In Asia, small and medium-sized enterprises (SMEs) account for the major share of employment and dominate the economy. Asian economies are often characterized as having bank-dominated financial systems and underdeveloped capital markets, in particular venture capital. Hence looking for new methods of financing SMEs is crucial.
Hometown Investment Trust funds (HIT) are a new form of financial intermediation that was only recently started and has now been adopted as a national strategy in Japan.
In this paper, we explain about the importance of SMEs in Asia and will describe about HIT. Then, we provide a scheme for credit rating of SMEs employing two statistical analysis techniques, principal components analysis and cluster analysis, applying various financial variables to 1,363 SMEs in Asia.
This comprehensive and efficient method would enable banks, to group their SME customers based on their financial health, adjust interest rates on loans, and set lending ceilings for each group.
Moreover this method is applicable to HIT around the world.
