S&P Capital IQ has launched an enhanced SME Scorecard to measure credit risk for women-led SMEs (Small and Medium Enterprises) in emerging markets.

Bob Durante, Senior Director of Risk Solutions at S&P Capital IQ, said the scope of application for the SME Scorecard includes emerging markets such as Africa.

“A key component of the Scorecard is Country risk, which is defined as the risk of doing business in that country. Also the scorecard has different financial benchmarks emerging market countries,” he said.

The scorecard is designed to provide a consistent and transparent lending framework for financial institutions.

“The SME Scorecard is designed to evaluate the default risk of loans to SMEs and can be used by venture capital, private equity, banks, multi-lateral lending institutions or other credit sensitive institutions,” Durante told Africa Global Funds.

It’s estimated that the credit gap experienced by small women-owned businesses in emerging markets accounts for $287bn and affect as many as 70% of women-owned SMEs who are unserved or underserved by financial institutions.

The enhanced SME Scorecard enables lenders, particularly commercial and development banks, to better address underserved populations by providing loans with acceptable and sustainable levels of credit risk, while also ensuring these loans will have a positive social impact.

“The advantages for closing the lending gap for small women-owned business in emerging markets are pretty clear,” said Durante.

“It would fuel economic growth, boost labor force participation, drive up per capita income and strengthen GDP growth. That’s why we have developed our SME scorecard, to help credit lending institutions identify and rank order the default risk of loans to SMEs,” he added.

For S&P Capital IQ and many of its clients, empowering women in business, especially in emerging markets, has become an extremely relevant issue to focus on.

S&P Capital IQ’s SME Scorecard specifically identifies a borrower’s key risk factors and weighs those factors against financial benchmarks broken out by industry and region.

This process is grounded in a developmental data set that includes over 10,000 SMEs.

In turn, the risk drivers, weights and benchmarks provide a consistent roadmap for both SME lenders and borrowers, no matter what bias – gender or otherwise.

Results from S&P Capital IQ’s performance testing of the SME Scorecard, including both benchmarking to the rated universe and back testing to historical defaults, will be fully documented in an upcoming whitepaper available upon request.