European Retail Banks Expect ‘Credit Gap’ to shrink for Small Businesses

Predictive analytics software vendor, Fico (formerly known as Fair Isaac) and the European Financial Marketing Association (Efma) have released the results of the seventh annual ‘European Credit Risk Survey’, which measures retail bankers’ outlook for the availability of credit, along with their investment priorities for the year ahead.

Thirty-eight per cent of the hundreds of bank respondents said they plan to invest in ‘big data’ risk analytics that mine the huge volumes of data now available for business insights and 31% expect to see a rise in small business loan requests. 

Among the other key findings from the Efma/Fico credit risk report were that 31% of the European bank respondents reported that they expect the aggregate amount of credit requested by small-to-medium sized enterprises (SMEs) to increase, and 29% expect the amount granted by lenders such as themselves to increase, suggesting that many SMEs won’t be disappointed as they have been in the past.

“Most of the new business growth in our corporate sector is coming from the SME segment,” said Dr. Cüneyt Sezgin, board and audit committee member at Turkey’s Garanti Bank in the Fico/Efma report. “Loans represent the primary relationship between banks and SMEs, as other financing alternatives for smaller companies are not well-developed in this market. Cash loans to SMEs represented 37% of total Turkish lira cash loans in 2012, and this ratio has been continuously increasing.”

According to Mike Gordon, senior vice president (SVP) for Fico sales, services and marketing, the ‘European Credit Risk Survey 2013’, also showed that: “Despite the economic challenges in many countries, lenders are telling us they’re prepared to meet a modest increase in credit demand. Given last month’s report that European banks have dramatically cut their Basel III capital shortfall, it appears that they gradually may be able to make more capital available for borrowers.”

European bankers also laid out their priorities for investment in big data analytics and technology. More than 40% of respondents to the survey from the banking sector reported that they will invest in improving their analytics, with the highest priorities being credit risk models for both new credit applicants (61% of respondents) and existing customers (50 %).

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