Importance The Basel Committee (Basel II) requires applying the internal rating system (IRB) to assess borrowers’ creditworthiness, including small businesses, by commercial banks. The IRB system should contain both quantitative and qualitative indicators. This foregrounds the development and practical application of new mathematical and analytical tools like fuzzy sets methods in the lending practice of banks. Objectives The aim of the study is to develop a new methodological approach to developing the fuzzy production system and a mathematical model to support credit decisions on practicability of lending to small businesses based on the fuzzy sets theory and the Fishburn’s rule. Methods Using the mathematical tools of the fuzzy sets theory, I propose a fuzzy production system of quantitative and qualitative indicators and a mathematical model to perform a comprehensive analysis of financial and economic condition and creditworthiness of a small business borrower, regardless of its branch and regional affiliation and form of incorporation. Conclusions To maximize the reliability of credit rating in commercial banks, it is necessary to automate the process by applying mathematical rules and tools of the fuzzy set theory. This will reduce the credit risk and the risk of subjectivity of assessment, minimize the impact of intentional errors and misrepresentation of financial and economic information, speed up the process of expert decision-making, and enable to vary the estimated figures depending on the specifics of small business operations and goals and objectives of the credit.
Keywords: creditworthiness, small business, assessment, creditworthiness, fuzzy sets
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