Hi Jeff,
1. Mifos has 3 ways of calculating interest: Flat Rate, Declining Balance
Method and Declining Balance-Equal Principal Installment.
If an MFI uses Flat Rate of interest, then the interest rate is charged
irrespective of the period. Grameen Koota, a Bangalore based MFI using
Mifos have used Flat Interest rate on loans based upon the same logic.
For instance, if a loan of 10000 is given for 10 weeks @ 10%, then the 10%
is for 10 weeks and not p.a.
Thus, Total Interest =
10000*10% = 1000
Weekly payable Interest
= 1000/10 = 100
Please refer to the following link for more information on interest
calculations:
http://www.mifos.org/knowledge/functional-specs/loans#interest-rate-formulae
2. A fee could be defined at Mifos as One Time (payable Upfront) or
Periodic (payable weekly/monthly depending upon the frequency of the loan).
Now, when a fee is defined for loans, the fee amount could be calculated as
a % of loan amount, (loan+interest) amount or only interest amount. Hence,
fee is something which is charged over and above interest on loans. But if
you wish to charge only fees and no interest on loans, then you can define
a loan product with "0" interest rate and attach a fee to the loan.
Thus, say a loan of 10000 is given for 10 weeks with a weekly frequency.
And a fee is attached to this loan. The fee amount is calculated as 10% of
the total loan amount.
Thus, the weekly payable Principal = 10000/10 weeks = 1000
In addition to this, each week, the customer has to pay fee = 10% of 10000
= 1000
Hence, the total amount of Installment becomes 1000+1000 = 2000
Hope the above information would help you. Please revert back if you need
further clarifications.
Thanks & Best Regards,
Arpita Adhicary
Business Analyst
IBM India Pvt. Ltd.
2nd Floor, Block A
Embassy Golf Links
Off Indiranagar-Koramangala Ring Road
Bangalore - 560 071
Mobile: +91-9886754331
E-mail: [EMAIL PROTECTED]
Jeff Blue
<[EMAIL PROTECTED]
ail.com> To
Sent by: [EMAIL PROTECTED]
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rceforge.net
Subject
[Mifos-functional] Interest Rate
29/04/2008 01:27 Entry
Please respond to
Mifos functional
discussions
<mifos-functional
@lists.sourceforg
e.net>
Let me try again. Sorry, but I incorrectly described how Mifos expects
the interest rate to be entered. However, I still desire help with how
best to handle my MFI client's service charge/interest rate. SEM charges
a flat rate, say 10%, of the loan amount. That's 10% of the total loan
amount regardless of whether the loan term is 3 months or 24 months. It
is not 10% per year. The payment of that charge is spread evenly over
the installments.
SEM would like to avoid their loan officers having to calculate the
equivalent APR interest rate. I looked at defining the charge as a fee
instead of the loan service charge/interest rate in the Mifos demo. If I
define the fee as a one-time fee, it is not spread over the
installments. If I define the fee as periodic, the rate entered is per
installment. Is there a way for this service charge to be entered as 10%
and have payment spread over the installments? Any suggestions?
Thank you,
Jeff
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