Predicting SME loan delinquencies during recession using accounting data and SME characteristics: The case of Greece

The objective of this paper is the comparison of various credit-scoring models (i.e. binomial logistic regression, decision tree, multilayer perceptron neural network, radial basis function, and support vector machine) in evaluating the risk of small and micro enterprises' (SMEs') loan delinquencies based on accounting data and applicants' specific attributes. Exploiting a representative large data set of SMEs' loans granted by a large Greek commercial bank in the expansion period, we track the evolution of SMEs' delinquencies over the recession period August 2010 to July 2012. This time frame encompasses a period of manageable levels of delays (early recession period: August 2011-July 2012) and a period when delays were increased to a very high degree (deep recession period: August 2011-July 2012). Comparison of the employed credit-scoring models during the early recession period shows that the multilayer perceptron neural network produces the highest predicting capacity, followed by the support vector machine model. As the crisis deepens, the support vector machine model presents the highest predicting accuracy, followed by the decision tree and then the multilayer perceptron model. Generally, the predictive performance of all credit-scoring models seems to be substantially reduced as the recession escalates. Our paper has important implications for the proper financing of SMEs given their importance for the European economy.