Credit Risk of SME

As is known to all, small and medium-sized enterprises (SMEs) are the basic force for promoting employment and stabilizing society, the backbone of economic growth and innovation, and the largest and most dynamic group in the market economy.The previous literature suggests that SMEs play an important role in an economy’s growth(Kang Li et al.,2019).Many large enterprises are from small and medium-sized enterprises, which inject a steady stream of vitality into the booming market.This blog explores the research progress and lending techniques of sme credit risk.

Through a detailed analysis of the literature, it can be found that in recent years, the research content of SME credit risk mainly includes three aspects: the research of SME credit risk based on financial index system, supply chain finance and enterprise big data.

1. Research on credit risk of SMEs based on financial index system.

The traditional credit risk index is mainly financial index, and the credit risk model based on financial index is widely used in the risk assessment and early warning of small and medium-sized enterprises.

2. Research on credit risk of SMEs based on supply chain finance model.

Supply chain finance is a kind of self-compensatory trade financing credit mode, which plays an important role in improving the financing environment of small, medium and micro enterprises. In recent years, it has received extensive attention from the industry and academia, and more and more literatures on credit risk research of small and medium enterprises based on supply chain finance mode have been published.

3. Research on credit risk of SMEs based on enterprise big data.

In addition to corporate financial data, corporate big data also includes all non-financial data that directly or indirectly reflect corporate operations, such as corporate shareholder background, corporate management information, and associated network media.With the development of big data technology, more and more scholars begin to pay attention to the research on credit risk of smes based on enterprise big data.

In the loan market, there is a serious information asymmetry between banks and enterprises, which is the fundamental reason that SMEs can hardly borrow from banks.Stiglitz & Weiss(1981) commentioned that information asymmetry and its credit risk are the root cause of financing difficulty of small and medium-sized enterprises.In the backdrop of the entrepreneurship, the country launched a series of policies to help small and medium-sized enterprise development, which makes the number of small and medium-sized enterprises increased year by year, the country SMEs have become an important part of the economic structure. However, influenced by internal factors and external environment, small and medium-sized enterprise the management floating is bigger, this leads to the commercial Banks can not accurately assess the credit risk of small and medium-sized enterprises.Business loans is the main source of income of commercial Banks, bank credit management effect greatly affects the stability of China's economic and social development. Therefore, commercial Banks should according to the new economic situation, in a timely manner to solve various problems arising from the loan business, both to help small and medium-sized enterprise financing problems, and promote the rapid development of economy in China.

Author: Yuxuan Shi

Date: 12.10.2021

Reference

Li, Kang; Niskanen, Jyrki and Niskanen, Mervi.(2019)Capital structure and firm performance in European SMEs: Does credit risk make a difference?Managerial Finance,45(5),pp.582-601.

Song, Zhuo-lin, Zhang, Xiao-mei.(2018)Lending technology and credit risk under different types of loans to SMEs: Evidence from China.International Review of Economics and Finance,57,pp.43-69.

Stiglitz and Weiss(1981)Credit rationing in markets with imperfect information.The America Economic Review, 73 (1981), pp. 400-410.