Re-inventing PTPTN Study Loan With Blockchain and Smart Contracts Haneffa Muchlis Gazali, Rusni Hassan, Rizal Mohd Nor, Hafizur M.M. Rahman . Kuala Lumpur, Malaysia. dentro de la 8th International Conference on Information Technology (ICIT) 2017 Abstract -  The issue of default payments from borrowers of the National Higher Education Fund Corporation (PTPTN) is worrisome. Many borrowers fail to pay their loans and claims that the PTPTN has poor management and filing system. This study proposed a prototype for managing study loan repayment utilizing blockchain and smart contracts. Borrowers have full access toward their accounts and ledgers while corporation filing and management system get automatically up-to-date with the assistance of smart contracts.

1. 2017 8th International Conference on Information Technology (ICIT)
978-1-5090-6332-1/17/$31.00 ©2017 IEEE
Re-inventing PTPTN Study Loan With Blockchain
and Smart Contracts
Haneffa Muchlis Gazali, Rusni Hassan
Institute of Islamic Banking and Finance
International Islamic University Malaysia
Kuala Lumpur, Malaysia
haneffa@ums.edu.my, hrusni@iium.edu.my
Rizal Mohd Nor, Hafizur M.M. Rahman
Department of Computer Science
International Islamic University Malaysia
Kuala Lumpur, Malaysia
rizalmohdnor@iium.edu.my, hafizur@iium.edu.my
Abstract—The issue of default payments from borrowers of
the National Higher Education Fund Corporation (PTPTN) is
worrisome. Many borrowers fail to pay their loans and claims
that the PTPTN has poor management and filing system. This
study proposed a prototype for managing study loan repayment
utilizing blockchain and smart contracts. Borrowers have full
access toward their accounts and ledgers while corporation filing
and management system get automatically up-to-date with the
assistance of smart contracts.
Keywords—component; formatting; style; styling; insert (key
words)
I. INTRODUCTION
The major source of financing for tertiary education in
Malaysia is the National Higher Education Fund Corporation
(PTPTN), the Malay acronym). PTPTN is an initiative
introduced by the Malaysian Government to provide
educational loan for Malaysian citizens to join either public or
private university for their tertiary education and to reduce
students’ financial difficulty [1]. To date, PTPTN had given
out loans to 1.3 million students amounting to RM24 billion
since its’ establishment in 1997. However, in 2016 the Central
Credit Reference Information System (CCRIS) reported that
they have listed 1.25 million of defaulters who failed to
payback their educational loans [2]. Most of them are by
PTPTN graduates.
Despite harsh warning in the loan agreement which states
that recipients are responsible to repay back their educational
loan within 6 months after they have completed their study or
may affect their possibility in pursuing higher level of
education, PTPTN loans are still taken for granted. The failure
of recipients to repay their loan would negatively affect the
PTPTN where funds for new students may be diminishing. It is
time for PTPTN to be serious in recouping the loans from
borrowers to replenish funds for the next generation. PTPTN is
currently working with many other departments to penalized
loan defaulters like Inland Revenue Board Malaysia,
Immigration of Department Malaysia, Ministry of Higher
Education and CCRIS (Central Credit Reference Information
System) to ensure that defaulters pay back their loans.
However, in defense of the borrowers, poor filing system,
effective payment collection as well as tracking payment
systems [3] is noted to be a major contributor to failure in loan
repayment.
The need for PTPTN to be more effective and efficient on
collecting loan repayments from borrowers is undeniable. In
this paper, we are proposing a solution based on blockchain
and smart contract to allow PTPTN and other government and
non-governmental agencies to easily monitor the status of
PTPTN borrowers. Blockchain technology operates as a world-
wide distributed ledger where all transaction are recorded and
shared among all participants in the network. The technology
behind blockchain is based on the invention claimed by a
pseudo name Satoshi Nakamoto (2008), in his attempt to
introduce the cryptocurrency called bitcoin [4].
In this paper, we aim to study the implementation of using
blockchain and smart contract for managing study loans and to
review how this mechanism can be implemented by PTPTN
Malaysia. In our research, we adopted the methods describe by
Ekblaw, Azaria, Halamka and Lippman [5] for the seminal
work in “MedRec” prototype for electronic health records and
medical research data. This paper is organized as follows. The
next section attempts to discuss literature in blockchain and
smart contract. Subsequently, we will discuss the smart
contract and networking framework. Finally, in the conclusion,
we consider the implications and future research direction.
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II. LITERATURE REVIEW
A. Blockchain
As mentioned earlier, Blockchain is a cryptographic
technology [6] that acts as a world-wide distributed ledger,
recording all transactions on a computer network [7]. The
blockchain allows a trustless network, whereby two strange
parties can perform secure electronic transactions without the
need to trust each other, without a middle man. It is
decentralized ledger and devoid of double transaction through
the network [8], [9].
