Alternative credit scoring model for SMEs as a credit risk management tool and implementation

The most important concern for the banks is to maximaze their profits in line with the risk management principles. Credit risk is one of the major risks banks and financial institutions are faced with the New Basel-II Accord, banks and financial institutions have the opportunity to improve their risk management process by using rating based approach. Conserning credit cycle process in banking sector, one of the most important innovative concepts is the credit scoring in terms of risk-based credit decision, colleterals, credit pricing, etc. The improvement and use of credit scoring is increasing day by day. The credit scoring with the help of classification techniques provides to take easy and quick decisions in lending operations. However, no definite consensus has been reached with regard to the best method for credit scoring and in what conditions the methods performs best.The objective of this study is to establish a novel-hybrid- method for SME?s, where risk evaluation is more complex and difficult compared to large scale enterpreneurs.