Credit Risk Reduction Effect on Small and Medium-sized Enterprise Finance Through the use of Bank Account Information
Nemoto, Naoko; Yoshino, Naoyuki; Okubo, Yutaka; Inaba, Daimei; Yanagisawa, Kentaro | August 2018
Abstract
This paper verifies the impact of bank account information, such as information on deposits and withdrawals, that is not necessarily fully accounted for in conventional internal ratings and that can affect the accuracy of the default predictions of small and medium-sized enterprises (SMEs). The analysis demonstrates that the accuracy of default predictions improves when a model based on bank account information is used in addition to the default prediction model based on traditional financial information. The analysis also shows that the degree of improvement increases when the size of the company is small. For small companies, the quality of financial data is generally assumed to be low, but the bank account information model can complement the incomplete data. In addition, for small firms, the bank account information model shows better default prediction capability compared to the financial model, which implies the possibility that banks could extend loans even if only the bank account information is available. The correlation coefficients of the financial model and the bank account model are higher than 50% but not very high, suggesting that these models evaluate borrowers from different perspectives.
This study suggests the possibility of analyzing credit risk more easily without past financial information, especially for small enterprises. If the bank account information model is utilized, banks can reduce credit costs and loan review times and costs, which will make SME financing more efficient and smooth. The empirical analysis in this paper focuses on SMEs in Japan, but the results can also be applied to other countries, particularly emerging countries in Asia.
Citation
Nemoto, Naoko; Yoshino, Naoyuki; Okubo, Yutaka; Inaba, Daimei; Yanagisawa, Kentaro. 2018. Credit Risk Reduction Effect on Small and Medium-sized Enterprise Finance Through the use of Bank Account Information. © Asian Development Bank Institute. http://hdl.handle.net/11540/8636.Keywords
Risk Financing
Urban Development Finance
Trade Finance
Small Business Finance
Rural Finance
Roundtable on International Trade and Finance
Regional Development Finance
Public Service Finance
Public Finance
Project Finance
Private Finance
Nonbank Financing
Non-Bank Financial Institutions
Municipal Finance
Local Government Finance
Local Currency Financing
Limited Resource Financing
International Financial Institutions
Infrastructure Financing
Industrial Finance
Government Financial Institutions
Government Finance
Financing of Infrastructure
Financial Sector Development
Financial Regulation
Urbanization
Urban Services
Urban Projects
Urban Problems
Urban Poverty
Urban Policy
Urban Planning
Urban Infrastructure
Urban Health
Urban Government
Urban Economic Development
Urban Development Finance
Urban Development
Urban Conditions
Urban Communities
Urban Population
Taxation
Public Accounting
National Budget
Municipal Bonds
Local Government
Local Taxes
International Monetary Relations
International Financial Market
International Banking
Central Banks
Business Financing
Capital Resources
Budgetary Policy
Capital Needs
Corporate Divestiture
Capital Instruments
Pension Funds
Insurance Companies
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Portfolio Management
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Economics of Education
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Urban Plans
Urbanism
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Taxing power
State of taxation
Tax-sales
Tax revenue estimating
Tax planning
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Effect of taxation on land use
Effect of taxation on labor supply
Intergovernmental tax relations
Inheritance and transfer tax
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Local government
Urban renewal
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