Screening Creditworthiness of Sme's: The Case of Small Business Assistance in Turkey

Posted: 6 Sep 2014

See all articles by Mehmet Baha Karan

Mehmet Baha Karan

Hacettepe University - Department of Business Administration

Selcuk Caner

Bilkent University - Faculty of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: September 5, 2012

Abstract

In this paper we estimate creditworthiness of small and medium-sized enterprises (SMEs) that receive financial and non-financial incentives from the small business development administration (KOSGEB) in Turkey. Assessing creditworthiness of SMEs to qualify for government support remains a concern since standard methods based on financial information on firms would be inadequate due to lack of transparent financial information. Such businesses apply for government support because they would not qualify for funding from financial institutions. To assess the creditworthiness of these businesses other firm-level data is essential. A logit model is used to estimate riskiness of SMEs including non-financial data obtained from the business survey obtained by KOSGEB. We find that efficient and internationally competitive SMEs are unlikely to default. Firms with high creditworthiness are also managed by owners and focus on their core businesses. The model used in this paper provides a tool that can be used to better screen applicants seeking incentives as well as monitoring firms under a government support program.

Suggested Citation

Karan, Mehmet Baha and Caner, Selcuk, Screening Creditworthiness of Sme's: The Case of Small Business Assistance in Turkey (September 5, 2012). Available at SSRN: https://ssrn.com/abstract=2492026

Mehmet Baha Karan (Contact Author)

Hacettepe University - Department of Business Administration ( email )

Beytepe Campus
Ankara, 16800
Turkey
+903122978700 (Phone)

Selcuk Caner

Bilkent University - Faculty of Business Administration ( email )

06533 Bilkent, Ankara
Turkey
0 312 290 18 60 (Phone)
0 312 266 49 58 (Fax)

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