Functional Spec Automatic Application of Late Payments Penalties

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  1      Automatic application of Late payment Penalties for Loans

Release H ( Ver 2.3)
Current Owners: Chetan Bekkinkeri
Status (Draft,   In   Review, Stable / Approved): Draft

Contents:

  2     Introduction

In order to ensure timely loan repayments, most MFIs intend to charge a fee for late repayments for loans. The fee for late repayment can be calculated using any of the following methods

  1. Fixed      fee for each time period of late payment
  2. As a      percentage of Outstanding Principal Amount
  3. As a      percentage of Outstanding loan amount
  4. As a      percentage of overdue amount
  5. As a      percentage of overdue principal

The penalty for the late repayment can be applied after allowing for a grace period. The frequency of the penalty (late fee) application on the account needs to be configured while defining the penalty.

Penalty once defined will be configured as part of the loan product definition. Penalty once configured on the loan product can be removed or edited.

Penalty is calculated at end of day (EOD) by the batch job and is applied to a loan account based on the criteria defined on the penalty. However given that most micro-finance institutions operate with double bottom-line mission, it is important that penalty once calculated and applied to an account should be removable and the transaction reversible. ( taking compassion into consideration)

Note: For the purpose of this document, Penalty will be considered equivalent to late fees although the terms may be used in different contexts by MFIs.

  2.1 Goals

List Goals of feature

  • Ability to allow automatic application of penalty for delay in the loan repayments

 2.2 Non-Goals

  • Ability to allow automatic application of penalty for delay in the mandatory savings payments

  2.3 Definitions and Terminology

Term Definitions
User User of system
EOD End of Day
  • Mandatory fields will be preceded by  "*" (an asterisk)
  • Links are italicized
  • Buttons are Button

  2.4 Related Documents

*insert links to related specs here

  3     User Stories

List high level user stories - these can be broken down later into small user stories / user tasks if needed

Priority Use Cases User Stories Section in FR
P1 4.1 As a Mifos user, I   want to be able to define a penalty using the Mifos Admin screen. 5.1
P1 4.2 As a Mifos user, I want to be able to edit and view the   attributes defined for a penalty 5.2
P1 4.3 As a Mifos user, I   want to be able to configure and add the penalty while defining a loan   product, so   that the penalty can be viewed   at product level. 5.3
P1 4.4 As a Mifos user, I want to be able to view the defined   penalty as part of the loan product defined. 5.3
P1 4.5

As a Mifos user, I   want to be able to remove penalty configured from an existing loan product   definition. 5.3
P1 4.6 As a Mifos user, I   want to be able to view the applied     penalty/fee as part of the loan repayment schedule in the Penalty   column 5.4

P1 4.7 As a Mifos user, I want to be able to apply Penalty to the loan schedule using "apply charges" option 5.3
P1 4.8 As a Mifos user , I want to be able to make payments   for   penalty using collection sheet or   apply payment option, so that the repayments get applied to the penalty on   account
5.4

P1 4.9 As a Mifos user, I   want to be able to repay the total amount     due on a loan, so that the loan repayment amount includes the penalty   amount   calculated. 5.6
P1
4.10 As a Mifos user, I want to be able to remove Penalties   applied to a loan account using the “remove Fees/Penalty” option  

  4     Use Cases

  4.1 Penalty Definition

Actors

  • Mifos      user who has permissions to create and edit fees

Preconditions

  • Mifos      is configured as per the MFI      requirements

Basic Flow

  1. Navigate to Admin screen
  2. Click  on 'Define new penalties'
  3. Enter      the penalty details by entering the values as defined in the section 9.0      of the document
  4. Click      on preview and user validates all values entered are displayed and correct
  5. Submit      for processing.

Post-conditions

  1. The      user should be able view the late fees (Penalty) as per the requirements      of the MFI
  2. Any      user with create and/or edit loan permissions should see the penalty      listed as an option to add to the loan product.
  3. Any      user creating a loan instance see's the penalty as an option to add while      creating the loan

Alternative Flows

NA

Validations

1. If user enters a negative value for the following fields, Mifos should display a error message “Incorrect value. Negative values not allowed.”

