Credit Rating Methods for Public–Private Partnership Infrastructure Projects and Small and Medium-Sized Enterprises in South Asia

Date: February 2014
Type: Guides
Country:
Show 6 tags
Bangladesh; Bhutan; India; Maldives; Nepal; Sri Lanka
Subject:
Finance; Private sector
Series: South Asia Operational Knowledge Working Papers

Description

A credit rating compresses an enormous amount of diverse information into a single symbol. Credit quality embraces relative default probability, loss severity, financial strength, and transition risk. The purpose of this rating methodology is to help domestic credit rating agencies, issuers, investors, regulators, and other market participants understand how public–private partnership projects could be assessed, and to explain how key quantitative and qualitative risk factors can be mapped to specific rating outcomes.

This paper does not present an exhaustive treatment of each and every factor reflected in ratings of public–private partnership projects and small and medium-sized enterprises, but it should enable the reader to understand the key rating factors used by domestic credit rating agencies in the final rating determination. It covers this ground and suggests rating methodologies that can help reduce procedural bottlenecks and thus boost credit availability in South Asia.

Contents

  • Credit Rating Methods for Public-Private Partnership-based Infrastructure Projects
    • Introduction
    • Ways in Which Public-Private Partnership-Based Projects and Financing Models are Unique
    • Constraints Faced by Public-Private Partnership Projects
    • Interventions Required to Spur Growth of Public-Private Partnership Projects
    • A Broad Rating Methodology for Infrastructure Projects and Financing Models Based on Public-Private Partnerships
    • Rating Definition and Scale
    • Factors Influencing the Rating Approach
    • How Rating Agencies Can Benefit Public-Private Partnership Projects 
  • Credit Rating Methods for Small and Medium-Sized Enterprises
    • Introduction
    • Addressing the Challenges Faced by Small and Medium-Sized Enterprises
    • Typical Hurdles That Evaluators of Small and Medium-Sized Enterprises Face
    • Suitable Credit Rating Methodology for Small and Medium-Sized Enterprises
    • Illustrative Scorecard for Rating Small and Medium-Sized Enterprises
    • Rating Definition and Scale
    • Relevance of Credit Ratings for Small and Medium-Sized Enterprises
    • Default Statistics
    • Application of Credit Ratings for Small and Medium-Sized Enterprises
    • Credit Rating of a Small/Medium-sized Enterprise: A Case Study
    • Suggested Report Content
    • Other Ways in Which Rating Agencies Services Can Be Relevant for Small and Medium-Sized Enterprises
    • Enabling Domestic Credit Rating Agencies to Play the Benefactor’s Role