Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

Design and Development of a Lending and

Credit Management System for a
Micro Finance Company
(Paper ID: CFP/5639/2024)

Justina Lombe Phiri1; Eng. Lameck Nsama2

Department of ICT, School of Engineering
Information and Communication University, Lusaka, ZAMIA

Publication Date: 2025/02/19

Abstract: This study aims to investigate the effectiveness of online lending and credit management systems on loan
performance among microfinance institutions in Zambia. Microfinance institutions (MFIs) play a vital role in providing
loans to the rural communities and unbankedand underserved population thereby bridging the financing gap in the
mainstream financial sector. However, the high incidence of risks associated with the high levels of nonperforming loans by
MFIs in the past years, threatens their growth and sustainability. The effectiveness of online lending and credit management
systems is critical to the success of MFIs as most of their income is generated from interest earned on loans extended to small
and medium entrepreneurs. Past studies have focused on loan application models used by MFIs and the impact on their
profitability, but there has been lack of proven studies on credit recovery systems.

The findings of this study could help improve online lending and credit management systems in MFIs and enhance
their ability to provide access to credit for the rural unbanked and unserved population.

Keywords: Microfinance Institutions, Credit Risk, Credit Management Systems, Loan Performance, Rural Unbanked Population,
Non-Performing Loans.

How to Cite: Justina Lombe Phiri; Eng. Lameck Nsama. (2025). Design and Development of a Lending and Credit Management
System for a Micro Finance Company. International Journal of Innovative Science and Research Technology,
10(1), 2734-2742. https://doi.org/10.5281/zenodo.14891747.

I. INTRODUCTION B., & Morduch, J., 2010). Banks in USA gave credit or loans
to customers with high interest rates and demanded for
A Lending and Credit Management System is basically collateral which sometimes discouraged borrowers hence the
an online platform that helps Microfinance Institutions concept of credit was not popular (Ditcher, 2013). In Africa
process loan applications with ease. The system has different the concept of credit was largely appreciated in the 1950’s
modules such as customer information module, loan when most banks started opening the credit sections and
application module, loan approval or rejection module, loan departments to give loans to white settlers. In Zambia credit
repayment module and reports. All these modules make it was initially given to the rich people and big companies and
easy for MFIs to make informed decisions in the management was not popular to the poor. In 1990s loans given to
of loans. Microfinance institutions may largely benefit from customers did not perform which called for an intervention.
this system as they are able to access customer information In the late 2000s the concept of credit has become popular
and other related information on borrowers that have due to an increase in the number of MFIs that have been
defaulted in the repayments of loans. Microfinance is an established.
important tool for inclusive entrepreneurship and access to
affordable loans because it provides access to start-up capital II. METHODOLOGY
to people that have no access to banks and mainstream
financial markets. These loans are typically offered by A. Baseline Study
Microfinance institutions (MFIs) that are dedicated to serving The methodology will cover system analysis, system
specific target client groups, but it can also be offered by modelling and methodology used in the design and
financial institutions, governments and other financial actors. development of the system. This gives an outline of the
The concept of credit can be traced back in history and it was methodology that was used in the design and development of
not appreciated until after the Second World War when it was the lending and credit management system. It provides
largely appreciated in Europe and later Africa (Armendariz, information on the baseline study, the target population for

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

the research and the research design. The researcher describes managers, loan officers, and financial analysts. The
the development design that was chosen for developing the interviews will focus on: Insights into the credit management
system and the reasons for this choice. The tools that were processes, Strategies for credit risk assessment and
used for data collection and also the procedures that were monitoring, Challenges faced in loan recovery, Perspectives
followed to carry out the development are included. Lastly, on the effectiveness of existing credit management systems.
several ethical considerations were considered to ensure that
the study and ultimately development was conducted in an  Focus Groups: Organizing focus group discussions with
appropriate manner (Babbie & Mouton 2021). To comply borrowers to gain a deeper understanding of their
with ethical considerations as discussed by (Leedy & experiences with MFI loans. Discussions will explore:
Neuman, 2020) in conducting research, all participants
provided verbal consent to be interviewed and to participate  The impact of loan terms on repayment capability
in the research. The participants therefore willingly  Awareness and understanding of credit management
participated in the study after they were approached by the policies
researcher (Leedy & Neuman, 2020) and the research purpose  Suggestions for improving credit management systems
and process were explained to them. Secondary Data Collection Financial Records: Analyzing
financial statements and loan books of the MFIs to gather
Prototyping approach to be used will be to deliver the quantitative data on:
first model. In prototyping model, a system that mimics the  Loan disbursement and recovery rates
real system is given to the users and the real system is  Patterns in non-performing loans
developed by basing on the prototype or by improving on it  3.Financial health indicators relevant to credit risk
(Edward, 2017). Thus, the users to use the system in part will Reports and Publications: Reviewing published reports,
see whether they find it a good system or not. To give users academic papers, policy documents, and industry
time to learn how to use and interact with the system. Oral analyses to understand the broader context of
and written interviews or questioners will be used to collect microfinance credit management and to compare the
requirements and information from the locals since the other findings from primary data with existing literature.
possible means like observation requires an existing system
to learn from it. III. KEY FINDINGS