  1. Cumulative Penalty( minimum)
  2. Cumulative Penalty ( maximum)
  3. Grace period duration
  4. Fixed Amount Column of the Penalty calculation type attribute

2. If user enters a incorrect value( number with commas or special characters) value for the following fields, Mifos should display an error message “Incorrect value. Please enter the correct values”

  1. Cumulative Penalty( minimum)
  2. Cumulative Penalty ( maximum)
  3. Grace period duration
  4. Fixed Amount Column of the Penalty calculation type attribute

3. If the user clicks on the Preview and Submits without entering any values in the following fields, then Mifos should display an error message “ Please specify a value for the fields -- “

          a. Penalty Name

b. Applies to

c. Cumulative Penalty Amount (Minimum)

d. Cumulative Penalty Amount (Maximum)

e. Penalty calculation type

f. Accounting Details

 4.2 View/Edit Penalty Definition

Actors

  • Mifos      user who has permissions to create and edit fees

Preconditions

  • Mifos      is configured as per the MFI requirements

Basic Flow

  1. Navigate  to Admin screen
  2. Click      on 'View penalties'
  3. User selects a penalty to view
  4. The      user should be shown the attributes of the penalty defined as per Use Case      4.1.
  5. Click      on the Edit Button

Post-conditions

  1. The      user should be able view the Penalty definition and terms & conditions      as required.
  2. Attributes      which are “editable” as per the attribute definition in Section 9.1 should      be editable.
  3. Making      changes to the “Editable” values and clicking on preview->submit should      save the values changed.

Alternative Flows

NA

Validations

1. Penalty (Late fee) as created by the administrator should be viewable/edit when the view Penalty definition link is clicked.

  4.3 Penalty configuration in the loan product definition

Actors

  1. Mifos user who has permissions to create and edit loan products

Preconditions

  1. Mifos is configured as per the MFI requirements
  2. Penalty has been defined as part of configuring the penalties for the MFI [See Story 4.1]

Basic Flow

  1. Navigate  to Admin screen
  2. Click  on 'Define New Loan Product'
  3. User enters in loan details
  4. When user gets to Fees/Penalties, user can successfully select Penalty in left      side and add to the Right Panel
  5. User   completes entry of Loan product parameters and clicks on 'Preview' button
  6. On      Preview page, the Penalty is listed.
  7. User      clicks on Submit and Loan Product is Created

Post-conditions

  1. The      defined loan product should have a late fee (penalty) configured
  2. Any      user with rights to view loan product definitions should see penalty      configured
  3. Penalty      appears during loan creation workflow.

Alternative Flows

1) If the loan product already exists and the user needs to add a new late penalty to the product

  1. Navigate      to the admin screen
  2. User      clicks on 'View Loan Products'
  3. User      clicks on a Loan Product
  4. User      clicks on "Edit Loan Product Information"
  5. User      selects a Penalty on the left side panel in the Fees/Penalties section and      adds it to the right panel by click on "Add"
  6. User      clicks on Preview button
  7. On      Preview page, the Penalty is now listed
  8. User      clicks on Submit and Loan Product is updated

Validations

  1. All      new loan products created will have the penalty automatically attached
  2. All      loans created before edit to loan will NOT have the penalty automatically      attached

 4.4 View penalty in loan product definition

Actors

  1. Mifos user who has      permissions to create and edit loan products

Preconditions

  1. Mifos      is configured as per the MFI requirements
  2. Penalty      has been defined as part of configuring the penalties for the MFI [See      Story 4.1]
  3. Penalty      has been added to the loan product definition [See Story 4.3]

Basic Flow

  1. Navigate      to Admin screen
  2. Click on View Loan Products
  3. Click      on loan product for which penalty was added as part of User story 4.3
  4. Penalty      as added in the loan product definition should visible in the loan      definition screen

Post-conditions

  1. The      defined loan product should have a late fee (penalty) configured
  2. Any      user with rights to view loan product definitions should see penalty configured
  3. Penalty      appears during loan creation workflow.

Alternative Flows

NA

Validations

  1. All      new loan products created will have the penalty automatically attached
  2. All      loans created before edit to loan will NOT have the penalty automatically      attached

   4.5 Remove penalty from loan product definition

Actors

  1. Mifos user who has      permissions to create and edit loan products

Preconditions

  1. Mifos      is configured as per the MFI requirements
  2. Penalty      has been defined as part of configuring the penalties for the MFI [See      Story 4.1]
  3. Loan      product has already been defined.