Like other internet technologies, blockchain is enclosed
with a public key cryptography, giving access to users
tocontrol their account and to protect them from unauthorized
users [7]. The blockchain structure consist of blocks that have
multiple transactions interconnected with the previous chain of
transactions. When the blockchain technology is being used,
new block will be added to the previous blocks and complex
mathematical puzzles need to be solved [4]. The process of
solving these puzzles is called proof-of-work. This process is
designed to secure and protect the transaction form a hacker,
since the same problem will need to be solved by a hacker and
the chances of solving these problems are small. Furthermore,
once a problem is solved, the whole network verifies its
solution and hence makes it impossible for one person to fake
its results. The transparency, security and transaction history
coded into the blockchain makes it difficult to be erased [4].
Fig. 1 illustrates how the chain is carried out and represent the
hash from the previous block. Because its distributed nature,
and highly secure feature, Crosby, Nachiappan, Pattanayak et
al. [10] concludes that blockchain technology is very attractive
and useful to overcome financial and non-financial industry
dilemmas.
B. Ethereum (ETH)
One of the latest cryptocurrency being develop is
Ethereum. Ethereum supports stateful contract because the
blockchain carries value, executable code and private contract
that can be depleted in multiple invocations. The Bitcoin and
the Ethereum works almost the same, though ethereum
includes transaction list and the latest state. Atzei, Bartoletti
and Cimoli [11] mentions that three transactions that users can
use in the Ethereum network is to create new contract, transfer
the ether to contract or to other users and to invoke the function
of contract. The Ethereum contract is economic in value. In
order to execute the contract, Ethereum does not dependent on
trusted central authority and the processed managed by huge
network of mutually trustless peers which termed as miners.
The miners will receive financial incentives for their work on
the computations that is required by the protocol. Users are
responsible to pay half of the execution fees upon each
transactions, the purpose of charging execution fees is to
prevent denial-of service attacks.
C. Smart Contract
The concepts of smart contract is not new, infact, 20 years
ago, Szabo [12] explored such usage for digital currencies.
Nowadays, the industry has emerged to the second generation
of blockchain applications which incorporates smart contract,
intellectual property and digitizing asset ownership [7]. Luu,
Chu, Olickel et al. [13] describes smart contract as an
autonomous agent that are stored in the blockchain.
Transactions are encoded and transformed to a contract. The
blockchain smart contracts contains scripts that are stored on
the blockchain and this contracts have a unique address so that
it can easily be trace. Luu, Chu, Olickel et al. [13]
acknowledges that smart contract are applicable in a wide
range of applications, for instance financial instruments, self-
governing applications, or decentralized gambling. Juels,
Kosba and Shi [14] notes that decentralized smart contracts has
its own advantages compared to the traditional
cryptocurrencies like bitcoin. The advantages like fair
exchange, to minimized interaction among parties and it is also
can enriched transactions.
III. SMART CONTRACT AND NETWORKING FRAMEWORK
A. System Actors
System Actors refers to the contracting parties in the smart
contract. In our paper, the system actors for the smart contract
are students, university, PTPTN, KWSP, Public Service
Department (Pension), Inland Revenue Board Malaysia
(IRBM), The Companies Commission of Malaysia (SSM),
Immigration of Department Malaysia, Ministry of Higher
Education Malaysia (MOHE), Financial Institution and Central
Credit Reference Information System (CCRIS).
Fig. 2 illustrates the system actors that involved in the
smart contract. The smart contract begins in the period of
study, where the student have two contracts at the initial stage
with university and PTPTN. Fig. 3b depicts the main level of
the smart contract. The financial contract occurs between theFig. 1. The Blockchain Structure
Fig. 2. System actors and stages of repayment.
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3. 2017 8th International Conference on Information Technology (ICIT)
student and PTPTN when they sign up for a study loan. This is
the most crucial part, where the university is involved in the
process of verification of the students’ academic status, the
number of semester, deferment, extension, graduation and
other matters of academic tracking. With the smart contract,
students can have a better study plan and they can track their
ledger on the amount that they received from PTPTN. On the
PTPTN side, the corporation (PTPTN) are well informed about
the current status of their students especially on their academic
status. In addition, the smart contract also aid the corporation to
have a proper data management that allows them to track the
amount of loan disburse as well as tracking the payment made
by the borrowers. Smart contract will diminish issues of
transparency and reduce management cost.
The smart contact is more complex when the borrower
enters the job market. New smart contracts from many
departments are now link together. For instance, if the
borrower enter the job market in the private sector, they will
have smart contract with Employees Provident Fund (EPF).
The EPF smart contract would link with the previous PTPTN
smart contract. PTPTN can then track the status of the
borrower and could start suggesting scheduled repayment
schmes to the borrower or give them options to pay back their
loan through salary deduction.
