Category: News

Prof Altman (Wiserfunding) chose modefinance to launch the first Fintech rating for european SMEs

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Wiserfunding, Altman's company, and modefinance developed together the first Fintech rating for european SMEs

With the 2008 crisis, SMEs in Europe have suffered from the inability of the banking world to continue to meet their financial needs. Credit crunch led to a reduction in the supply of credit, limiting even more access to external sources of financing. The rise in credit costs, and a rigid and unclear regulation, brought a significant reduction in confidence in the markets, discouraging SMEs to take actions.According to a recent report by Unimpresa, just in Italy in 2018, SME loans were reduced by 5% compared to the previous year. The restriction of bank credit has strongly affected the 141 industrial districts in Italy, which make up about a quarter of our country's production system.In the period between 2010 and 2017, loans tobusinesses in Italian districts decreased in total by 57 billion. Furthermore,the Basel 3 regulations provide that a bank, in order to issue a loan to anunrated company, must set aside much more capital than a loan granted to acompany with an official rating. It is therefore reasonable to expect a furtherincrease in the cost of bank credit in light of the new rules.

At the same time, alternative credit channels have developed, which have facilitated a slight recovery of SMEs in the continent in recent years. This new important alternative finance ecosystem is still young and fragile, and now that we are beginning to observe the first signs of a slowdown in the world economy, there is a real risk that this ecosystem will disappear quickly. The main costs would be paid by SMEs, and with them the entire economies of European countries.

Starting from this need, Wiserfunding, an English Fintech company specialized in small and medium enterprises’ credit risk assessment, founded by Gabriele Sabato and professor Edward Altman -inventor of the Z-score model, the first credit rating in the world– chose modefinance for a unique strategic partnership: create an innovative solution that facilitates the dialogue between SMEs and the financial system (both traditional and innovative), favoring their growth and reducing credit losses.

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The solution:

A SMEs Rating, for all the 25million SMEs across Europe, made accessible in terms of costs and timing.

Thanks to the high tech profile of the two companies, based on an approach of data analysis (AI, Big Data and machine learning), and recognized throughout Europe, we developed a tailored SMEs Rating, with a high technological coefficient, and a strong focus on transparency and independence.The collaboration combines the economic analysis’ skills (thanks to the international reputation of Professor Altman, and the experience of CEO Gabriele Sabato) to the advanced technologies of a Fintech Rating Agency, giving a concrete support to the world of SMEs and helping them understand the multi-level dissemination of a correct credit culture.With the use of Data Science and Artificial Intelligence methods, integrated with private data and traditional analyses, this new solution allows the development of highly predictive and reliable model, able to identify potential risk factors and support the daily economic-financial management.The automation of the resulting analysis processes and the scalability of the information therefore make the creditworthiness assessment processes of a SME usable and transparent in a much shorter time.The objective is twofold: to allow SMEs tounderstand their risk profile (and how to analyze it within a constantimprovement) and to help interested parties to offer credit to SMEs (factoringplatforms, traditional banks, etc.), reducing costs and capital requirements,in compliance with the existing regulations.

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Wiserfunding

Wiserfunding is a Fintech company based in London, specializing in the credit risk assessment of small and medium-sized enterprises (SMEs).Founded in 2016 by Edward I. Altman and Gabriele Sabato, the company has developed a platform that allows companies in search of financing or credit institutions to find effective tools to assess the risk of investments, to obtain accurate data quickly.

Edward Altman (professor at the Stern School of Business in New York and director of Research in Credit and Debt Markets at the Salomon Center in New York for studies on financial institutions) is considered one of the pioneers of credit risk analysis as early as the 1960s and is the inventor of the Z-score model (1968).

After graduating at La Sapienza in Rome, Gabriele Sabato was a visiting scholar at the Stern School of Business of the New York University under the supervision of Professor Altman. He has worked for several financial institutions and consultant companies across the world, gaining an international career in risk management (Experian, ABN AMRO, RBS and NatWest) for the past 18 years.The two founders have been doing research together since 2004 and have published several academic articles on SME risk modeling.

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