Basic Flow

  1. Navigate      to the admin screen
  2. User      clicks on 'View Loan Products'
  3. User      clicks on a Loan Product
  4. User      clicks on "Edit Loan Product Information"
  5. User      selects a Penalty on the right side panel in the Fees/Penalties section      and adds it to the right panel by click on "remove” button
  6. User      clicks on Preview button
  7. On      Preview page, the Penalty is no longer visible
  8. User      clicks on Submit and Loan Product is updated

Post-conditions

  1. The      defined loan product should have the late fee (penalty) removed.
  2. Penalty      is removed from the loan creation workflow.

Alternative Flows

NA

Validations

  1. All new loan products created will have NOT have the penalty automatically attached
  2. All loans created before edit to loan will have the penalty still active

 4.6 Penalty (Late fee) application to the loan schedule

Actors

  1. 1. Mifos user who has the appropriate permissions for managing loan transactions

Preconditions

  1. Mifos      is configured as per the MFI      requirements
  2. Penalty      (Late fee) has been defined for the MFI and added to the loan           product definition
  3. Loan      has been created and disbursed and      is currently “active bad standing”           state
  4. The      daily Batch job has run      successfully.

Basic Flow

  1. Login      into the Mifos application
  2. Click      on a loan account with status “active in bad standing”
  3. View      the repayment schedule of the loan

Post-conditions

  1. Penalty      should be applied and visible in the “Penalty” column of the loan      schedule.
  2. Penalty      should be applied on the same schedule date on which the amount is due.

Alternative Flows

  

Validations

1. The loan schedule should display the late fee calculated as per the late fee definition.

4.7 Penalty (Late fee) application to the loan schedule using "apply charges" option

Actors 

       Mifos user who has the appropriate permissions for managing loan transactions

Preconditions

  1. Mifos is configured as per the MFI      requirements
  2. Penalty has been defined  for the MFI from the admin screen

Basic Flow

  1. Login into the Mifos application
  2. Click on a loan account.
  3. Click on the apply charges link.
  4. From the "select charge type" dropdown, select a penalty type which is already defined
  5. Click on submit
  6. View the repayment schedule of the loan

Post-conditions

  1. Penalty  should be applied and the loan summary page should list the penalty
  2. Running the batch job should ensure that penalty gets applied only to overdue amounts only after the date of penalty addition to the loan. i.e. if the penalty is added in the 4th week of loan repayment, the penalty should only be applied to repayments from 4th repayments and beyond only and should not effect the loan repayments of week 1 to 3 even if they are overdue.

Alternative Flows

Validations

1. The loan schedule should display the late fee calculated as per the late fee definition.

  4.8 Penalty payment using the collection sheet or apply payment option

Actors

1. Mifos user who has the appropriate permissions for managing loan transactions

Preconditions

  1. Mifos      is configured as per the MFI requirements
  2. Penalty      has been defined as part of configuring the fees for the MFI
  3. A      loan is overdue. The penalty has been calculated and applied to the loan      account

Basic Flow

  1. Login      into the Mifos application
  2. Navigate      to the collection sheet entry page
  3. Apply      the payments due on the collection sheet and submit.

Post-conditions

          1. Collection sheet displays the total amount due (including penalty, fees, Interest and principal)

           2. The Fee/penalty payments should not display any amount due.

Alternative Flows

1) Payment made directly against penalty

  1. Login to the Mifos application
  2. Search and navigate to the loan account
  3. Click on the apply Payment option on the transactions pane
  4. The amount calculated currently shows all the amount currently due on the account. This amount should include any penalty applied to the loan account.

2) Partial Payment

  1. User navigates to loan with penalty applied
  2. User clicks on "Apply Payment" and pays partial amount due
  3. User submits payment
  4. Payment is applied in the correct order: Penalty->Fees->Interest->Principal

Validations

  1. The penalty amount paid should be applied to the account and the amount due should be 0.
  2. Payment should follow Mifos standard: Penalty -> Fee -> Interest -> Principal

 4.9 Repay loan option includes the penalty amount   calculated.

Actors

1. Mifos user who has the appropriate permissions to process loans and apply fees

Preconditions

  1. Mifos      is configured as per the MFI requirements
  2. Penalty      has been defined as part of configuring the fees for the MFI
  3. A      loan is overdue. The penalty has been calculated and applied to the loan      account

Basic Flow

  1. Login      into the Mifos application
  2. Navigate      to loan account
  3. Click      on the repay loan option on the right side top transaction box

Post-conditions

      1. Total repayment amount calculated should also include the penalty calculated

      2. Repaying the loan should apply the penalty amount calculated appropriately.

Alternative Flows

1. Login to the Mifos application

2. Search and navigate to the loan account

3. Click on repay loan option. Total amount calculated will include the penalty calculated

4. Click on Cancel

5. Go back to the loan account and click on the “remove penalty” option.

6. Save and click on the repay loan option again

7. the total amount to be paid should not include the penalty amount as the penalty has been removed.

