Decentralized Credit Score System

In Pakistan only 49 million people are using banks? services, and remaining 75% are deprived from banks services. Lending Services in Banking Sector play a vital role to lift up the country?s economy. Now-a-days ,People do not relay on bank services because of trust deficit and lack of transpare

Project Title

Decentralized Credit Score System

Project Area of Specialization

Blockchain

Project Summary

In Pakistan only 49 million people are using banks’ services, and remaining 75%
are deprived from banks services. Lending Services in Banking Sector play a vital role to lift up the country’s economy. Now-a-days ,People do not relay on bank services because of trust deficit and lack of transparent information between financial institutions and borrowers. Credit Score is digital identity. “Credit Score” is considered very important factor for borrower while requesting for loan or credit card from any financial Institutes. Credit Score is numeric score which describes the credit-worthiness of each individual. The traditional way to evaluate the creditworthiness of an individual borrower is that each bank is managing credit history of individual borrowers independently and they are not sharing the credit information with other banks because of competitive advantages. They are sharing the credit information of borrowers only with Govt. licensed credit bureau institutions to calculate the credit score. Credit scoring institutions in Pakistan (such as eCIB, DataCheck, AISL, etc.) are mostly centralized third-party systems that rely on obsolete techniques and technologies. Traditional and manual scoring methods ignore the unsecured consumer credit analysis it cannot match the level of inclusiveness, transparency, privacy and security.

We are going to propose a model called DCScore (decentralized credit score) that will be composed of a decentralized identity and credit scoring system and it will be implemented by permissioned Blockchain technology. Our system will eliminate the dependency of centralized institutions (credit bureau) for credit score calculation, and it provides the secure and transparent solution to every financial institution with the feature of privacy and confidentiality. Blockchain technology that allow us to sustain highest standards of transparency, security, decentralization, users and institutions data privacy. Our system will provide the solution of all above mentioned issues.

The purpose of credit score is to check the financial condition of individual that he or she either is eligible for lending or not. In our proposed system, the central governing bank of Pakistan (i.e. State Bank) will be able to observe and manage the complete system transparently

Project Objectives

The core objective of the project is to increase the lending services in Pakistan and main idea behind of our system is built strong trust of people to use lending services. Credit score plays major role to calculate creditworthiness of borrower   our system that is web based application fulfill the requirement and calculate the “credit score” of borrower. Our system based on private blockchain where each lender/financial institutes is permissioned to be a part of network, there will be three or more lender/financial institutes who can easily communicate each other and share data and those data will be store in distributed form. The more lender are member of our system the less chances of to measure the losses and defaulter. With our system our idea is to eliminate the dependency of existing centralized institutions (credit bureau) for credit score calculation, and DCSore provides the secure and transparent solution to every financial institution with the feature of privacy. Our system will provide transparency feature by user perspective every organization can monitor on every tiny bit of changes, this system also possess the traceability aspects to investigate any activity. Our system will be easy to accessible for the financial institutes who are the part of that permissioned network. Our system will be providing integrity, confidentiality and immutability. Immutability in a sense once the data is inserted in distributed ledger no other financial institute can update or modify. Consequence of our system built the Strong trust and relationship between the borrower and lender to use lending services.  

Project Implementation Method

3. Project Implementation Method

First we gather the requirements and analysis the use cases of the system so it makes clarity of idea and each use case define the functionality also the pre-condition or post-condition of the system. In next deliverable we make some diagrams like sequence, Entity Relationship and architecture diagram by using StartUML software. Those diagrams provide pictorial view of the system. In next deliverable we install Linux operating System on our nodes and each node will be configuring by the different commands. For configuration of the nodes first we find number of tools that we used in project implementation. Like we install following software in each node (Curl, Node.js, Hyperledger-composer, CLI, Docker, Docker-compose, etc.) on our machine which has a Linux operating system. By using Hyperledger Fabric and its tool to generate network architecture. The documentation of hyperledger fabric has all the steps and commands that help us to make first blockchain network successfully. Now we create the credit score formula by using FICO (Fair, Isaac and Company) which use five basic and  important factor for calculating credit score (Payment history, Credit utilization, Length of credit history, New credit and Credit mix). After this we design the chaincode that will be written in Go language. We defined all organization, users, assets. Then after we design the structure of the web interface on paper then implement  on the node by using html, css, JavaScript, php etc. We connect the web interface with blockchain network by using REST API. In last we will complete system and all requirements then ready for transaction, to check the credit score. If the system has some bug so we resolve in testing phase. After completing the testing, we deploy our system on Microsoft azure cloud service.

Benefits of the Project

After completion of this project .Our system will able to provide decentralized scoring services to all banks/lenders/financial institute that will boost up the economy and increase the customer trust and satisfaction. Customer/borrower trust also will be increase because, our proposed model called DCScore (decentralized credit score) that will be composed of a decentralized identity and credit scoring system and it will be implemented by using a decentralized credit platform as a proof of concept. Implanting the Blockchain technology in our project that allows us to sustain highest standards of transparency, security, decentralization, users and institutions data privacy. The characteristics of DCScore are data is shared with only permissioned/ limited financial Institutes that is high demand for modern organizations. In existing system data tempering is easily possible but, Our system will not allow to temper the data and provide tractability features that because of  no one can temper the sensitive information . Our system will eliminate the dependency of centralized institutions (credit bureau) for credit score calculation, and it provides the secure and transparent solution to every financial institution with the feature of privacy. All lenders will be able to check the credit scores of individuals, and the complete information of individuals will be secret expect credit score .The cost of calculating the credit score will be zero or very low therefore every organization/lender can be part of system.

Technical Details of Final Deliverable

At the end of the project we will delivered a web application that will be based on Blockchain technology with using framework “Hyperledger fabric”. In our project we are going to use Hyperledger ledger fabric that is permissioned distributed ledger technology (DLT) which allows us to develop a private network it means that participant/banks/lenders are known and permissioned to be a part of our system.

For developing a project we initially required two banks/organizations to be a part of our network. Three organizations are connected with each other using peer to peer network, because Blockchain is peer to peer based network. .Every lender organization consists of two or more peer node for communication with each other. Every organization consists of single user.

After adding organizations we will implement consensus mechanism that is known as “Kafka” ordering service, which best fit in our project with benefits high-throughput and low-latency in real time system.

Chaincode is developed after building the network architecture of project. Chaincode (Smart contract ) is developed in go language .chaincode considered one of The most important component of our project .That is the algorithm to calculate the “credit score “that will help individual to calculate the credit score for that calculation process we are using very famous FICO structure to build our project algorithms

We create one channel between three lending organization to share the ledger. After that  we will install chaincode over all peer in last chaincode is instantiate over the channel in The user under the organizations requires communication with chaincode to interact with ledger. For that Hyperledger fabric use REST API model to interact with Backend (Blockchain Network) and Frontend (GUI), for this we are going to use the Node SDK.

Final Deliverable of the Project

Software System

Core Industry

Finance

Other Industries

Core Technology

Blockchain

Other Technologies

Cloud Infrastructure

Sustainable Development Goals

Decent Work and Economic Growth

Required Resources

If you need this project, please contact me on contact@adikhanofficial.com