Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/115353 
Year of Publication: 
2015
Series/Report no.: 
ADBI Working Paper No. 536
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
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.
JEL: 
G21
G23
G24
G32
Document Type: 
Working Paper

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