Micro loans are small loans, which are beginning to gain popularity especially among borrowers in developing countries. The idea is to bring venture lenders together using information technology. Typically, the loans will be used to finance startup or development of the borrower’s company, so that there is a realistic chance for repayment. The money in a loan can, unlike traditional loans, come from many lenders. In this project, you must create an E-R model that describes the information necessary to manage micro loans. The following information form the basis for creating the model:
● Each borrower and lender must be registered with information (first name,last name, address, phone, and credit rating).
● The process starts with the creation of a loan request. A loan request has a request date, the total amount being loaned (US-dollars), the date in which the money will be paid back by, and total amount to be paid back (Consider this a simplicity so we don’t have to think about interest). Also, a description is included of how the money will be used.
● Lenders can commit to an optional portion of the total amount of a loan request. Example 1: Lenders may contribute equally toward backing a loan request. For example, a loan request for $10,000 could be backed 50% by one lender and 50% by another. Example 2: Lenders may contribute non-equally as well. Three lenders could back a request at (50%, 30%, and 20%).
● When the commitments for the loan request covers the requested amount, the request is converted to a loan. If not enough commitments can be reached, the loan request is cancelled. (Thus, not all loan requests will become a loan).
● A borrower can have more than one request, and more than one loan at a time.
● There is no assigned payment schedule, the borrower chooses when he or she will make a payment. Every payment must be registered in the database with an amount and a date. (If there were multiple lenders for a given micro loan, then the lenders share the repayment based on how large a part of the loan they are responsible for.)
● In some situations the loan can’t be repaid entirely by the agreed upon deadline. When this happens a new date is chosen and the total amount to be paid back is increased as a form of penalty. The database must not delete the old deadline and amount. Instead, the entire history of these changes must be kept.
● Each lender can, for each burrower, save a “trust”, which is a number between 0 and 100 that determines the lender’s evaluation of the risk of lending money to that person. This can be used in conjunction with their credit score in making decisions.