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

17 Pages Posted: 12 Aug 2015

See all articles by Naoyuki Yoshino

Naoyuki Yoshino

Asian Development Bank Institute

Farhad Taghizadeh Hesary

Waseda University

Phadet Charoensivakorn

National Credit Bureau

Baburam Niraula

Asian Development Bank Institute

Date Written: August 10, 2015

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

JEL Classification: G21, G23, G24, G32

Suggested Citation

Yoshino, Naoyuki and Taghizadeh Hesary, Farhad and Charoensivakorn, Phadet and Niraula, Baburam, SME Credit Risk Analysis Using Bank Lending Data: An Analysis of Thai SMEs (August 10, 2015). ADBI Working Paper 536. Available at SSRN: https://ssrn.com/abstract=2641712 or http://dx.doi.org/10.2139/ssrn.2641712

Naoyuki Yoshino (Contact Author)

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

Farhad Taghizadeh Hesary

Waseda University ( email )

1-6-1 Nishi-Waseda,
Shinjuku, Tokyo 169-8050
Japan

Phadet Charoensivakorn

National Credit Bureau ( email )

Bangkok

Baburam Niraula

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

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