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https://issues.apache.org/jira/browse/FINERACT-2062?page=com.atlassian.jira.plugin.system.issuetabpanels:comment-tabpanel&focusedCommentId=17825667#comment-17825667
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Francis Guchie commented on FINERACT-2062:
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[~kigred.developer] [~adamsaghy] [~bgowda] & [~eroemma] , [~ikimbrah]
Mathematically everything is correct, but the practice is not correct in my
view. I have experienced this from a number of clients who like to assume a
month has 4 weeks. So they want to give out loans and use the weeks as a yard
stick ( to their customers) yet the want to annualize the interest calculation
(they want to use this as a {*}"LUNAR MONTH"{*})
a month measured between
[successive|https://www.google.com/search?sa=X&sca_esv=1114ab6409594670&biw=1777&bih=830&sxsrf=ACQVn08chJpugHbWy1NIK7JNEteQgx_azw:1710248186155&q=successive&si=AKbGX_pt4UlL1m2gNC94R_NJDj6SF39e9PuGLPKk1qjEgJkeoeSrsMOJx8LzLMIDC-cz1UsXq9wOtXMrthQQYx1FDHcIdK3TtpDWLY_YbFTA8ae9B5I7MXQ%3D&expnd=1]
new
[moons|https://www.google.com/search?sa=X&sca_esv=1114ab6409594670&biw=1777&bih=830&sxsrf=ACQVn08chJpugHbWy1NIK7JNEteQgx_azw:1710248186155&q=moons&si=AKbGX_oRjcCPa5QPMQwD2ABTMArQUfLzInjyVbGwBh1zPlK-Ip0wPQzNdEc3XAJYBfRb40bIrCk2e-NZZRckVYXvsV5SqiMh8A%3D%3D&expnd=1]
(roughly 29 1/2 days).
*
(in general use) a period of four weeks
In my personal view,
A daily loan should be calculated using daily interest calculations 1/365 (or
360) if one chooses a year of 360 days
A weekly loan should be calculated using weekly interest calculations 1/52
weeks in a year
A Monthly loan should be calculated using monthly interest calculations 1/12
weeks in a year
A mixture of weeks and months in a loan interest calculation method is likely
to confuse the flock unless we can come up with a package that does not violate
rules of engagement in the Financial Industry
[~ikimbrah] please comment
> Use 48 weeks in a year when interest rate is per month
> ------------------------------------------------------
>
> Key: FINERACT-2062
> URL: https://issues.apache.org/jira/browse/FINERACT-2062
> Project: Apache Fineract
> Issue Type: Improvement
> Components: Loan
> Affects Versions: 1.9.0
> Reporter: Kigenyi Wilfred
> Priority: Minor
> Fix For: 1.10.0
>
>
> Given that the interest rate period on a loan is monthly and client has
> chosen to make weekly repayments, it makes more sense to assume that there
> are 4 weeks in the month and 12 months in the year which comes to 48 weeks
> rather than assuming the traditional 52 weeks in the year.
> For example if a loan has a flat interest rate of 2% Per month and the
> principal is 1000 and the repayments are weekly, weekly interest is currently
> computed as follows:
> interest per week = (0.02*12*1000)/52 = 4.61538
> it would make more sense if interest per month is computed as follows:
> interest per week = (0.02*12*1000)/48 = 5
>
> In other words there is no need for computing weeks in a year when we are
> dealing with a month. There are 4 weeks in a month and this assumption
> calculates a more reasonable figure as compared to when we compute weeks in
> year.
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