Validations

1. The penalty amount paid should be applied to the account and the amount due should be 0.

 4.10 Ability to remove penalty applied to a loan account

Actors

1.Mifos user who has the appropriate permissions to process loans and apply fees

Preconditions

  1. Mifos      is configured as per the MFI requirements
  2. Penalty      has been defined as part of configuring the fees for the MFI
  3. A      loan is overdue. The penalty has been calculated and applied to the loan      account
  4. The      penalty is visible under the loan account details view with a link to      remove the penalty

Basic Flow

  1. Login      into the Mifos application
  2. Navigate      to loan account
  3. Under      the account details, the penalty calculated for the account is visible
  4. Click      on the “remove” link under the account details section

Post-conditions

      1. The penalty added should get removed from the account details section

      2. Under the recent activity section, a transaction “Penalty removed” should be

          Recorded

Validations

1. The penalty amount paid should be applied to the account and the amount due should be 0.

2. the calculated penalty should be removed completely and the transaction reversed.

  5     Functional Requirements

  5.1 Penalty Definition

  • FR#
  • Description
  • Comments/Mockups
5.1.1
Admin screen will   need to have link to enable penalty     definition creation The Mifos   Admin   screen will have two new links under Organizations Preferences, directly below the Fees actions
1.  Define New   Penalty
2.  View   Penalty
5.1.2 Penalty Details Information Define   new penalty screen will have fields to capture the fee details
The grace period function will work similar to the   loan product grace period.
For a weekly loan, if the grace period type is “Number of installments” and the grace period duration is 1, penalty will not be applied until after 1 week from the actual repayment due date.
For examples, See section 5.7.8 and 5.7.9

The following   fields are to be added to be defined under     the “fee Details”
1. Penalty Name – name – Text Field
2. Applies to -- drop down with values Loans/Savings 
3. Grace period Type (LOV with the following entries
  number of   installments
  Number of days
4. Grace Period duration: Will be a number field to   input   the number of installments/days
5. Cumulative Penalty Limit (minimum)
6. Cumulative Penalty limit(maximum)

5.1.3 Penalty Calculation   Details(loans) : Details on how the   penalty will be calculated
If the “Applies to”   drop down has “loans” as the chosen     value, provide the following options to calculate penalty
1. One Time Amount ( for fixed amount penalty)
OR
2. Calculate penalty as
% of Outstanding Principal Amount
         Outstanding   loan amount
       Overdue   amount due
       overdue   principal
 ( the 4 values   will   be a dropdown)

5.1.5 Penalty application   Details
Will specify the frequency of calculation of the   penalty   (late fee).
Penalties are applied to the loan account when the repayment due on a particular date is not paid until the end of day. A batch job run at mid night on the repayment day will apply penalties to the account based on the frequency applied.
Penalty application will be subject to grace period considerations. See Section 5.7.8 and 5.7.9 for examples

Specify frequency   of Penalty fee application to account
1. Daily : Calculate and add penalty daily
2. Weekly : Calculate and add penalty every week
3. Monthly : Calculate and add penalty every month
4. None : for one time fixed penalty

5.1.6 Accounting details : Will have the GL   code listed for the penalty amount’s accounting
1. List the GL   Codes with GL account name “Income from     micro credit & lending activities” should be displayed here

5.2 Penalty configuration in the loan product definition

FR# Description  
5.2.1
The existing Fee   label will be modified to include Penalty     in the same label Modify the “Fees” label to “Fees/Penalty” Label
Modify “attach fee types”    string to “attach Fee/penalty types”
5.2.2
Loan Product   definition will need to have the ability to     add the configured penalty to the loan product 1. The penalties   defined as part of section 5.1 should be visible in the Attach fees panel on the   loan product create/edit screen
2. Clicking on add should add the penalty to the   product   definition
5.2.3 The penalty should be visible when we click on the “loan   product” on the “view loan product “ link from the Admin tab. 1. Penalty should be added as a label in the loan product   screen and visible on the screen
5.2.4 The penalty application frequency signifies the frequency of calculation of the penalty.  A daily penalty application implies that penalty is calculated and applied for each day of non payment of dues. Similarly a weekly penalty application implies that the penalty will be calculated for each week of non-payment of dues.

