nep-mfd New Economics Papers
on Microfinance
Issue of 2015‒12‒28
one paper chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Who cares about your Facebook friends? Credit scoring for microfinance By DE CNUDDE, Sofie; MOEYERSOMS, Julie; STANKOVA, Marija; TOBBACK, Ellen; JAVALY, Vinayak; MARTENS, David

  1. By: DE CNUDDE, Sofie; MOEYERSOMS, Julie; STANKOVA, Marija; TOBBACK, Ellen; JAVALY, Vinayak; MARTENS, David
    Abstract: Microfinance has known a large increase in popularity, yet the scoring of such credit still remains a difficult challenge. In general, retail credit scoring uses socio-demographic and credit data. We complement such data with social network data in an innovative manner i.e. with fine-grained interest and social network data from Facebook. Using a unique dataset of 4,985 microfinance loans from the Philippines, we show how the different data types can predict creditworthiness. A distinction is made between the relationships that the available data imply: (1) look-a-likes are persons who resemble one another in some manner, be it liking the same pages, having the same education, etc. (2) friends have a clearly articulated friendship relationship on Facebook, and finally (3) the \Best Friends Forever" (BFFs) are friends that interact with one another. Our analyses show two interesting conclusions for this emerging application. Firstly, applying relational learners on BFF data yields better results than considering only the friends data. Secondly, the interest-based data that defines look-a-likes, is more predictive than the friendship or BFF data. Moreover, the model built on interest data is not significantly worse than the model that uses all available data, including the friendship data. Hence begging the question: who cares about your Facebook friends when your interest data is available?
    Keywords: Networks, Data mining, Default prediction, Microcredit
    Date: 2015–10

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