Rural micro-credit model design and credit risk assessment via improved LSTM algorithm

Abstract

Rural microcredit plays an important role in promoting rural economic development and increasing farmers’ income. However, traditional credit risk assessment models may have insufficient adaptability in rural areas. This study is based on the improved Long Short Term Memory (LSTM) algorithm using self organizing method, aiming to design an optimized evaluation model for rural microcredit risk. The improved LSTM algorithm can better capture the long-term dependence between the borrower’s historical behavior and risk factors with its advantages in sequential data modeling. The experimental results show that the rural microcredit risk assessment model based on the self organizing LSTM algorithm has higher accuracy and stability compared to traditional models, and can effectively control credit default risk, providing more comprehensive risk management support for financial institutions. In addition, the model also has real-time monitoring and warning functions, which helps financial institutions adjust their decisions in a timely manner and reduce credit losses. The practical application of this study is expected to promote the stable development of rural economy and the advancement of financial technology. However, future work needs to further validate the practical application effectiveness and interpretability of the model, taking into account the special circumstances of different rural areas, in order to achieve sustainable application of the model in the rural microcredit market.