Jul 2026· International Journal of Computer Science and Engineering· 0 citations
TL;DR
This study explores the use of Explainable Artificial intelligence techniques to improve the interpretability of credit default prediction and highlights the practical value of explainable machine learning in developing more understandable, trustworthy, and accountable credit risk assessment systems for real-world financial decision-making.
Abstract
Credit default prediction has become an important application of machine learning in the banking and financial sector, as it helps financial institutions identify potential loan defaulters and support informed lending decisions. Although machine learning models often provide high predictive performance, many of them function as black-box system, making it difficult for financial analysts and decision-makers to understand the reasoning behind their predictions. This lack of transparency can reduce user trust, particularly in high-stakes financial applications where explainable decisions are essential. To address this challenge, this study explores the use of Explainable Artificial intelligence (XAI) techniques to improve the interpretability of credit default prediction. A Random Forest classifier was developed using a publicly available credit default dataset containing financial attributes such as employment status, bank balance, annual salary, and loan default status. The dataset was preprocessed and partitioned into training and testing sets before model development. To explain the prediction process, SHAP (Shapley Additive Explanations) and LIME (Local Interpretable Model-Agnostic Explanations) were integrated with the trained Random Forest model. SHAP was used to provide both global and local explanations by identifying the overall importance and contribution of individual features, while LIME generated instance-level explanations to illustrate how specific features influenced individual predictions. The explanation results were presented through visualizations, including feature importance plots, waterfall plots, and local explanation graphs, allowing a clearer understanding of the model's decision-making process. The findings demonstrate that the combined use of SHAP and LIME enhances the transparency and interpretability of the Random Forest model by providing complementary perspectives on feature contributions. This study highlights the practical value of explainable machine learning in developing more understandable, trustworthy, and accountable credit risk assessment systems for real-world financial decision-making.
An Explainable Machine Learning (XML) framework for credit risk assessment that combines an ensemble classifier, integrating XGBoost, Random Forest, and LightGBM, with an integrated SHAP-and-LIME explainability layer is proposed and evaluated using a large-scale retail and priority-sector loan dataset drawn from public...
A. Agrawal, Vaibhav C. Gandhi· International journal of com...· 0 citations
It is argued that predictive accuracy and regulatory transparency are not competing objectives but complementary necessities for institutional survival in Nepal’s cooperative sector.
S. K. Sahani· Journal of Intelligent Decis...· 4 citations
The paper shows that ensemble learning models have superior predictive power and argues that behavioral data complement traditional datasets for underbanked populations, such as "credit invisibles," and makes a strong case for XAI being essential for model transparency, combating bias, and meeting regulatory requiremen...
Bojun Chen· Advances in Economics, Manag...· 0 citations
This work compared five machine learning classifiers on a loan approval dataset: Random Forest, XGBoost, LightGBM, Logistic Regression, and Support Vector Machine and applied SHAP TreeExplainer to interpret the best-performing model.
Shengze Xu· Advances in Economics, Manag...· 0 citations
Regression results reveal that profitability and ESG score significantly reduce credit risk and liquidity risk and monetary freedom increase credit risk, making these indicators valuable for risk management frameworks in the Middle Eastern banking sector.
J. Jaber, A. A. Alkhawaldeh, Qusay Ayman Sulayman Mazahreh et al.· Risks· 0 citations
An efficient and effective credit risk assessment model capable of learning incrementally based on machine learning algorithm called Adaptive Heterogeneous Dynamic Ensemble Selection (AHDES) that uses big data from alternative sources for financial for the underbanked is proposed.
Tinofrei Museba· International Journal of Bus...· 0 citations
We use cookies to run the site and, with your consent, for analytics and to show ads.
See our Cookie Policy.