5.3 Penalty (Late fee) application to the loan schedule

FR#
  • Description
  • Comments/Mockups
5.3.1 The loan repayment   schedule should include the penalty     (late fee) calculated. the penalty amount should be added to the penalty column of the repayment schedule. 1. The daily batch   job should calculate the penalty(late     fee) as per the configuration in the product
2. The penalty should be added to the penalty  column and should be displayed as part   of   the repayment schedule
3. The penalty for late payment of a particular repayment amount should be applied to the same date. i.e. penalty for non-repayment of a due on date X should be applied to scheduled repayment on date X.
5.3.2 The batch jobs   should be able to calculate the penalty and     apply to the same to the repayment schedule at midnight on a daily   basis. 1. Batch job should be run everyday midnight. For example,   if a loan amount is due on 01/12/2012 and remains unpaid on 01/12/2012, at   midnight on 01/12/2012, a batch job should be run to calculate the late fee
2. The late fee should be added in the penalty column of the repayment due on 01/12/2012
5.3.3 On the loan summary page, under the account details section,   a new label/field for penalty should be added. 1. the account details section should display the new   label/field --“penalty”
5.3.4
The apply charges option should display the Penalty configured defined in #5.1 as a dropdown option.( Any penalty configured and applicable to a loan account should be visible in the drop down)
Currently the "apply charges" option in the loan account screen displays fees which are configured. Similarly there should be a provision to add penalties using apply charges
1. Need to modify the dropdown list values in the "apply charges" screen to include penalty.
2. Selecting and adding penalties should reflect the added penalty in the loan account and in the loan repayment schedules.

   5.4 Penalty payment using the collection sheet or apply payment option

FR#
  • Description
  • Comments/Mockups
5.4.1 Collection sheet   amount calculations should include the     penalty amount applied to the account 1. The amount due   calculations need to be modified to     include the penalty calculated
5.4.2 Penalty payments   should be applied first in the repayment     order 1. Whenever a   payment is made, the payment to the account     should be applied in the order
     a. Penalty
     b. Other fees
     c. Interest
     d. Principal
5.4.3 When clicking on apply payment and making payments, the amount calculated should include the penalty ( if applied ) on the account.
Making payments using apply payments should ensure that the penalty amounts are  should be included in the payment amount.

  5.5 Repay Loan option should include the penalty calculated

FR#
  • Description
  • Comments/Mockups
5.5.1 When user clicks on   the repay loan option to close a loan,     the total amount calculated to be paid should include any penalties   already   calculated 1. Amount field   should display the     penalty+fees+interest+principal
5.5.2 If user clicks on   the “remove” function of the     fees/penalty, the penalty should be removed from the total payment   amount 1. Repay loan   amount calculation should consider penalties     applications and removal while calculating the amounts.

 5.6 Ability to remove penalty applied to a loan account

FR#
  • Description
  • Comments/Mockups
5.6.1 An option to remove the penalty applied to the loan account  should be provided. The removal of a penalty should be such that all the calculated and applied penalties should be reversed
1. A “Remove” link  should be  added on the loan summary next to the recurring or one time penalty being displayed.
5.7.2 Removal of penalty should add the details of the activity   to the “recent activity” details section 1. The recent activity section should be modified to   include changes resulting from the addition of penalty.

 5.7 Example Late Fee (penalty) calculations

In the examples below, only the penalty fields relevant to the example have been mentioned. See section 9 for the full list of parameters( fields) required for defining penalties.

