A Comprehensive Method for the Credit Risk Assessment of Small and Medium-sized Enterprises Based on Asian Data
Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad | December 2018
Abstract
Due to the asymmetry of information between borrowers that are small- or medium-sized enterprises (SMEs) and lenders (banks), many banks are considering this sector as a risky sector. It is crucial for banks to be able to distinguish healthy from risky companies in order to reduce their nonperforming assets in the SME sector. If they can do this, lending and financing to SMEs through banks will be easier with lower collateral requirements and lower interest rates. In this paper, we provide a scheme originally developed by Yoshino and Taghizadeh-Hesary (2014) for assigning credit ratings to SMEs by employing two statistical analysis techniques—principal component analysis and cluster analysis—applying 11 financial ratios of 1,363 SMEs in Asia. If used by the financial institutions, this comprehensive and efficient method could enable banks and other lending agencies around the world, and especially in Asia, to group SME customers based on financial health, adjust interest rates on loans, and set lending ceilings for each group.
Citation
Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad. 2018. A Comprehensive Method for the Credit Risk Assessment of Small and Medium-sized Enterprises Based on Asian Data. © Asian Development Bank Institute. http://hdl.handle.net/11540/9479.Keywords
Development
Finance
Development Challenges
Development Issues
Development Problems
Microenterprises Finance
Commercial Finance Companies
Enterprise Financing
Financial Analysis
Banking Finance And Investment
SMEs
Small Business Finance
ADB
Project finance
Development plans
Strategic planning
Business Financing
Investment Requirements
Insurance Companies
International Monetary Relations
International Financial Market
Exchange Rate
Insurers
Insurance stocks
Insurance holding companies
Insurance carriers
Insurance agencies
Business subsidies
Investment companies
Foreign investment
Equity Finance
International banks and banking
Stock exchanges
Grants
Loans
Communication in rural development
Communication in community development
Economic development projects
Development banks
Economic forecasting
Environmental auditing
Cumulative effects assessment
Human rights and globalization
Small business
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