Leveraging AI for credit scoring and financial inclusion in emerging markets
Federal Home Loan Bank of Chicago, Senior Data Science & Analytics Developer.
Research Article
World Journal of Advanced Research and Reviews, 2022, 15(03), 526-539
Article DOI: 10.30574/wjarr.2022.15.3.0904
Publication history:
Received on 03 August 2022; revised on 23 September 2022; accepted on 27 September 2022
Abstract:
It even promises artificial intelligence (AI), a credit revolution in credit scoring, and a boost of credit access for developing economies. When implemented in finance, AI ensures accurate credit scoring to create a win-win situation for credit concession to those who may have been locked out of the rates for one reason or another. Analyzing the opportunities and challenges, this paper identifies and focuses on how AI can improve credit assessment methods in the chosen regions. AI-integrated systems can use complex, unconventional data feeds to create credit scores for people without credit profiles. This innovation fills the lacuna created by the usual credit evaluation mechanisms, coping with failing to open access to economic activity. However, integrating AI comes with some emerging factors, including algorithmic bias, the Data Privacy Act, and digital ignorance of some financial institutions. The paper shows that high importance should be paid to the ethical framework regulating AI to guarantee transparency, fairness, and inclusion. This also brings more focus to ensuring content containing details such as these are protected, and consumers’ trust needs to be established; hence, such technologies should be encouraged to impact the maximum number of people possible.
Possible challenges are also highlighted, including inadequate interoperability between financial organizations, lack of leadership by government and financial institutions in integrating AI in financial services, and lack of a comprehensive social agenda from developers of technologies and other community stakeholders. By solving such challenges and fairly bounding innovation in AI, the technology can improve the quality of financial services, help empower excluded people, and contribute to socioeconomic development in growth-belt nations. This discovery is a wake-up call to policymakers and other stakeholders worldwide to ensure that AI becomes integrated to lead to sustainable and equitable banking for all around the globe.
Keywords:
Artificial Intelligence; Credit scoring; Financial inclusion; Emerging markets; Alternative data sources; Advanced algorithms
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This paper has received CERTIFICATE OF BEST PAPER Volume 15 - Issue 3 (September 2022).
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