Title: Explainability of a Machine Learning Granting Scoring Model in P2P Lending [1]

Objective: The paper addresses the need for effective and explainable credit risk models in P2P lending,
emphasizing that while traditional statistical models like logistic regression offer good prediction
performance and explainability, machine learning models often outperform them in prediction but lack
transparency.

Methods: The study evaluates the performance and explainability of different credit scoring approaches
for P2P lending. It compares logistic regression with various machine learning algorithms, including
decision trees, random forest, and XGBoost. Genetic algorithms are used to optimize hyperparameters
for machine learning algorithms.

Data Source: Data from Lending Club, a well-known P2P lending platform, is used for model
development.

Performance and Explainability: The paper assesses the performance of these models using statistical
inference and examines classification metrics for both default and non-default classes. It also focuses on
the explainability aspect, utilizing SHAP (SHapley Additive exPlanations) values to understand the
models' interpretability.

Key Findings:

1. Machine learning models outperform logistic regression in terms of both prediction accuracy
and explainability.

2. SHAP values reveal that machine learning models can capture complex nonlinear relationships,
including dispersion and structural breaks in data, which logistic regression cannot.

Importance of Explainability: The need for interpretability and transparency in credit risk models is
highlighted, especially in P2P lending, where information asymmetry is more pronounced due to the
absence of traditional intermediaries. Regulatory entities and end-users demand models that can be
understood and trusted.

Structure of the Paper: The abstract outlines the paper's structure, which includes a review of relevant
literature, an explanation of explainability concepts in machine learning, the dataset, models, empirical
results, and conclusions.

Literature Gap: The paper acknowledges that while machine learning methods are commonly used in
P2P lending, they often lack interpretability analysis. It seeks to address this gap by utilizing SHAP values
for model explainability.

In summary, this paper explores the use of machine learning models for credit risk assessment in P2P
lending and demonstrates that these models can provide both superior predictive performance and
enhanced interpretability through the application of SHAP values. The study highlights the importance
of transparency in credit risk modeling, especially in the emerging field of P2P lending.
[1]Miller Janny Ariza-Garzon, Javier Arroyo, Antonio Caparrini, and Maria-Jesus Segovia-Vargas,
“Explainability of a Machine Learning Granting Scoring Model in Peer-to-Peer Lending,” IEEE Access, vol.
8, pp. 64873–64890, Jan. 2020, doi: 10.1109/ACCESS.2020.2984412.