FR#
  • Description
  • Comments/Mockups
5.7.1 Penalty Amount : Fixed($1 say)
Penalty   application   frequency : none
(For fixed onetime penalty application)
Grace period Type : None 		Example : A   weekly loan with
Repayments  due   on   01/04/2012 : $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job adds a fixed   fee   $1(say) to the Fee/Penalty of the   loan
Total amount due on 01/05/2012 :$451
On 01/06/2012 total amount due continues to be : $451
5.7.2 Penalty Amount : Fixed   ($1 say)
Penalty   application   frequency : Daily
Grace period Type : None
Example : A   weekly loan with
Repayments due on 01/04/2012: $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job adds a fixed   fee   penalty $1 to the Fee/Penalty   column of the loan
Loan Amount due on 01/05/2012 : $451
If Payment Status is Not   paid,
At EOD on 01/05/2012, the daily batch job adds a fee   penalty $1 to the Fee/Penalty of the loan
Loan Amount due on 01/06/2012 : $452
Continue adding penalty of $1 till the installment due   is   paid
5.7.3 Penalty Amount : Fixed   ($5 say)
Penalty   application   frequency : Weekly
Grace period Type : None
Example : A   weekly loan with
Repayments due on 01/04/2012: $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job adds a fixed   fee   penalty $5 to the Fee/Penalty   column of the loan
Loan Amount due on 01/05/2012 : $455
Loan Amount due on 01/06/2012 : $455
If the account continues to remain unpaid until   01/11/2012(   i.e. no payment is   received)
Additional Penalty on repayment amount due on 01/04/2012 : $5
Penalty for repayments      due on 01/11/2012 : $5
Loan Amount due on 01/12/2012 : $455+$5+$450+$5(for current     installment due) = $915
5.7.4 Penalty Amount : Fixed   ($5 say)
Penalty   application   frequency : Weekly
Grace period Type : Number of installments
Grace Period   duration: 1 		Example : A   weekly loan with
Repayments due on 01/04/2012: $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job runs but   the   penalty is not calculated as   there is a grace period defined.
Amount due on 01/05/2012 : $450
If the loan installment continues to remain unpaid   until   01/11/2012, the batch jobs adds   $5 to the Fee/penalty column of the loan as     the first time penalty amount
Loan Amount due on 01/12/2012 : $450+$5+$450(*current installment due not paid) = *$905
5.8.5 Penalty Amount : 0.5%(say)   of    Outstanding loan amount
Penalty application   frequency : Weekly
Grace period Type : None
Example : A   weekly loan with principal of $20000
Total outstanding loan Amount  on 01/04/2012 : $22000
Repayments due on 01/04/2012 : $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job runs and   calculates the penalty/fee amount as
Penalty/Late Fee Calculated: 22000*0.005 = $110
Loan Amount due on 01/05/2012 : $450+$110 = $560
If the account continues to remain unpaid on 01/11/2012,
Total outstanding loan amount:$22000
+ $110 = $22110
Penalty/Late Fee calculated:$22110*0.005 = $110.55
Total amount due on 01/12/2012 = $560+$110.55+$450(   current due installment not paid) = $1120.55
5.7.6
Penalty Amount : 1%(say)   of    loan Amount Overdue
Penalty application   frequency : Weekly
Grace period Type : none
Example : A   weekly loan with
Repayments due on 01/04/2012 : $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job runs and   calculates the penalty/fee amount as
Penalty/Late Fee Calculated: 450*0.01 = $4.5
Loan Amount due on 01/05/2012 : $450+$4.5 = $454.5
On 01/11/2012, client pays $450 (the current due only). The amount should apply to   repayment   due on 01/04/2012
At EOD on 01/11/2012, the batch runs and calculates   the   late fee as follows:
Penalty : 4.5*0.01+450*0.01 = $0.045+$4.5 = $4.54
Total amount due on 01/12/2012 = $450+$4.54 = $454.54
5.7.7
Penalty Amount : 1%(say)   of    loan Amount Overdue
Penalty   application   frequency : Weekly
Grace period Type : none
Example : A   weekly loan with
Repayments due on 01/04/2012 : $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job runs and   calculates the penalty/fee amount as
Penalty/Late Fee Calculated: 450*0.01= $4.5
Loan Amount due on 01/05/2012 : $450+$4.5 = $454.5
If the account continues to remain unpaid on 01/11/2012,
Total amount due :$454.5+$450   = *$904.5*
Penalty/Late Fee calculated( for 01/04/2012 payment)
454.5*0.01 = $4.54 and
Penalty/Late Fee calculated( for 01/11/2012 payment)   =   450*0.01 = $4.5
Total amount due on 01/12/2012 = $904.5+$4.54+$4.5 = $913.54
5.7.8 Penalty Amount : 0.1%(say)   of    loan principal amount
Penalty   application   frequency : Weekly
Grace period Type : Number of days
Grace Period   duration: 7 		Example : A weekly   loan with loan principal of $20000
Repayments due on 01/04/2012 : $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job runs but no   penalty is calculated since the grace   period is in effect.
Repayments due on 01/05/2012 : $450
Repayments due on 01/06/2012 : $450 and so on
If the account continues to remain unpaid on   01/11/2012,penalty is calculated by the   batch job run at EOD for the     installment due on 01/04/2012
Penalty/Late Fee calculated 20000*0.001 = $20
Total amount due on 01/12/2012 :   $450+$20+$450(current   repayment due   not paid)
= $920
5.7.9 Penalty Amount : 1%(say)   of    loan amount due
Penalty   application   frequency : Weekly
Grace period Type : None
Grace Period   duration: NA
Cumulative Penalty   Limit   (minimum) : $5
Cumulative Penalty   Limit(maximum) : $10