B. System Analysis Under key findings, the developer will give the analysis
What is system analysis? (Lonnie D. Bentley p.160 7th of the survey from the questionnaire before the system was
edition.) defines system analysis as "the process of studying designed and developed and after.
a procedure or business in order to identify its goals and
purposes". Another view by (Horne 2007) sees system In efforts to improve the existing lending and credit
analysis as a problem-solving technique that breaks down a management systems in Zambia, observation on the problems
system into its component pieces for the purpose of studying and opportunities from the existing systems both in Zambia
how well those component parts work and interact to and outside had been conducted. With that, it is recommended
accomplish their purpose (Lonnie D. Bentley p.160 7th that an integrated system of solutions that attempts to rectify
edition.). This also describes the plan that the investigator will many of the existing problems in the current lending and
undertake to develop the ways of solving problems and credit management systems be developed and develop an
provide guidance in various steps of undertaking the research innovative way to enhance the services provided by MFIs.
(Horne 2007).
Therefore, the goal of the developed Lending and Credit
C. Data Collection Management System is to provide a revolutionary way to
The data collection process is a critical step in empirical interact effectively in a one stop venue. Furthermore, with
research as it provides the foundation upon which analysis this system, customers will be able to obtain a wider choice
and conclusions are built (Horne 2007). For this study, the of MFIs.
data collection will be comprehensive, encompassing both
primary and secondary data sources to assess the In short, with the developed system, MFIs can now be
effectiveness of credit management systems on loan involved in making loan transactions convenient, cost
performance among microfinance institutions. effective and finally can do away with the
manual/conventional methods of approving and disbursing
 Sources of Data loans. Therefore, the developed system will be superior and
Primary Data Collection Surveys: Designing structured function as a catalyst in the competitive business environment
questionnaires that will be distributed to selected participants regardless of the geographic barricades among the MFIs.
from the rural unbanked population who have borrowed from
MFIs, as well as to MFI staff responsible for credit or loan A. Intended Users
management. The surveys will aim to collect data on: The system has the public and SMEs (as Customers),
Borrower satisfaction, Repayment discipline and challenges. super system Administrator, Cashiers, and Manager’s (as
The perceived impact of credit management systems on loan MFIs). These are identified as the main users of the system.
accessibility and repayment Interviews: Conducting semi- This is because this system can only be successful when there
structured interviews with key informants, including MFI

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

is a customer to apply for a loan and MFIs to provide their (Mathew Martin, 2021). Staff (MFIs) and Customers (public
services. and SMEs) use this developed Lending and Credit
Management System. A clear and detail functional system
B. Analysis of the Developed System requirements for this system are the Staff section and
The system function can be divided into two sections, Customer section. These are described as following;
the Staff section (Administrators), and the Customer section.
In the Administrator section, the system allows  The Functional Requirements of the Lending and Credit
Administrators to edit/register staff, a cashier manages all Management System are:
payment activities while a manager handles loan approvals or
rejections and generates reports, view user logs and activity  The user can create a profile
logs.  Users can apply for a loan according to the desired
amount up to the maximum specified by the MFI.
In the Customer section, the customer can view the  Users can receive their funds (loans) through any of the
home page to create a profile with their ID number, personal mobile network operators or banks.
details and password. After creating a profile, the customer
can then log in to apply for a loan. D. Non-Functional Requirements
Non-functional requirements address aspects of the
C. Functional Requirement system other than the specific functions it performs. These
A Functional Requirement (FR) is a description of the aspects include system performance, costs, and such general
service that the software must offer. It describes a software system characteristics as reliability, security, and portability.
system or its component. A function is nothing but inputs to The non-functional requirements also address aspects of the
the software system, its behaviour, and outputs. It can be a system development process and operational personnel. It
calculation, data manipulation, business process, user includes the following:
interaction, or any other specific functionality which defines
what function a system is likely to perform as defied by
 The system is user friendly and consistent  The system allows developer access to installed
 The system provides an attractive graphical interface for environment
the user  The system is targeted to the customer base

