Credit risk analysis of small and medium-sized enterprises based on thai data

Farhad Taghi Zadeh Hesary, Naoyuki Yoshino, Phadet Charoensivakorn, Baburam Niraula

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

Small and medium-sized enterprise (SMEs) often face severe difficulties raising money. Considering the bank-dominated characteristic of Asian economies, banks are the main source of financing. In order to prevent the accumulation of nonperforming loans in the 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 financial and non-financial data are not accessible just by using lending data of 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 nonperforming loans to this important sector.

Original languageEnglish
Title of host publicationUnlocking SME Finance in Asia
Subtitle of host publicationRoles of Credit Rating and Credit Guarantee Schemes
PublisherTaylor and Francis
Pages112-135
Number of pages24
ISBN (Electronic)9780429684579
ISBN (Print)9781138353428
DOIs
Publication statusPublished - 2019 Jan 1

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ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

Cite this

Taghi Zadeh Hesary, F., Yoshino, N., Charoensivakorn, P., & Niraula, B. (2019). Credit risk analysis of small and medium-sized enterprises based on thai data. In Unlocking SME Finance in Asia: Roles of Credit Rating and Credit Guarantee Schemes (pp. 112-135). Taylor and Francis. https://doi.org/10.4324/9780429401060-6