Credit scoring for a microcredit data set using the synthetic minority oversampling technique and ensemble classifiers. Issue 2 (27th December 2018)

• Record Type: Journal Article
• Authors: Gicić, Adaleta; Subasi, Abdulhamit
• Is Part Of: Expert systems. Volume 36:Issue 2(2019)
• Page Start: n/a
• Page End: n/a
• Publication Date: 2018-12-27
• Subjects: credit scoring -- data mining -- decision support system -- ensemble classifiers -- microcredit data set -- synthetic minority oversampling technique (SMOTE); Expert systems (Computer science); 006.33
• DOI: 10.1111/exsy.12363
• Languages: English
• ISSNs: 0266-4720

Abstract

Abstract: Although microfinance organizations play an important role in developing economies, decision support models for microfinance credit scoring have not been sufficiently covered in the literature, particularly for microcredit enterprises. The aim of this paper is to create a three‐class model that can improve credit risk assessment in the microfinance context. The real‐world microcredit data set used in this study includes data from retail, micro, and small enterprises. To the best of the authors' knowledge, existing research on microfinance credit scoring has been limited to regression and genetic algorithms, thereby excluding novel machine learning algorithms. The aim of this research is to close this gap. The proposed models predict default events by analysing different ensemble classification methods that empower the effects of the synthetic minority oversampling technique (SMOTE) used in the preprocessing of the imbalanced microcredit data set. Initial results have shown improvement in the prediction results for certain classes when the oversampling technique with homogeneous and heterogeneous ensemble classifier methods was applied. A prediction improvement for all classes was achieved via application of SMOTE and the Consolidated Trees Construction algorithm together with Rotation Forest. To obtain a complete view of all aspects, an additional set of metrics is used in the evaluation of performance.