Studies On Credit Risk Evaluation System For SMEs By Our Commercial Banks

Considering the fundamental role played by small and medium sized enterprises (SMEs) in the economy of our country, the situation of their credit availability is not optimistic. From a credit risk point of view, SMEs are different from large corporations for many reasons. And the commercial banks don't have an effective method to measure the credit worthiness of them, which is the critical cause of the risk-averse behavior of banks in funding SMEs.Firstly, we use, for the first time, the definition of SMEs provided by the New Basel Capital Accord. Then we analyzed the characteristics of SMEs'credit risks and the influences of the Internal Ratings-Based Approach on SMEs. After comparing three main prediction models in theory, we used different techniques on panel data of over 300 listed SMEs (with sales less than 500 million yuan) over the period of 2005 to 2010. So far, many researches on the credit worthiness of SMEs have focused on suggestions on preventing the credit risks. Empirical studies are greatly constrained by the small number of samples. And this paper managed to expand the number of sample to more than 300.After comparing the three different models, we concluded that it's feasible using KMV model to measure the credit risk for listed SMEs. Comparing with MDA and Logistic regression model, KMV shows the best predictive power. Thus KMV is the preferred choice. Finally, we put forward a series of policy suggestions to help banks set their internal systems and procedures to manage credit risk for SMEs.Generally, the commercial banks of our country should build up the database and find an effective model to predict the credit risk for SMEs. Only through this way, can they adjust their client structure and achieve a continue development.