Fig 2: Staff Interface

Source: Author 2024

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

Figure 2 shows the interface of the cashier for the online  Manager: Manager is a company staff who manages
lending and credit management system that has been company activities and can perform the following
developed. The cashier is able to create accounts for functions:
customers who apply for the loans. This ensures that  Manage Customers: Manager can view, edit, delete, and
customers do not provide their personal information every search all the customer information in the register with the
time they want to apply for a loan. The cashier is also able to company.
see the loans that have been approved and rejected in order to  Activity Logs: Manager can view all the activities
disburse funds to those customers whose loans have been performed in the system.
approved. The cashier is also able to update the payment  User’s logs: Manager can view all the activities performed
history of customer who have repaid their loans. The ensures by the staff and customers.
that loan repayment is easily monitored and tracked.  Generate report: Manager can generate report by using a
particular date or range base on approved and disbursed
 The other Modules Included in the System are Discussed amount, number of loan applications and print it.
Below:  Cashier: Cashier is a finance department person that
disburses funds and accepts loan repayments from
The functional requirements for the staff’ section is customers.
divided in to three functions which are: (a) Administrator (b)
Manager (c) Cashier.  Customers
The customers are able to access some of the functions
 Administrator: Administrator is a super person that has in this system, which includes the main page module,
the overall control of company staff which includes: registration module.

Fig 3: User Interface Design

Source: Author 2024

Fig 3 shows the user interface design for all the users of status. The customer also creates a password which they
the system. These users are; cashier, system administrator, would use whenever they want to log into the system.
manager and cashier. The user interface is used to create  After successful registration with validations from the
accounts to login into the system. Users accounts are useful system, a customer proceeds to apply for a loan by
for accountability and audit trails. Users can also reset their selecting which MFI they want to borrow from and
passwords in the user interface. specifying the amount they wish to borrow.

 The Functional Requirements for the Customers Section  Reset Password:

are as Follows: Customers are also able to reset their password if they
can’t remember the previous one or feel it may have been
 Loan Application: During loan application, a customer compromised.
performs the following activities:

 Creates an account on the system with the personal details

i.e identity number, first name and last name, employment

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
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Fig 4: Dashboard
Source: Author 2024

Fig 4 shows an analytical dashboard for the number of total customers which are classified as individual customers and small
and medium enterprise customers.

Fig 5: Manager Interface

Source: Author 2024

Fig 5 is the interface for the manager where he can approve or reject loan applications.

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

Fig 5: Sex of Respondents

Source: Justina Phiri

Fig 5 shows the respondents from the survey that was of responses was because of the purposive sampling method
conducted. The respondents consisted of 57.9% male and that was used to select the sample for the research.
42.1% female. The distribution of different numbers in terms

Fig 6: Graph of Respondents

Source: Justina Phiri

Fig 6 shows the graph of the respondents. The Figure 7: Responses in percentages on the awareness of
respondents were asked if they had ever used any ICT the respondents of any Lending and credit management
systems in their daily work of rending and credit systems in Zambia.
management. 68.6% said they had never used any ICT
systems in their daily work, 27.3% said they had, while 4.1%
said they could not remember.

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

Fig 7: Responses in Percentages for Respondents Awareness of Online MFIs

Source: Justina Phiri

 System Implementation Results languages: JavaScript, CSS, and HTML. And while it sounds
(Ojo A., and Longe, O. 2017) define implementation as quite complicated, once you know what you are doing,
the stage in the project where there are several activities understanding web technology and the way it works becomes
involved, while implementing a theoretical design is turned significantly easier (Mailos: 2019). This system is designed
into a working system. The implementation phase constructs, to work on the following hardware and software
installs and operates the new End user training. The officers configuration. DOS VER 3.0 or higher (it is recommended
will be imparted the necessary training on the new that the user use Ms –DOS 3.0 or a higher version. The
technology. End User training start after the implementation program can work with disk formatted by any version of Dos.
and testing is over. When the system is found to be more Processor: IBM Ps 12 all models, pc, at, xt and most IBM
difficult to understand and complex, more effort is put to compactable and higher Output design: LCD, CRT, VGA,
educate the end user to make them aware of the system, EGVA, MONOCHROME. Storage devices: 20MB and
giving them lectures about the new system and providing above (Higher capacities will be most Ideal). Memory
them necessary documents and materials about how the requirement: At least 512kb base memory.
system operates. Training of application software after
providing the necessary basic training on the computer C. Development of the System as a Solution
awareness, the users will have to be trained upon the new The programming languages chosen for the
system such as the screen flows and screen design, type of development of the system are JAVA, CSS and HTML. The
errors while entering the data, the corresponding validation languages were chosen because it enables the creation of
check at each entry and the way to correct the data entered. It applications with a graphical user interface, containing
should then cover information needed by the specific user or controls such as text fields, combo box, labels, command
group to use the system. buttons, (Sangeeta, 2016).

