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Sarah Omran

Diplômé DBA - 2018

Titre de thèse

RELATIONSHIP BETWEEN MULTIDIMENSIONAL CREDIT EVALUATION MODEL AND SMALL TO MEDIUM ENTERPRISES ACCESS TO CREDIT: A COMPARATIVE IN DEPTH LOOK INTO THE LEBANESE BANKING/SME RELATIONSHIP

Superviseur(s)

Vassili Joannides
Purpose In this study we investigate the relationship between adopting a multidimensional credit evaluation model and SMEs’ access to credit within the Lebanese context. Academics and practitioners pointed to the inaccuracy of mathematical tools when evaluating SMEs, and to the importance of including non-financial factors. However, there is scarcity in the studies that track the relationship between mixed models and SMEs’ access to funds. In this research, a new credit evaluation model is designed by combining Finance and Management research streams. Design/methodology/approach This is a quantitative based research, a questionnaire was addressed to credit officers within Lebanese banks. Binary logistic regressions were applied view the categorical nature of the dependent variable for two samples: Alpha banks and Non-Alpha Banks. The Wald test was adopted to check significance of resultsFindings The first outcome of the research identifies a positive relationship between the financial, customer, & management factors and the Lebanese SMEs’ access to Credit within Alpha banks with a model fit of 87.3%. As for non-Alpha Banks, only the financial factor hypothesis was confirmed as a determinant of SMEs’ access to credit with pseudo R-squares results reaching 100%. The second outcome is that when omitting the financial factor, the predictors: Management Factor, Customer Factor, and Internal Factor determine SMEs’ Access to credit with a model fit of 87.6%.Research limitations/implications Under the “Lebanese Secrecy Law “established in 1956, bankers are forbidden from revealing any information concerning their clients. This implies the impossibility of collecting accurate data about the dollar value of credit portfolio held by each credit officer.Practical implications Credit access is crucial for SMEs to achieve business growth and avoid shut down. These firms are highly dependent on banks as a main source of funding. An accurate credit rating enables banks to effectively meet their capital requirements, and SMEs to avoid credit rationing, or in other cases credit approval under severe pricing and collateral conditions.Originality/value This research is considered as one among few quantitative studies that quantify the importance of qualitative data within SME firms, and up to our knowledge the first study that addresses this topic in Lebanon. The significance of this study is interrelated directly with banks and Small to medium enterprises, and with the financial stability of a country as a result of the importance of those two sectors in any economy. Keywords: Credit rating, SME, Banks, IRB, credit rationing, Value at Risk (VAR), Performance Measurement Systems, hard data, soft data.