A Preliminary Study on Generating Criteria Priorities Series via AHP for Decision Process of Commercial Credit Applications in Turkey

Since capital may not be abundant for banks, banks have to assess the efficiency of small and medium enterprises (SMEs) to efficiently and profitably allocate available funds. This study aims to generate criteria priority series for the decision process of commercial credit applications (DPCCAs) to conduct statistical hypothesis testing and produce information for researchers, decision-makers/managers. Having lots of criteria in assessing SME performance, analytic hierarchy process (AHP) — a multi-criteria decision-making method — is applied according to experts’ views. By determining SMEs’ indicator-criteria priorities, this study’s priorities give information on SME growth potential, managerial competence and institutionalization which are rarely used in SMEs’ credit evaluation in academic studies. This study also evaluates tolerated consistency boundary approach (TCBA) defined in Pekkaya’s studies and generates priority-series that allows for statistical testing. The findings reveal that “profitability and business volume†with its sub-criteria of “operating profitability†have the highest priority, and then “stability and intelligence†with “repayment practices of debts†and “total income and stability in profitability†have quite high priorities among seven main- and 26 sub-criteria. This study contains some criteria which are not previously observed in the related literature, incorporates considerably more expert views, and shows to conduct statistical hypothesis tests by using the generated priority series via AHP for each criterion.