Interest-free loans make you seem like a generous person, but maybe you could be more motivated if you introduced some interest. Most loan services require a small additional payment and this can provide more probity to your capital. I think you can accept a small amount of interest by setting an additional repayment period. The extra period and some extra interest will help you to continue the service in the long run.
Increasing the loan amount may be decent.
The fine of $5 per day will suffice that and he doesn’t need that also if they even come to some kind of agreement with the borrower privately. He said this is an interest free loan and I commend him for starting this up very well. It is very hard to come across an interest free loan this era and this is a welcome development. His rules are well explained and very simple to follow. Not collecting extra fees after taking the loan doesn’t mean the service will not last long or will give him more capital to sustain the loan service. This is an help to the community and about increasing it will depend on how people react to the loan, repayment on time and trustworthiness of them.