1,143 research outputs found
SMEâS Rating System and Process in Turkey According to the Basel II Settlements
Basel II settlements have a strong influence on the SMEs that are of great importance to countriesâ economies. Conditions to become an SME have changed and rating of SMEs has become very important with this new settlement. In this study, in order to be awarded high credit ratings SMEs will be evaluated by analyzing this period in accordance with Basel II. The following were studied; the rating period and its requirements under the framework of Basel II, rating of SMEs and the criteria used during this period, credit rating analysis methods under the scope of the rating procedure and principle
The New Basle Capital Accord and Developing Countries: Issues, Implications and Policy Proposals
Risk-management, Internal-ratings, Pro-cyclicality, Net impact
ADBâOECD Study on Enhancing Financial Accessibility for SMEs: Lessons from Recent Crises
During the era of global financial uncertainty, stable access to appropriate funding sources has been much harder for small and medium-sized enterprises (SMEs). The global financial crisis impacted SMEs and entrepreneurs disproportionately, exacerbating their traditional financing constraints. The financial conditions of many SMEs were weakened by the drop in demand for goods and services and the credit tightening. The sovereign debt crisis that hit several European countries contributed to further deterioration in bank lending activities, which negatively affected private sector development.
The global regulatory response to financial crises, such as the Basel Capital Accord, while designed to reduce systemic risks may also constrain bank lending to SMEs. In particular, Basel III requires banks to have tighter risk management as well as greater capital and liquidity. Resulting asset preference and deleveraging of banks, particularly European banks with significant presence in Asia, could limit the availability of funding for SMEs in Asia and the Pacific. Lessons from the recent financial crises have motivated many countries to consider SME access to finance beyond conventional bank credit and to diversify their national financial system.
Improving SME access to finance is a policy priority at the country and global level. Poor access to finance is a critical inhibiting factor to the survival and growth potential of SMEs. Financial inclusion is thus key to the development of the SME sector, which is a driver of job creation and social cohesion and takes a pivotal role in scaling up national economies.
The Asian Development Bank (ADB) and the Organisation for Economic Co-operation and Development (OECD) have recognized that it is crucial to develop a comprehensive range of policy options on SME finance, including innovative financing models. With this in mind, sharing Asian and OECD experiences on SME financing would result in insightful discussions on improving SME access to finance at a time of global financial uncertainty. Based on intensive discussions in two workshops organized by ADB in Manila on 6â7 March 2013 and by OECD in Paris on 21 October 2013, the two organizations together compiled this study report on enhancing financial accessibility for SMEs, especially focusing on lessons from the past and recent crises in Asia and OECD countries.
The report takes a comparative look at ADB and OECD experiences, and aims to identify promising policy solutions for creating an SME base that is resilient to crisis, from a viewpoint of access to finance, and which can help drive growth and development
The Political Economy of Global Financial Governance: The Costs of Basle II for Poor Countries
The 1990s financial crises triggered many changes to the design of the international financial system, the so-called international financial architecture. While much affected, developing countries have had very little influence on the changes, which the formulation of the new Basle capital accord (B-II) illustrates. The article shows that B-II has largely been formulated to serve the interests of powerful market players, with developing economies being left out. For developing countries, B-II can make domestic financing more costly and raise the costs of and reduce the access to external financing. Importantly, B-II can exacerbate fluctuations in the supply of external financing, an unfortunate outcome, given that developing countries already suffer from volatility.Basle Committee, capital adequacy, financial governance, financial architecture, financial reform, international standards, capital flows, poor countries, cost of capital, international development
A Quantitative Study of Multilayered Market Systems and Small and Medium-Sized Enterprises
Small and medium-sized enterprises (SMEs) account for approximately 50% of the world\u27s gross domestic product. However, these economic agents suffer from inadequate access to liquid funds to finance their operations. The liquidity gap has led to early bankruptcy and liquidation, stagnant growth and development, and fewer employment opportunities. The problem under study was the effect of funding limitations on SMEs\u27 business operations and growth. The purpose was to examine the impact of multilayered capital systems as alternative funding for SME growth. This study was informed by Gilbrat\u27s law and the theory of financial exclusion. The research questions addressed the use of a multilayered capital market as a substitute for the conventional methods of funding for SMEs. A survey instrument was used to collect data using a stratified random sample of 54 small-scale business owners and finance professionals. These participants were identified from U.S. Census Bureau data between 2009 and 2014 across the information technology, service, and manufacturing sectors. Multiple regressions and correlation analyses were used to analyze the data. The results showed that age, credit score, average turnover, and total assets have significant impacts on obtaining funding, especially total assets. Moreover, results showed that growth rates correlated with funding from multilayered capital systems. This study contributes positively to social change by highlighting alternative means of funding SMEs, leading to reduced dependency on government, less crime through gainful employment, and improved corporate social responsibility due to better interactions among community member
Banking concentration, information asymmetries and credit rationing: The Argentinean case
This paper highlights the importance of the information efficiency in the banking sector as a way to ensure his correct operation as financial intermediary and the correct functioning of the economy in general. The problems of information in the banks distort their relation with the financing demand and especially with the sector of the SMEs, what really means an important obstacle for the smooth operation of any market system. The analysis is centred in the relative size of the financial institutions, the generation of different types of information and the way how it affects the sector of the SMEs. By means of empirical evidence we will show how the greater size of the banks has influence on the creation of information systems that are not well adapted for some segments of the demand or even they do not generate information at all
Modelling Credit Risk for SMEs in Saudi Arabia
The Saudi Governmentâs 2030 Vision directs local banks to increase and improve credit for the Small and Medium Enterprises (SMEs) of the economy (Jadwa, 2017). Banks are, however, still finding it difficult to provide credit for small businesses that meet Baselâs capital requirements. Most of the current credit-risk models only apply to large corporations with little constructed for SMEs applications (Altman and Sabato, 2007). This study fills this gap by focusing on the Saudi SMEs perspective.
My empirical work constructs a bankruptcy prediction model based on logistic regressions that cover 14,727 firm-year observations for an 11-year period between 2001 and 2011. I use the first eight years data (2001-2008) to build the model and use it to predict the last three years (2009-2011) of the sample, i.e. conducting an out-of-sample test. This approach yields a highly accurate model with great prediction power, though the results are partially influenced by the external economic and geopolitical volatilities that took place during the period of 2009-2010 (the world financial crisis).
To avoid making predictions in such a volatile period, I rebuild the model based on 2003-2010 data, and use it to predict the default events for 2011. The new model is highly consistent and accurate. My model suggests that, from an academic perspective, some key quantitative variables, such as gross profit margin, days inventory, revenues, days payable and age of the entity, have a significant power in predicting the default probability of an entity. I further price the risks of the SMEs by using a credit-risk pricing model similar to Bauer and Agarwal (2014), which enables us to determine the risk-return tradeoffs on Saudiâs SMEs
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