Abstract
The phenomenal economic growth of Asia has been in a leading position in the world for decades (Helliwell, 1996), keeping the regional economy a most active global economic power. The great success of the Asian economy has completely changed the global competitive landscape. Among all contributing factors, the booming small and medium-sized enterprises (SMEs) have played a key role. While SME-related issues have drawn growing interests in academic literature, financing difficulties these enterprises often encounter are a heated topic intensively discussed in voluminous studies.
This recent book by Naoyuki Yoshino and Farhad Taghizadeh-Hesary is a much needed and highly relevant work, providing a comprehensive cross-country collection of relevant research. The book is composed of three main parts. It first reviews (Part I) the role of SMEs in Asia and the general financial challenges these enterprises face. The aim is to further discuss possible remedies for unlocking financing of SMEs. The authors then proceed to explore how to resolve the financing difficulties of SMEs from two aspects in the cases of individual countries: credit risk assessment (Part II) and credit guarantee schemes (CGSs; Part III).
Starting from a general discussion on the gap between the needs of credit risk assessment and the status quo of credit risk databases in Part II, the authors introduce a comprehensive method for credit risk assessment (Chapter 3) and use Japan as an example to demonstrate the establishment of a credit risk database and a statistical scoring model using that database (Chapter 5). Chapters 4 and 6 further elaborate the role of credit rating/analysis for SMEs using India and Thailand as two special cases.
CGS is a commonly adopted form of policy support to alleviate SMEs financing difficulties worldwide. Part III showcases an extensive collection of relevant studies covering a broad spectrum of countries. The role of CGSs or similar/equivalent government supporting policies is discussed for 10 countries individually. Among them, Japan (Chapter 11), Korea (Chapter 12) and Singapore (Chapter 14) are three leading developed economies. Learning from their experiences can offer valuable implications to other developing countries. It is also interesting to see the discussions on financing of SMEs specifically in Kazakhstan (Chapter 7) and Iran (Chapter 10), both featured with rich natural resources and quite different economic structures from other developing countries in this collection. Turkey (Chapter 15) is included, which gives me a little surprise and attracts me to read it before others.
In general, I find that this book is easy to follow and it is of great value to both policymakers and academic researchers. Government authorities should and could learn substantially from the cross-country comparison offered in this book. Establishment of a comprehensive credit risk database is not only necessary but also urgent, as shown by the evidence in this book. It is not only a challenging task but also a highly worthwhile investment. With the rapid development of information technology and tools for big data analysis, the construction of such a database is made feasible, though a biggest challenge remains on how the institutional setup can quickly follow up and timely adapt to the consequent changes. Authorities can also improve the design of their policy instruments by benefitting from the experiences of other countries. On the other hand, the authors document that existing CGSs have played important roles, but are not free from problems. A successful scheme should be able to adapt to a country’s specific level of financial development, natural endowments and economic structure. The collection of topics in this book hopes to inspire more research on comparative studies. Although country-specific analyses are currently abundant, cross-country studies in Asia incorporating different levels of development and other major social/economic factors are sparse and much needed.
While this book is generally successful and conveys valuable information to potential readers, a few points are worth mentioning to guide the readers for further consideration. First, while the existing method for alleviating the financing constraints of SMEs, namely CGSs, has been discussed in great details, relatively limited information is provided for credit risk analysis. The authors emphasise the importance of establishing credit risk databases and also a method for assessing credit risk in Part II. As mentioned above, the development of data collection method and information technology is expected to remove technical constraints of the establishment of credit risk databases. The effective use of these databases and methods of analysing credit risks are more critical instead. I doubt if India and Thailand can be considered as typical examples, and more information from other countries is needed. Second, failing to include China in this collection is an unfortunate drawback. I believe that many readers would be interested to see a comparison between China and India. SMEs are important for both countries in terms of employing the world’s two largest populations and supporting their fast economic growth. These countries, however, have fundamental differences regarding the level of financial development and regulatory framework. Their differences can be more informative if included and discussed. Third, as a reader, I give the biggest credit to the comprehensive nature of Part III, though a short summary is missing, which should have better accomplished the book.
To conclude, I would like to congratulate the authors again for compiling this valuable book. I am sure that potential readers can gain lots of information and inspirations. My brief comments should not be considered as any shortcomings of this great job but rather further expansions from its core contents.