit from adding some clarifications to the methodological part to clarify how to analyze the data and how to define the relationship between safeguards and risks more specifically. Overall, this study provides important findings about the impact of granting loan guarantees on bank risks and recommends measures to enhance banks' utilization of these guarantees. One of the most important objectives of the study is to be a reference for people seeking future loans, such as family and marriage loans.