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Using A Neural Network-Based Methodology for Credit–Risk Evaluation of A Tunisian Bank


  • Hamadi Matoussi

    () (University of Manouba (Tunisia))

  • Aida Abdelmoula


Credit–risk evaluation is a very important and challenging problem for financial institutions. Many classification methods have been suggested in the literature to tackle this problem. Neural networks have especially received a lot of attention because of their universal approximation property. This study contributes to the credit risk evaluation literature in the MENA region. We use a multilayer neural network model to predict if a particular applicant can be classified as solvent or bankrupt. We use a database of 1100 files of loans granted to commercial and industrial Tunisian companies by a commercial bank in 2002 and 2003. Our main results are: a good capacity prediction of 97.1% in the training set and 71% in the validation set for the non cash-flow network. The introduction of cash-flow variables improves the prediction quality to 97.25% and 90% respectively both in the in-sample and out-of-sample sets. Introduction of collateral in the model substantially improves the prediction capacity to 99.5% in the training dataset and to 95.3% in the validation dataset.

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  • Hamadi Matoussi & Aida Abdelmoula, 2008. "Using A Neural Network-Based Methodology for Credit–Risk Evaluation of A Tunisian Bank," Working Papers 408, Economic Research Forum, revised 06 Jan 2008.
  • Handle: RePEc:erg:wpaper:408

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    References listed on IDEAS

    1. Hamadi Matoussi & Rim Mouelhi & Sayah Salah, 1999. "La Prediction De Faillite Des Entreprises Tunisiennes Par La Regression Logistique," Post-Print halshs-00587769, HAL.
    2. Schmidt-Mohr, Udo, 1997. "Rationing versus collateralization in competitive and monopolistic credit markets with asymmetric information," European Economic Review, Elsevier, vol. 41(7), pages 1321-1342, July.
    3. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    4. repec:bla:joares:v:4:y:1966:i::p:71-111 is not listed on IDEAS
    5. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    6. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
    7. Longstaff, Francis A & Schwartz, Eduardo S, 1995. " A Simple Approach to Valuing Risky Fixed and Floating Rate Debt," Journal of Finance, American Finance Association, vol. 50(3), pages 789-819, July.
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