Genetic programming for credit scoring: The case of Egyptian public sector banks

Credit scoring has been widely investigated in the area of finance, in general, and banking sectors, in particular.
Recently, genetic programming (GP) has attracted attention in both academic and empirical fields,
especially for credit problems. The primary aim of this paper is to investigate the ability of GP, which was
proposed as an extension of genetic algorithms and was inspired by the Darwinian evolution theory, in the
analysis of credit scoring models in Egyptian public sector banks. The secondary aim is to compare GP with
probit analysis (PA), a successful alternative to logistic regression, and weight of evidence (WOE) measure,
the later a neglected technique in published research. Two evaluation criteria are used in this paper,
namely, average correct classification (ACC) rate criterion and estimated misclassification cost (EMC) criterion
with different misclassification cost (MC) ratios, in order to evaluate the capabilities of the credit scoring
models. Results so far revealed that GP has the highest ACC rate and the lowest EMC. However, surprisingly,
there is a clear rule for the WOE measure under EMC with higher MC ratios. In addition, an analysis of the
dataset using Kohonen maps is undertaken to provide additional visual insights into cluster groupings.