SME Credit Risk Analysis Using Bank Lending Data: An Analysis of Thai SMEs

Naoyuki Yoshino (), Farhad Taghizadeh-Hesary (), Phadet Charoensivakorn and Baburam Niraula
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Phadet Charoensivakorn: Asian Development Bank Institute
Baburam Niraula: Asian Development Bank Institute

No 536, ADBI Working Papers from Asian Development Bank Institute

Abstract: Small and medium-sized enterprises (SMEs) are the backbone of most Asian economies. The main obstacle to the development of the SME sector is the lack of stable finance. Considering the bank-dominated characteristic of economies in Asia, banks are the main source of financing, and the lack of a comprehensive credit rating database has been a bottleneck for SMEs. This paper 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 Thai SMEs and classify them into subgroups based on their financial health. 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 amount of non-performing loans to this important sector.

Keywords: credit risk analysis; SMEs; bank lending; Thailand (search for similar items in EconPapers)
JEL-codes: G21 G23 G24 G32 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2015-09-04
New Economics Papers: this item is included in nep-ban, nep-ent, nep-rmg, nep-sbm and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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