The application of cat swarm optimisation algorithm in classifying small loan performance

Abstract

It is common for banking system to analyse the feasibility of credit application before its approval. Although this process has been carefully done, there is no warranty that all credits will be repaid smoothly. This study aimed to know the accuracy of Cat Swarm Optimisation (CSO) algorithm in classifying small loans' performance that is approved by Bank Rakyat Indonesia (BRI), one of several public banks in Indonesia. Data collected from 200 lenders were used in this work. The data matrix consists of 9 independent variables that represent profile of the credit, and one categorical dependent variable reflects credit's performance. Prior to the analyses, data was divided into two data subset with equal size. Ordinal logistic regression (OLR) procedure is applied for the first subset and gave 3 out of 9 independent variables i.e. the amount of credit, credit's period, and income per month of lender proved significantly affect credit performance. By using significantly estimated parameters from OLR procedure as the initial values for observations at the second subset, CSO procedure started. This procedure gave 76 percent of classification accuracy of credit performance, slightly better compared to 64 percent resulted from OLR procedure.