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2017 8th International Conference on Information Technology (ICIT)
978-1-5090-6332-1/17/$31.00 ©2017 IEEE
Re-inventing PTP...
2017 8th International Conference on Information Technology (ICIT)
II. LITERATURE REVIEW
A. Blockchain
As mentioned earlie...
2017 8th International Conference on Information Technology (ICIT)
student and PTPTN when they sign up for a study loan. T...
2017 8th International Conference on Information Technology (ICIT)
between customer and provider allows the notions to be
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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

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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.

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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

  1. 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. 751
  2. 2. 2017 8th International Conference on Information Technology (ICIT) 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. 752
  3. 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. 753
  4. 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. REFERENCES [1] E. Abu Bakar, J. Masud, and Z. Md Jusoh, “Knowledge, attitude and perceptions of university students towards educational loans in Malaysia,” Journal of Family and Economic Issues, vol. 27, no. 4, pp. 692–701, 2006. [2] BERNAMA, “1.25 Million PTPTN borrowes listed in CCRIS,” 2016. [Online]. Available: http://www.nst.com.my/news/2016/04/ 141094/125-million-ptptn-borrowers-listed-ccris [3] New Straits Times Online, “Borrowers, pay up,” pp. 1–2, 2016. [Online]. Available: http://www.nst.com.my/news/2016/08/167300/ borrowers-pay [4] H. Watanabe, S. Fujimura, A. Nakadaira, A. Akutsu, and J. Kishigami, “Blockchain Contract: Securing a Blockchain Applied to Smart Contracts,” in 2016 IEEE International Conference on Consumer Electronics (ICCE) Blockchain, 2015, pp. 1–33. [5] A. Ekblaw, A. Azaria, J. D. Halamka, A. Lippman, I. Original, and T. Vieira, “A Case Study for Blockchain in Healthcare: ” MedRec” prototype for electronic health records and medical research data MedRec: Using Blockchain for Medical Data,” 2016. [6] T. I. Kiviat, “Beyond Bitcoin: Issues in Regulating Blockchain Transactions.” Duke Law Journal, vol. 65, no. 3, pp. 569–608, 2015. [Online]. Available: http://search.ebscohost.com/login.aspx?direct=truefn&gdb=aphfn&gAN =111722153fn&glogin.aspfn&gsite=ehost-live [7] G. W. Peters and E. Panayi, “Understanding Modern Banking Ledgers through Blockchain Technologies: Future of Transaction Processing and Smart Contracts on the Internet of Money,” pp. 1–33, 2015. [8] H. Watanabe, S. Fujimura, A. Nakadaira, Y. Miyazaki, A. Akutsu, and J. J. Kishigami, “Blockchain contract: A complete consensus using blockchain,” in 2015 IEEE 4th Global Conference on Consumer Electronics, GCCE 2015, 2016, pp. 577–578. [9] K. Christidis and M. Devetsikiotis, “Blockchains and Smart Contracts for the Internet of Things,” pp. 2292–2303, 2016. [10] M. Crosby, Nachiappan, P. Pattanayak, S. Verma, and V. Kalyanaraman, “Applied Innovation Review,” Applied Innovation Review, no. 2, pp. 6–19, 2016. [11] N. Atzei, M. Bartoletti, and T. Cimoli, “A survey of attacks on Ethereum smart contracts.” [12] N. Szabo, “Formalizing and Securing Relationships on Public Networks,” First Monday, vol. 2, no. 9, pp. 1–21, 1997. [13] L. Luu, D.-H. Chu, H. Olickel, P. Saxena, and A. Hobor, “Making Smart Contracts Smarter,” in CCS, 2016, pp. 254–269. [Online]. Available: http://eprint.iacr.org/2016/633.pdf A. Juels, A. Kosba, and E. Shi, “The Ring of Gyges : Investigating the Future of Criminal Smart Contracts,” Online manuscript, pp.1–28, 2015. [Online]. Available: http://www.initc3.org/files/Gyges.pdf 754

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