Possible Application of Data Mining Technology in Supporting Loan Disbursement Activity at Dashen Bank S.c

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Addis Ababa University


The commercial banking sector plays vital role in the economic developmel1l efforts a/a country. And the viability of the sector relies on the alibi(v of the institutions to maintain a positive inflow of resources. And one of the factors that affect the ability of the commercial banking sectors to maintain positive flow of resources is the problem of default rates. Among the Ethiopian banking sector there is a general problem of high default rate and the commercial banks have tried to tackle this problem through different ways. One technique that has become popular in addressing problem of credit risk in other countries is data mining. Data mining technology has enabled banks in other countries to make good prediction on the probability that a certain borrower would default or not. BUI, so jar, no commercial bank in Ethiopia has used data mining technology for such purposes i.e. assessment of credit risk. l1ws, the objective of this research work was to serif application of data mining could also be beneficial in the Ethiopian banking context. For reasons of familiarly D ashen Bank S. C was selected as a case study. The methodology employed for the research handbag Sic ally three stages. These were collection of data, preparation of data and model building and testing. Data was collected hi-om two kinds of documents that were available at the head office of D ashen Bank. 7'l1Cn the data was prepared which included stigmatization, deriving of minefields and handling of missing data. The data mining technique employed for the model building and testing was neural network. Neural network software was thus used in building and test inga number of models From the numerous trials, many models with encouraging results were obtained. These models indicated that data mining application for credit decision-making is feasible at D ashen Bank. But one major limitation was unavailability of data in an electronic form. However, a survey in the IT deportment of D ashen Bonk suggested that this problem is being duly addressed.



Disbursement Activity at Dashen Bank