Hi Oskar,
Thanks for the email-you're right, there are a lot of details to be
worked out! I look forward to hearing more from your customer on their
requirements. The other complexity to keep in mind is how the system
should work if you allow back-dated payments. (See "Backdating loan
payments" header under http://tinyurl.com/yl35m2c )
One thing to note is that many MFIs charge "extra interest" if the
repayment is late-however they apply this extra interest as a fee or
penalty, so that the original repayment schedule doesn't change (the GL
code of this charge could be set up to be the same for interest-so from
an accounting perspective-this amount could be recorded the same as
interest). The idea is the customer must pay these additional charges
first before paying down their principal. Mifos doesn't yet have
functionality to auto calculate of penalties, but this might be an
approach to implementation.
Given the complexity and number of the scenarios-I'd recommend tackling
this in a more step-by-step approach... pick the most critical/crucial
scenarios to support and begin by spec-ing those out first. As I
mentioned before, many MFIs charge extra interest (calculated on a daily
basis) for overdue payments-so this is a more common scenario and
perhaps one to work on first. I haven't yet come across an MFI that
actually reduces interest b/c of early repayment-so perhaps that one can
be tackled later.
Emily.
From: Oskar Himmelreich [mailto:[email protected]]
Sent: Sunday, December 06, 2009 2:17 AM
To: A good place to start for users or folks new to Mifos.
Subject: Re: [Mifos-users] daily re-calculation of interest
Hi Emily,
At the moment we do not yet have details of the needed functionality. I
will be working on them this week together with my colleague. It will
take me a few days to work out the real details of what we need. As of
now I only know we highly likely need to recalculate interest on a daily
basis for the following items:
- Early repayment
- Late repayment
- Overdraft products
- Accrual accounting
- Regulations which has to do with loan provisioning (if I use the
terminology right in English)
- Liquidity management on a weekly basis
Some of these are solvable by reporting and calculating, but others will
become difficult if the system is not daily recalculating the real
interest which our clients owe us.
The specifications in the following text are ideas we had, they are not
worked out yet, be aware of that when you read it:
Your questions are very valid, we had indeed initially in mind that if
somebody payed a few days early the interest due for the coming
repayments are then getting down. Communicating this to the client is a
difficulty because they need to transfer money to us and they do not
know the new amount (one idea is to keep the original schedule and only
adjust the last one so it reflects all the saved money. I will need to
do some final checks on what exactly we need on this one.
With late payments we would send an SMS which says because of late
payment they owe us some more and if they do not pay this difference it
will be added to the loan in total. This can then also be solved at the
last payment where the will pay more then the original schedule. Again
details are not clear.
As you already can see a lot need to be done on the detail part of this
daily interest calculation because it is a tricky thing (business and
technical) and I will do my best to get these as soon as possible.
Cheers,
Oskar
On Sat, Dec 5, 2009 at 12:25 AM, Emily Tucker
<[email protected]> wrote:
It would be helpful to know how the remaining repayment schedule is
impacted by the early or late repayment. If I have a repayment for 100
dollars, 50 is for principal and 50 for interest-if I repay early, I'm
assuming more of my payment would be applied towards the principal.
Given that:
(*) Are all of the remaining repayments recalculated and reduced by the
reduced principal amount? (unlikely)
(*) If repaid early, is the amount due for that installment less b/c
there is less interest?
(*) Do the repayment amounts remain the same as originally
calculated-and there are just fewer repayments at the end?
(*) Or is the amount simply applied towards the next installment-so
there are no fees/penalties if the customer misses or underpays the next
installment?
(*) And probably a few other scenarios I haven't thought of....
More specifics and details would be helpful!
Emily.
From: Kay Chau [mailto:[email protected]]
Sent: Friday, December 04, 2009 2:50 PM
To: A good place to start for users or folks new to Mifos.
Subject: [Mifos-users] daily re-calculation of interest
Hi there
We are working with an MFI in the community that has the need of
re-calculation of interest based on what's been paid by the user and I
am wondering if anyone else has encountered this and if there is a
workaround?
Basically, they need to recalculate interest on loans on a daily basis
so that if somebody pays back early it adjust the amount down and if
somebody pays back later it goes up. Basically the interest would be
re-calculated daily so if they make an early payment, this interest
they're paying on should have decreased. They are planning to use
mobile payments and will not have payments coupled to meeting schedules.
The business reason is they want to reward clients who are paying back
early.
Thanks!
Kay
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Oskar Himmelreich
IT Officer Musoni
Mobile: +31 (0)6 24284028
Email: [email protected]
Website: www.musoni.eu
Skype: oskarhimm
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Join us December 9, 2009 for the Red Hat Virtual Experience,
a free event focused on virtualization and cloud computing.
Attend in-depth sessions from your desk. Your couch. Anywhere.
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