The Cohort Shapley value to measure fairness in financing small and medium enterprises in the UK

Xuefei Lu and Raffaella Calabrese

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: Banks are relying on machine learning techniques to support their decisions in financing small and medium enterprises (SMEs). As regulators require that credit decisions are transparent, there is a need to develop methods to measure fairness. We propose a weighted average of the Cohort Shapley value, which removes impossible feature combinations, and a relative fairness score for assessing the fairness level within sub-populations. Based on our knowledge, this is the first paper that investigates the fairness of UK financial institutions in providing funding to SMEs. Our findings reveal discrimination against start-up, micro, women-led companies, and owners of Asian ethnic backgrounds.

Keywords: Explainable AI; Shapley value; Fairness; Small and medium enterprises (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323009145

DOI: 10.1016/j.frl.2023.104542

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