Fuzzy logic approach applied to credit scoring for microfinance in Morocco

Abstract

Microfinance institutions in Morocco target clients who are excluded from the traditional financial systems and have no guarantees, exposing them to the risks of default and therefore bankruptcy. Also the microfinance sector is experiencing information asymmetry which makes it difficult to apply classical theory given the low databases quality and the lack of depth in the behavioral history of bad customers. The aim of this research is to use fuzzy logic approach that allows an individual and dynamic treatment of the customers by integrating the opinion of the experts in order to evaluate customer behavior to reduce loan default and ensure the viability and the sustainability of the microfinance institutions.The research used three composed Fuzzy Input variables with their trapezoidal membership function, an output variable and seventy eight fuzzy rules in the development of an evaluation model.