Credit risk rating
On Debita, issuers are required to meet stringent credit risk standards to ensure transparency and investor confidence. In most cases, issuers must obtain a risk rating from our partner, Wiserfunding, a global leader in SME credit risk assessment. Wiserfunding’s methodology combines cutting-edge analytics and decades of research to provide a comprehensive risk profile, even in data-limited environments, making it particularly well-suited for emerging markets.
Wiserfunding’s modular risk framework
Wiserfunding’s SME Z-Score integrates three key data modules, combining financial, non-financial, and macroeconomic variables to deliver a highly accurate credit risk profile:
Financial variables This module assesses a company’s financial health using over 25 metrics, such as leverage, liquidity, profitability, and debt coverage ratios. These metrics reflect the issuer’s capacity to meet its debt obligations.
Non-financial variables Factors such as corporate governance, ownership structure, and legal or regulatory events are evaluated. The module also incorporates media sentiment and social media activity to identify potential reputational risks.
Macroeconomic variables To contextualize a company’s risk, this module examines macroeconomic indicators such as GDP growth, inflation, and unemployment rates. It accounts for sector-specific sensitivities to economic cycles, particularly relevant in emerging markets.
Bond rating equivalent (BRE)
The SME Z-Score is translated into a bond rating equivalent (BRE) using a globally recognized scale, such as the Standard & Poor’s framework. This allows issuers and investors to interpret the credit score within a familiar context, facilitating decision-making and cross-border investment.
Adaptability for emerging markets
Wiserfunding’s framework is particularly valuable for SMEs in emerging markets, where traditional data quality and availability may be limited:
Dynamic weighting The scoring methodology adjusts the importance of each module based on data availability, ensuring robust results even with incomplete financial information. For instance, non-financial variables like governance or macroeconomic trends are given greater weight in markets where formal accounting data is sparse.
Alternative data sources By integrating unstructured data such as open banking insights, media sentiment, and regional economic trends, Wiserfunding compensates for gaps in traditional datasets.
How banks and financial institutions fit in
Banks and financial institutions (FIs) can play a pivotal role in the credit risk scoring process, particularly in emerging markets:
Data facilitation Banks can support SMEs by helping compile and submit the necessary financial and operational data to Wiserfunding, leveraging their existing relationships with borrowers.
Enhanced credibility When banks act as intermediaries in the scoring process, it adds an additional layer of trust for investors, particularly in regions where regulatory frameworks are still developing.
Collaborative monitoring Banks can work with Debita and Wiserfunding to monitor issuers post-rating, identifying early warning signs and maintaining investor confidence.
Guidance for issuers on Debita
Mandatory rating Unless exempted for specific reasons, issuers must undergo credit risk scoring by Wiserfunding to ensure a standardized assessment.
Streamlined onboarding During the onboarding process, issuers submit their financial and operational data, which is analyzed by Wiserfunding to generate their SME Z-Score and BRE.
Ongoing monitoring Wiserfunding provides continuous risk tracking, ensuring investors are informed of any changes to the issuer’s credit profile.
Why this matters
Transparency A robust credit risk framework builds trust by providing standardized, reliable metrics for evaluating issuers.
Accessibility in emerging markets Wiserfunding’s adaptable methodology ensures that even SMEs with limited data can participate in private debt markets.
Collaboration opportunities By involving banks and FIs in the scoring process, Debita creates a seamless ecosystem where financial institutions can enhance their value proposition while strengthening market confidence.
By combining Wiserfunding’s proven methodologies with the unique capabilities of financial institutions, Debita bridges the gap for SMEs in emerging markets, enabling them to access funding while providing investors with reliable, actionable insights.
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