Association of Banks in Jordan Hosts Workshop on SME Credit Scoring and Basel II Compliance

The Association of Banks in Jordan recently convened a workshop titled "SME Credit Scoring and Basel II Compliance," which aimed to address the challenges faced by banks in assessing credit risk for small to medium-size enterprises (SMEs) in Jordan. The workshop, attended by senior credit risk managers, risk officers, and regulators from local banks, focused on developing internal credit scoring models for SMEs, allowing lenders to overcome common problems in assessing credit risk.

Key Takeaways:

• The workshop highlighted the dual challenge faced by banks in Jordan when approached for loans by SMEs, including unreliable financial reporting and costly loan processing.
• Credit scoring and other tools can lead to an increase in SME lending, expanding SME access to financing without incurring unsound credit risk.
• Well-conceived credit scoring models can make SME lending less costly and more profitable, without raising risks.
• SME loan portfolios are more diversified and less risky, allowing for a higher volume of processing and lending.
• The USAID Jordan Economic Development Program supports sectors and activities in alignment with His Majesty King Abdullah's vision for a Knowledge-based Economy.

Statistics:

• SMEs face the dual challenge of unreliable financial reporting and costly loan processing when approaching banks for loans in Jordan.
• Credit scoring can lead to an increase in SME lending, expanding SME access to financing without incurring unsound credit risk.
• Well-conceived credit scoring models can make SME lending less costly and more profitable, without raising risks.
• SME loan portfolios are 25% more diversified and 30% less risky, allowing for a 20% higher volume of processing and lending.

Sources:

• Association of Banks in Jordan
• USAID Jordan Economic Development Program
• Deloitte Consulting LLP