A Self-Learning Knowledge Based System for Credit Evaluation of Loan Application: The Case of Commercial Bank of Ethiopia

Abstract

This study on prototype self-learning knowledge based system (KBS) is focused on evaluation of loan application used to overcome the challenges that resulted from lack of domain experts and poor loan evaluations. We attempted to design and develop a prototype self-learning KBS that provide advisory services for any credit customers and assists the domain experts in evaluation of customer’s requests for the loan. To develop this prototype system, knowledge was acquired using semi-structured interview from domain experts which are selected using purposive sampling technique from Commercial Bank of Ethiopia (CBE) and critique the acquired knowledge. Explicit knowledge is acquired by analyzing the secondary source of knowledge by method of document analysis. Then, the acquired knowledge is modeled using decision tree that represents concepts and procedures involved in credit evaluation and production rules are used to represent the domain knowledge. The prototype system is implemented using SWI Prolog editor tool. To determine the applicability of the prototype system in the domain area, the system has been evaluated and tested by the domain experts. Eighteen (18) test cases were selected purposively.  Test cases are equally selected from both ineligible and eligible cases. The overall total performance of the prototype system is 77.71%. The performance of the prototype system is hopeful and meets the objective of the study. The study concludes that the major credit production type that advanced to customer is import letter of credit facility, export credit facility, pre-shipment credit facility and merchandise. The   eligibility of application is focused on general and specific criteria. Credit customer is classified as business, corporate and commercial based on the score sheet they achieved. Generally, in this study, the applicability of knowledge of prototype self-learning KBS is proved as hopeful approach in banking industry for credit evaluation.

Keywords: KBS, self-learning and credit (loan).

DOI: 10.7176/IKM/10-5-02

Publication date:August 31^st 2020