Blockchain Smart Contracts for Automated Credit Approval in Savings and Loan Cooperatives

Abstract

Savings and loan cooperatives play an essential role in promoting financial inclusion and supporting Indonesia's local economy by providing affordable credit and encouraging community-based savings. However, many cooperatives still depend on manual or semi-digital procedures for credit approval, resulting in inefficiencies, delayed loan processing, human errors, and limited transparency. These weaknesses often lead to mismatched capital-to-loan ratios, data inconsistencies, and reduced member trust in cooperative governance. To address these challenges, this study proposes a blockchain-based smart contract framework that automates the credit approval process through secure, rule-based decisionmaking. The research employs the Design Science Research Methodology (DSRM) to design, implement, and evaluate a prototype system developed using Solidity on the Ethereum blockchain, integrated with Web3.js and Metamask for decentralized interactions. The smart contract encodes cooperative business rules, automatically verifies member eligibility, and records transactions immutably on the blockchain ledger. A case study conducted in an Indonesian cooperative demonstrates that the proposed system reduces credit approval time from several days to a few seconds, eliminates manual verification errors, and achieves 100 % transaction success and data consistency. The findings highlight the potential of blockchain and smart contracts to enhance operational efficiency, transparency, and trust in cooperative finance, contributing to Indonesia's digital transformation and offering a scalable model for other community-based financial institutions.