Credit scoring model proposal for SME companies in The Basel-II framework: The example of Artvin province

SMEs both in all countries of the world and in Turkey are accepted as indispensable elements of the economic system. Given that SMEs' cooperation with banks will increase gradually, it is obvious that SMEs will be affected by these set of criteria due to the risk-oriented approach for Basel II criteria. With Basel-II, banks started to give scores to SMEs. These scores will be the result of credit scoring by the banks according to various criteria and the amount of interest that will be paid by the SMEs will be changed according to the rating. In the current structure, the risk density of the loans granted regardless of the risk structure is 100%, while the risk methods of the companies included in the corporate portfolio according to the Basel-II definition may vary according to the credit score and the collateral structure of the firms, which are introduced in Basel II. Thus, firms with lower ratings pay more interest and firms with high ratings may pay less interest. In order to raise their credit score points, SMEs need to strengthen their own funds, adjust their financial structures, establish a transparent accounting management system, balance sheet statements that reflect the appropriate reality, and increase their transparency levels and work to achieve a corporate structure. In this study, the effects of Basel-II criteria on SME financing costs are tried to be analysed through the ratings applied by banks to firms. At the same time, a simple model that companies can use to calculate the score is tried to be created. Key Words: Basel-II, SMEs, Credit Costs, Scoring, Rating, Panel Data