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    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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    Citable URI
    http://hdl.handle.net/11540/9479
    Metadata
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    adbi-wp907.pdf (481.2Kb)
    Author
    Yoshino, Naoyuki
    Taghizadeh-Hesary, Farhad
    Theme
    Development
    Finance
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise