He had paid his previous loans, but those were small amounts, typically less than $100. That was enough to build a reputation as a paying customer. I think what DaveF approved for him was reasonable, as it was within his usual range. However, the oversight was not knowing he already had another loan. This became an issue, especially when he was granted a large loan of $500 from Shasan -- an amount far beyond anything he had borrowed before.
The main concern here is that all these are unsecured loans. Even if the borrower initially had no intention to scam, life circumstances or unexpected events could make it impossible for him to repay. Based on the signs, this loan might end up being unpaid. I’m not an expert, but I suggest lenders limit their loan exposure, even to trusted borrowers, because these are still unsecured loans. If the borrower dies or disappears, the loan remains unpaid, making it high-risk.
Since most of us don’t know each other personally here, I’d like to suggest introducing something like a co-maker system, a group loan arrangement. In this setup, if one member fails to pay, the others in the group share responsibility for repaying the loan. This concept already exists in real-world microfinance, which often deals with unsecured loans. The risk is minimized because there are co-makers who can be held accountable if a borrower defaults.