Credit Risk Measurement of SMEs

Abstract:     
Purpose – The purpose of this paper is to discuss important aspects concerned with credit risk measurement of SMEs.

Methodology - Paper presents theoretical study, based on literature review and summary of findings of similar research papers, which have focused on credit risk assessment of SMEs.

Research Findings - Research identifies and discusses five distinctive aspects of risk assessment practice: choice of models, rating philosophy and time horizon, default definition, determinants of default and dataset issues.

Research limitations – Paper is theoretical and does not present an empirical study or analysis of numerical data. It restricts itself with analysis of the above five points only.

Practical implications – Paper considers frequent problems encountered when dealing with each of the five points in consideration, which impact the model structure and assumptions.

Value – Paper discusses possible remedies and applications to the highlighted problems given characteristics and specifics of SMEs.

Number of Pages in PDF File: 14

Keywords: SME finance, credit risk, bankruptcy

JEL Classification: L11, D81, D82, G21, G24, G28, G32, G33

working papers series