Creditworthiness evaluation of Italian SMEs at the beginning of the 2007–2008 crisis: An MCDA approach

• We analyze the creditworthiness of Italian SMEs at the beginning of the crisis.
• A MURAME based approach is used, recently adopted for credit risk evaluation.
• The approach takes into account different factors affecting firms’ solvency level.
• Early signals of recession in the Italian SMEs sector are unveiled.
• Differences among the groups of SMEs in terms of credit dynamics are highlighted.

In this paper we use a Multi-Criteria Decision Analysis (MCDA) approach in order to evaluate the creditworthiness of about 40,000 Italian Small and Medium-sized Enterprises (SMEs) viewed as potential applicants for bank loans in the three-year period 2006–2008, a timespan embracing the beginning phase of the recent economic and financial crisis. This approach is able to consider simultaneously different factors affecting the firms’ solvency level. The results obtained in terms of classification into homogeneous rating classes, scoring and migration probabilities show that the proposed approach is able to unveil early signal of recession in the Italian SMEs sector. Furthermore, some comparisons between our approach and a couple of known methodologies for creditworthiness assessment show the goodness of our method.