Towards Sustainable Financial Inclusion: A Comparative Study of Ensemble Architectures and SHAP-Based Explainability in Bank Loan Prediction

As the retail banking sector shifts toward automated lending, the black-box nature of high-performing machine learning models remains a significant barrier to regulatory transparency and institutional trust. A critical gap in existing literature is the lack of deployed frameworks that simultaneously optimize predictive accuracy, manage asymmetric financial risks, and provide actionable interpretability. To bridge this gap, this study aims to develop and evaluate a highly interpretable, ethically accountable ensemble machine learning framework for credit risk assessment. Utilizing a cross-sectional public dataset of over 45,000 generalized retail banking records, this research conducts a comprehensive comparative analysis of four diverse ensemble architectures: Bagging, Boosting, Stacking, and Voting. To address inherent class imbalance and evaluate risk tolerance, the models were integrated with Synthetic Minority Over-sampling Technique (SMOTE) and Adaptive Synthetic Sampling (ADASYN) resampling techniques. While all architectures demonstrated high discriminative power, the SMOTE-balanced Bagging model emerged as the superior performer, achieving a peak Area Under the Curve (AUC) of 0.972 by establishing a safe operational threshold that strictly minimizes costly false approvals. Crucially, a SHapley Additive exPlanations (SHAP) framework was applied across all four models to decode their internal logic. The SHAP analysis successfully validated that the ensembles prioritize core financial behavior, such as default history and loan-to-income ratios, while correctly assigning near-zero predictive weight to demographic traits like gender and education. By empirically proving that high-performance algorithms can be mathematically blind to demographic biases, this framework directly advances SDG 10 (Reduced Inequalities). Furthermore, by resolving the performance-transparency trade-off, this study provides the accountable, feature-level justifications required for secure and sustainable financial inclusion (SDG 8).

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Publication Details

Journal
Journal of risk and financial management
Published
2026-08-18
DOI
https://doi.org/10.3390/jrfm19080629
Primary Topic
Financial Distress and Bankruptcy Prediction
Type
article
Field-Weighted Citation Impact
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article

Towards Sustainable Financial Inclusion: A Comparative Study of Ensemble Architectures and SHAP-Based Explainability in Bank Loan Prediction

Mobashar Rehman, Shadab Kalhoro, Khalid Ahmed, Htet Nge Nge Ko et al.
Journal of risk and financial management
Financial Distress and Bankruptcy Prediction
article

Towards Sustainable Financial Inclusion: A Comparative Study of Ensemble Architectures and SHAP-Based Explainability in Bank Loan Prediction

Mobashar Rehman, Shadab Kalhoro, Khalid Ahmed, Htet Nge Nge Ko, Aung Htoo Khine, Maryam Kalhoro
article en

Abstract

As the retail banking sector shifts toward automated lending, the black-box nature of high-performing machine learning models remains a significant barrier to regulatory transparency and institutional trust. A critical gap in existing literature is the lack of deployed frameworks that simultaneously optimize predictive accuracy, manage asymmetric financial risks, and provide actionable interpretability. To bridge this gap, this study aims to develop and evaluate a highly interpretable, ethically accountable ensemble machine learning framework for credit risk assessment. Utilizing a cross-sectional public dataset of over 45,000 generalized retail banking records, this research conducts a comprehensive comparative analysis of four diverse ensemble architectures: Bagging, Boosting, Stacking, and Voting. To address inherent class imbalance and evaluate risk tolerance, the models were integrated with Synthetic Minority Over-sampling Technique (SMOTE) and Adaptive Synthetic Sampling (ADASYN) resampling techniques. While all architectures demonstrated high discriminative power, the SMOTE-balanced Bagging model emerged as the superior performer, achieving a peak Area Under the Curve (AUC) of 0.972 by establishing a safe operational threshold that strictly minimizes costly false approvals. Crucially, a SHapley Additive exPlanations (SHAP) framework was applied across all four models to decode their internal logic. The SHAP analysis successfully validated that the ensembles prioritize core financial behavior, such as default history and loan-to-income ratios, while correctly assigning near-zero predictive weight to demographic traits like gender and education. By empirically proving that high-performance algorithms can be mathematically blind to demographic biases, this framework directly advances SDG 10 (Reduced Inequalities). Furthermore, by resolving the performance-transparency trade-off, this study provides the accountable, feature-level justifications required for secure and sustainable financial inclusion (SDG 8).

Journal of risk and financial managementVol. 19(8)
University of Sindh (PK), INTI International University (MY), Middlesex University London (GB)
Reduced inequalities
Openalex Percentile: Top 3%
Financial Distress and Bankruptcy Prediction
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