The smart contract is also link with the financial
institutions. If the borrower take any loan from financial
institutions, they would also engage in smart contracts. Again,
this smart contract would also link with the previous chain. The
great challenge is whether financial institutions are allowed to
share information of their customers due to the restriction of
BAFIA (Banking Act that protect customer’s personal
information). Finally, if there are any default payment, the
borrowers still failed to make any payment. The PTPTN can
proceed to direct the borrowers to the Central Credit reference
Information System (CCRIS) for further actions. The following
section will further discuss what are the types of smart contract
involves and how the smart contract works.
B. How Smart Contract Works
We pattern our work to Ekblaw et al. [5], a case study for
blockchain in healthcare. Ekblaw argues that the (Electronic
Health Records) EHRs that manage the multi-institutional and
life time medical records have never been designed. Like
Ekblaw et al. MedRec paper, our proposal also allows
borrowers to have full access of their ledger. Three smart
contracts used for this study namely, registrar contract (RC),
customer provider relationship (CPR) and summary contract
(SC). The first smart contract occurs is the registrar contract
(RC). The public key or the ethereum address identity is being
assign to an individual so that the participant’s identification
strings can easily identified in the global contract maps. Instead
of using cryptographic, this study use strings so that the
existing ID can be used. In the case of identity registration, it
can be restricted to certified departments. Since the smart
contracts is dealing with many departments, the policies code
need to be adjustable so that the new parties can be added or
changed. The Summary Contract (SC) are mapped by the RC
that has been stored in blockchain. The second smart contract
appear in the current study is Customer-Provider Relationship
(CPR). When the borrower and provider enter into smart
contract, two nodes are issued. The first node is to store and the
other node to manage the borrower education loan records. The
CPR takes control of the types of data indicators and the
entrance permissions of loan records that detained by the
corporation (PTPTN). Worth to mention that the smart contract
(a) The process flow and how each system actor interact within the system. (b) Main Contract Actors.
Fig. 3. The repayment stages and how each system actor interact within the system.
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4. 2017 8th International Conference on Information Technology (ICIT)
between customer and provider allows the notions to be
extended in any pairwise of data stewardship interaction. The
affixed query string comes with hash from the data subset and
it represent each pointer in the provider’s database. This is to
ensure that the data cannot changed at the data source. Besides,
other information about the provider’s database can be
retrieved in the network. The corporation are responsible to
craft, manage and modify the new information towards the data
query and their associated information. However, the
borrowers also have the authority to share their ledger with
others and permit an access to the third party to just view their
information.
The borrowers interface of smart contract are made with a
simple and friendly web or mobile user interface where the
borrowers can simply check the query conditions on the CPR
address and they also can verify the information that they wish
to share. Following Ekblaw et al. [5], our smart contract design
is based on a proper SQL query in the blockchain via the CPR
so that it would easily operate with previous data storage
structure. Most importantly, borrowers would be granted an
access to control the information of their education loan and
they have access to share any portion of their information that
they want to share.
The summary contract (SC) records all transaction history
of the borrowers in the system. The borrowers are able to track
their transaction records history in the CPR contracts and it
shows all previous and current arrangement with multiple
provider in the system. For the borrowers, they would have the
SC that have been populated with all departments that engaged
with them in the whole process started from their study period
towards their working period. Alternatively, for PTPTN they
have references to the borrowers as well as the third party that
the borrowers allowed to share data. Therefore, the main
function of SC is to redistribute the network, adding and restore
the information of the borrower. The borrowers have the rights
to exit and rejoin the system for several time and at arbitrary
period of time. Besides, they also have the access to retain all
information history and downloading the latest blockchain
from the network. According to Ekblaw et al. [5], the
blockchain log remains intact as long as the nodes play a part
in the network.
In spite of keeping all the transaction records, SC also work
as user notifications for every single relationship that deposits
as a status variable. The details of relationship are properly
recorded in the system, for instance, the recent relationship,
pending updates from the borrowers. The main control for the
borrowers SC manage by the corporation (PTPTN). In the
repayment period, all relationship status set by the corporation
and providers can poll their SC and get notification when there
is new relationship proposed. In addition, the borrowers are
granted to decide which part of their relationship history that
they want to accept, reject or delete. The status variable only
can be accessed by the corporation in order to protect the
borrowers from spamming and mischievous behavior.
IV. CONCLUSION
This paper discuss the use of blockchain and smart contract
for management of study loans and to review how this
mechanism can be implemented by PTPTN Malaysia. We
intentionally concentrate our research in the implementation of
Ethereum smart contract and discuss its requirements to allow
borrowers to have full access towards their ledger to review,
approve and share the information. Other than its transparency
features, this proposal allows PTPTN to be able to track the
status of borrowers and the process of collecting back payment
will be much easier. For the borrowers, it provides a better
management of their loan repayments and understand how
regulators are tied together. In this paper, we did not discuss
implementation details for proof-of-concept. For our future
research we would like to explore implementation methods
and using technology that are agnostic to database technology
such as JSON as an intermediary to data storage to be
integrated into the blockchain as smart contracts.
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