The credit divider model is theoretically opposed to the credit multiplier model. In the credit multiplier model, it is assumed that banks need to hold a certain amount of reserves before they can lend. In contrast, in the credit divisor model, banks lend first and then refinance themselves. In this way, they create the amount of money corresponding to the demand for credit addressed to them, and the amount of reserves (and therefore the monetary base) adjusts accordingly. This model is part of a scheme in which money is endogenous, i.e., it is the economic agents themselves who determine the amount of money in circulation, rather than the central bank, as the multiplier model implicitly assumes.
It should be noted here that we are talking about models which, by their very nature, do not aim to describe reality, but to provide tools for better understanding it.
J.P.
