The Model for Financial Information Screening of Small and Medium-sized Enterprises in Laos: Based on the Information Economics

Abstract

In recent years, small and medium-sized enterprises in Laos have played an important role in improving economic growth, creating job opportunities, and optimizing the industrial structure. However, the financing scale and financial status have made SMEs repelled and restricted by the Lao financial market. Also, the Information Asymmetry is one of the main reasons why SMEs can hardly obtain financial support, and it is also an important consideration for financial institutions to avoid loans. The purpose of this article is to examine the current situation of financing and credit of SMEs in Laos, analyze the financing problems of SMEs in Laos, and construct an information screening model for SMEs in Laos. The researcher built the model through three main steps: 1. Identifying the financial and non-financial factors to use in the modeling; 2. Adopting the Altman’s Z-score method (1968) to evaluate the credit risk from financial factors in (1.); and 3. Employing the Fuzzy comprehensive evaluation in creating an information screening model to prevent problems in SMEs financing in Laos. The model was applied to a local company in Laos. The results showed that when using the constructed model, comparing the financial and non-financial indicators from 2017 and 2018, the information quality index of the company in 2017 is higher, better than that of the company in 2018. This can be said that the information screening model for SMEs has a certain degree of operability. This article also provides theoretical support and practical solutions for corporate financing difficulties.