Hi James,
Thanks for your response. The client is based in Kenya and not regulated by the Central Bank of Kenya. The penalty terms are stipulated in the loan agreements that they sign with their customers and its upon the customer to accept them or not. The reason for compounding penalties according to them is to discipline the clients to repay their loans on time and their customers are fully aware of. They operate on short term basis and loans that are overdue by more than 30 days are written off and further recovery actions taken. Is there a way Mifos X could serve their need despite how usurious this practise may sound? Perhaps, we should think of creating a new charge type to charge a % of outstanding balance as I had seen a requirement before where an MFI charges installment fee and the fee isn’t considered in calculation of penalty. Regards; ******* Zayyad A. Said | Chairman & C.E.O Cell No.: +254 716 615274 | Skype: zsaid2011 Email: [email protected] Schedule Meetings: https://calendly.com/zayyadsaid Description: Email banner From: James Dailey [mailto:[email protected]] Sent: 04 May 2019 12:05 AM To: Mifos software development Cc: Dev Subject: Re: [Mifos-developer] Compounded Penalty Hi Zayyad I usually don't comment on requirements because they are the domain of the user-organizations. However, my opinion is that Interest charged on Penalties is not ethical nor fair behavior and could land the organization in hot water with authorities or in the paper. Penalties are valid (if levied on behavior spelled out in the terms) Interest is valid But compounding Interest on penalties is different because it cannot be consented to by the consumer and has the potential to be quite usurious. I'd suggest finding a different mechanism, perhaps additional penalties or fees for clearly spelled out term violations. The main thing for consumer protection is to make the charges transparent and clear. https://www.centerforfinancialinclusion.org/client-protection-in-india/ Has the organization consulted with Banking Codes and Standards Board of India? http://www.bcsbi.org.in/ or with Sa-Dahn or SMART campaign for guidance? We all lose when banks or MFIs make myopic decisions. https://economictimes.indiatimes.com/blogs/et-editorials/penalty-on-customers-a-myopic-move-by-public-sector-banks/ Thanks, James On Fri, May 3, 2019 at 1:14 PM Zayyad A. Said <[email protected]> wrote: Devs, We have a requirement from one of our clients to charge Late Payment Penalty on compounding basis and to calculate as % of outstanding balance (including fees). Here is a practical scenario of how the penalty should be calculated on weekly basis: Principal: 10,000/= Interest: 200/= Fees: 485/= Penalty on Week 1: (10,000+200+485) * 1% = 106.85 Penalty on Week 2: (10,000+200+485+106.85) * 1% = 107.92 Penalty on Week 3: (10,000+200+485+106.85+107.92) * 1% = 109.00 Penalty on Week 4: (10,000+200+485+106.85+107.92+109) * 1% = 110.09 I configured a penalty charge using calculation method as % Loan Amount + Interest and I noticed the penalty calculated every week is 102/=, it doesn’t factor the fees of 485/= & also doesn’t compound. Kindly advise how we can configure this penalty to achieve what the client is looking for. I have tried both in version 18.03.01 and 17.07.01 and the behaviour is the same. Regards; ******* Zayyad A. Said | Chairman & C.E.O Cell No.: +254 716 615274 | Skype: zsaid2011 Email: [email protected] Schedule Meetings: https://calendly.com/zayyadsaid Description: Email banner Mifos-developer mailing list [email protected] Unsubscribe or change settings at: https://lists.sourceforge.net/lists/listinfo/mifos-developer
