Revisiting the Existing Credit Rating Methods of Small and Medium Enterprises

S M Rakibul Anwar(1), Riduanul Mustafa(2), Tanzina Tabassum Tanzo(3),


(1) Department of Business Administration, Bangladesh Army International University of Science and Technology, Comilla Cantonment,
(2) Department of Business Administration, Bangladesh Army International University of Science and Technology, Comilla Cantonment, Bangladesh
(3) Department of Finance, University of Chittagong, Bangladesh

Abstract

Credit rating of small and medium enterprises is more difficult because most of the SMEs information is not organized like the large corporate organizations. Traditionally used methods for corporate evaluation are not suitable directly for SMEs. For this reason, a comparative analysis is needed to compare the existing methods proposed by the different financial bodies. The aim of this paper is to make a comparative analysis of weight distribution in financial and non-financial factors in SMEs rating for the selected countries and to compare the indicators of proposed SMEs rating methods by ADB, ASEAN & Bangladesh Bank. After completing a comparative analysis, this paper reveals that these three methods give nearly similar weights to financial aspects whereas Bangladesh Bank adds two financial issues in different dimensions named bank relationship risk and financial security risk. Although these three methods have a similar weight for financial and non-financial aspects, there are differences among the indictors of non-financial aspects.

Keywords

credit rating methods; credit rating agencies; financial aspects; non-financial aspects; small and medium enterprises

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DOI: https://doi.org/10.32455/ijbfa.v1i1.8

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