IV. CONCLUSION AND RECOMMENDATION D. Comparison with other Similar Works

A. The Baseline Study  A Comparison with Manual Systems was Conducted and
Requirement analysis as explained by (Ahuja, P., & it was Found That:
Kulkarni, P., 2014) is the most important and fundamental
stage in SDLC. The researcher performed tasks by carrying  It involves a lot of paper work during transaction
out baseline study and the information was used to plan the  It is inefficient, tedious and time consuming. This part
basic project approach (Ahuja, P., & Kulkarni, P., 2014). The consists of the methods used in evaluating the proposed
method used in fact finding were outlined. system in terms of Accessibility, Accuracy and
Efficiency. The availability of the specification should be
B. Use of Technology identified with the proposed system if it is technically
(Ali A., and Safi S., 2019) explain that to create a Web feasible or not. (Chakrabarty, K., & Khan, F.,2017) states
system, a huge set of rules and technology are used so that the that it is in technical feasibility where the researchers see
website looks and function as you wish them to, and that the to it that the new system can be adopted by the user.
familiarization with web technologies help one to achieve it. Operational Feasibility is the method of evaluation used
The technological tools come down to knowing 3 main to determine whether the proposed system is effective or

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Volume 10, Issue 1, January – 2025 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

not as explained by (Chakrabarty, K., & Khan, F.,2017).  Provide borrowers with a real-time view of their loan
The proposed system will be tested and evaluated whether status, including amounts owed, upcoming payments, and
the software is fully functional. If the results of the a history of previous transactions. This promotes financial
evaluation are satisfactory, it is considered operationally literacy and self-management.
feasible (Basu S., 2015). The proponents evaluated the
operational feasibility of both the existing and proposed G. Summary
system through the following criteria: Accessibility. With the numerous advantages of computer systems
(Holton M., 2024) refers to accessibility as the ability of over manual system in terms of speed, accuracy,
the system to be easily accessed and used by as many organization, ease of update and timely and efficient report
users as possible at any place and time. for managerial use, the new online lending and credit
 Accuracy. (Holton M., 2024) refers to accuracy as the management system with its organization and structure will
ability of a system to give correct, exact and precise eliminate the problem of inefficiency in service delivery due
information to the user. to the use of manual systems. The MFI management will be
 Efficiency. (Holton M., 2024) defines efficiency as the provided with routine performance report of the organization
ability to do something well or achieve a desired result for effective control and decision making.
without wasted energy or effort. Economic Feasibility.
The proponent computed the system development cost to H. Conclusion
determine the expenses covered in the development of the Based on our research and design and development
system (Hulme, D., 2000). efforts, we have successfully designed and developed a
lending and credit management system for the microfinance
E. Possible Application company in Zambia. The system is user-friendly, efficient,
Over the years Money lenders / Micro finance managers and can handle large volumes of data. We believe that the
have had a problem in maintaining and managing their implementation of this system will significantly improve the
customers and their own records (Hulme, D., 2000). MFIs lending and credit management processes, resulting in
Management has become difficult because of issues that improved customer satisfaction and increased profitability.
include: We also found that the incorporation of digital financial
services, analytical tools can further enhance the efficiency
 Data growth. Storing and maintaining all data manually is and accessibility of the lending and credit management
very difficult. The developed system can be used to store system. Therefore, we recommend that microfinance
huge electronic data. institutions in Zambia should explore the use of digital
 Lack of computerized system. currently most money financial services such as mobile banking, online payments,
lenders / micro finance managers use the manual system and electronic record-keeping in its operations.
in recording and maintaining their property and customers
data I. Future Work
 Data security is not assured in a manual way, data is Once the software has been "rolled out" and any
recorded on books / papers which may easily get damaged necessary user training has been completed, it will be
leading to loss of data. The developed system is secure necessary to monitor the performance of the system over time
and there is no security breach. to ensure that it is behaving as expected IX I would like to
 There is no database to store information. potential of data thank my Almighty heavenly father for the gift of life,
loss or damage is very high because data is stored on strength sustenance and good health he has rendered to me
tangible files. The developed system has a database which during the course of doing my project.
stores information securely.
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ISSN No:-2456-2165 https://doi.org/10.5281/zenodo.14891747

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