Due to the asymmetry of information between borrowers that are smallor 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.
{"title":"A comprehensive method for credit risk assessment of small and medium-sized enterprises based on Asian data","authors":"N. Yoshino, Farhad Taghizadeh‐Hesary","doi":"10.4324/9780429401060-3","DOIUrl":"https://doi.org/10.4324/9780429401060-3","url":null,"abstract":"Due to the asymmetry of information between borrowers that are smallor 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.","PeriodicalId":273088,"journal":{"name":"Unlocking SME Finance in Asia","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125083839","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Farhad Taghizadeh‐Hesary, N. Yoshino, Phadet Charoensivakorn, Baburam Niraula
SMEs often have severe difficulties raising money. Considering the bank-dominated characteristic of economies in Asia, banks are the main source of financing. In order to prevent the accumulation of non-performing loans in the small and medium-sized enterprise (SME) sector, it is crucial for banks to distinguish healthy SMEs from risky ones. This chapter examines how a credit rating scheme for SMEs can be developed when access to other financial and non-financial ratios is not possible by using data on lending by banks to SMEs. We employ statistical techniques on five variables from a sample of 3,272 Thai SMEs and classify them into subgroups based on their financial health. The source of data used for the credit risk analysis in this research is the National Credit Bureau of Thailand. By employing these techniques, banks could reduce information asymmetry and consequently set interest rates and lending ceilings for SMEs. This would ease financing to healthy SMEs and reduce the number of non-performing loans to this important sector.
{"title":"Credit risk analysis of small and medium-sized enterprises based on Thai data","authors":"Farhad Taghizadeh‐Hesary, N. Yoshino, Phadet Charoensivakorn, Baburam Niraula","doi":"10.4324/9780429401060-6","DOIUrl":"https://doi.org/10.4324/9780429401060-6","url":null,"abstract":"SMEs often have severe difficulties raising money. Considering the bank-dominated characteristic of economies in Asia, banks are the main source of financing. In order to prevent the accumulation of non-performing loans in the small and medium-sized enterprise (SME) sector, it is crucial for banks to distinguish healthy SMEs from risky ones. This chapter examines how a credit rating scheme for SMEs can be developed when access to other financial and non-financial ratios is not possible by using data on lending by banks to SMEs. We employ statistical techniques on five variables from a sample of 3,272 Thai SMEs and classify them into subgroups based on their financial health. The source of data used for the credit risk analysis in this research is the National Credit Bureau of Thailand. By employing these techniques, banks could reduce information asymmetry and consequently set interest rates and lending ceilings for SMEs. This would ease financing to healthy SMEs and reduce the number of non-performing loans to this important sector.","PeriodicalId":273088,"journal":{"name":"Unlocking SME Finance in Asia","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128665846","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Yergali Dosmagambet, Yessengali Oskenbayev, Farhad Taghizadeh‐Hesary, M. Mukan
{"title":"Oil price fluctuations, creditworthiness of the financial system, and SME financing in Kazakhstan","authors":"Yergali Dosmagambet, Yessengali Oskenbayev, Farhad Taghizadeh‐Hesary, M. Mukan","doi":"10.4324/9780429401060-7","DOIUrl":"https://doi.org/10.4324/9780429401060-7","url":null,"abstract":"","PeriodicalId":273088,"journal":{"name":"Unlocking SME Finance in Asia","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116264450","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-11-07DOI: 10.4324/9780429401060-15
M. Yağcı
This study examines the recently revived credit guarantee fund (KGF) mechanism in Turkey from a comparative historical perspective and identifies the structural features of the Turkish economy that complicate access to finance for SMEs. The banking-based financial system in Turkey, state banks and the public sector, was unable to resolve the access to finance problem of SMEs in the near past. Consequently, the public authorities revived the KGF in early 2017. The KGF was established in 1993 but stayed idle until recently. Despite these efforts, structural impediments to easing SMEs’ access to finance persist in the Turkish economy. This paper identifies the chronic current account deficit, high inflation, large size of the informal economy, and bank-based financial system as the major structural obstacles to easing SMEs’ access to finance. Moreover, the global financial crisis has exacerbated the access to finance problem of Turkish SMEs. This paper posits that, for Turkey to resolve the financing problem of SMEs, it is necessary to identify clearly the sustainability of the recently revived KGF and its impact on public and private debt. In addition, the KGF mechanism needs to prioritize SME financing in value-added tradeable goods so that it can contribute to long-term, sustainable economic growth in Turkey.
{"title":"Credit guarantee scheme and small and medium-sized enterprise finance","authors":"M. Yağcı","doi":"10.4324/9780429401060-15","DOIUrl":"https://doi.org/10.4324/9780429401060-15","url":null,"abstract":"This study examines the recently revived credit guarantee fund (KGF) mechanism in Turkey from a comparative historical perspective and identifies the structural features of the Turkish economy that complicate access to finance for SMEs. The banking-based financial system in Turkey, state banks and the public sector, was unable to resolve the access to finance problem of SMEs in the near past. Consequently, the public authorities revived the KGF in early 2017. The KGF was established in 1993 but stayed idle until recently. Despite these efforts, structural impediments to easing SMEs’ access to finance persist in the Turkish economy. This paper identifies the chronic current account deficit, high inflation, large size of the informal economy, and bank-based financial system as the major structural obstacles to easing SMEs’ access to finance. Moreover, the global financial crisis has exacerbated the access to finance problem of Turkish SMEs. This paper posits that, for Turkey to resolve the financing problem of SMEs, it is necessary to identify clearly the sustainability of the recently revived KGF and its impact on public and private debt. In addition, the KGF mechanism needs to prioritize SME financing in value-added tradeable goods so that it can contribute to long-term, sustainable economic growth in Turkey.","PeriodicalId":273088,"journal":{"name":"Unlocking SME Finance in Asia","volume":"189 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115945103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Role of SMEs in Asia and the financing challenges they face","authors":"N. Yoshino, Farhad Taghizadeh‐Hesary","doi":"10.4324/9780429401060-1","DOIUrl":"https://doi.org/10.4324/9780429401060-1","url":null,"abstract":"","PeriodicalId":273088,"journal":{"name":"Unlocking SME Finance in Asia","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129429587","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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