A Metaheuristic Strategy for Feature Selection Problems: Application to Credit Risk Evaluation in Emerging Markets

Abstract

As countries develop digital financial infrastructure, a wide range of economic activities expand and grow in importance: from personal loans, to the rapidly developing networked microfinance industry, to mobile telephone services and real estate transactions and so on. Personal credit is also a foundation of trust for facilitation of integrated societal transactions more generally. In emerging markets there is, however, a gap between the requirement for establishing a credit or trust rating and the lack of a credit record. The development of methodologies for greater financial integration of growing economies has the potential to have a significant impact on increasing the GDP of developing economies (4-12% according to a recent McKinsey Global Institute report). In this paper, we develop and test a methodology for feature selection and test its in standard datasets from large institutions in mature market economies, and a recent dataset which illustrates characteristics of emerging markets. The results show performance in classification can be maintained while runtime can be reduced when using a GA for feature selection in a range of machine learning techniques.