The Importance of Subjective Criteria in Credit Ratings Under Informality: Sectors and regions with high informality. An analysis of participation banking in Turkey

Credit rating is at the heart of conventional loan business and gaining more importance due to a new regulatory environment for capital adequacy. This paper investigates one of the essentials of credit rating, non-financial factors, with a context of informal sectors and regions. We have examined whether there is any difference in application of subjective criteria in informal sectors and regions in participation banking during the credit rating process. The paper also investigated differences in different participating banks, administrative ranks and department levels.