Example : A weekly   loan with
Repayments due on 01/04/2012 : $450
Payment status : Not   paid
At EOD on 01/04/2012, the daily batch job runs and   calculates the penalty/fee amount as
Penalty/Late Fee Calculated: 450*0.01 = $4.5
Repayments due on 01/05/2012 : $450 +$5 (*since the minimum penalty to be applied is *$5)
If the account continues to remain unpaid on 01/11/2012,penalty is calculated by the batch job run at EOD
Penalty/Late Fee calculated 455*0.01 = $4.55 (for 01/04/2012 due amount)
Penalty/Late Fee calculated 450*0.01 =  $4.5 (for   01/11/2012   due amount)
Total penalty(calculated) : $4.55+$4.5 = $9.05
However penalty applied : $5 ( cumulative maximum allowed penalty is $10 )
$9.05+$4.55 = $13.6   > $10, hence apply $10. But $5 already applied, hence $5 should be applied
Total amount due on 01/12/2012 : $455+$450(current   repayment due not paid) +$5 = $910


  6      Standard Considerations

  6.1  Security

Security   (Permissions, Roles, and Data Scope) Yes/No Comments
Does the user   need   to be in a particular user   hierarchy to use this feature? No


Does the   office   hierarchy affect use of this   feature? No Should only matter when an user is making a loan product, and in those situations in apply penalties it should fall under the user's ability to create loans for their given office.

Are you using any   existing permissions to control this     feature? Yes


Are you adding any   new permissions or changing existing     permission to control this feature? No


Are you using   any   existing activities to control   this feature? NO


Are you adding   any   new activities or changing   existing activities to control this feature? No


Are there any   special considerations for upgrade     scenarios?  What will be the   default   value for new permissions? Yes Upgrades should not   change any existing loan accounts.  Any   penalties created by the user will only apply to new loan products.
What will be   the   default values for default roles   in a new installation?



            NA


  6.2  Impacts to System

Impacts to System Yes/No Comments
Does this   feature   affect Bulk Loan   Creation?  How? No


Does this   feature   affect Collection Sheet   Entry?  How? Yes. The calculation   of   total amount due should include   the penalty amount calculated
Does this feature   affect Redo   Loans? Yes. After the redoing   of the loans, if   the penalty  batch job finds an overdue   payment with no late fee calculated, it   should calculate and apply the     penalty to the account
Does this feature   affect Reverse Loans? Yes. Reversing a loan   should reverse the penalty applied and     paid on the loan account.
Is this   feature   affected by Holidays?
Yes. Currently this functional specification will ignore   holidays and continue to apply penalties for holidays
Is this feature   affected by Moratoriums?



  6.3  Globalization/Localization

Globalization/Localization Yes/No Comments
Will this   feature   support users localizing data   that they enter? No


Does this feature   involve any date/time related data, and if   so how should conversions be   handled? No


Is there   currency   or other numeric data ? If   so does it require any special handling or     validation?  Is there a need   for   mult-currency?  (Loan Accounts) NO


  6.4  Logging

  6.4.1 Change Log

Change Log Yes/No Comments
Do changes to   the   data that is collected or stored   by the new feature have to be fully logged     by the system? Yes Applications of   Penalties should definitely be logged
Does the   administrator configuring the system need   the ability to turn on or off   logging   for this feature? No


Is the feature   currently logged but the structure of the   logged records changing? No


  6.4.2 Reporting

Provide any relevant information about reporting requirements for the  new features and answer the questions below, providing detail to  explain any particular area when necessary.

Reporting Yes/No Comments
Does the   feature   affect any existing reports? Yes (TODO: Need to   list the reports that should get changed/updated) -- can someone like John   analyze the impact on the reports for these changes ?
Does the   feature   require adding any new   reports? NO


  6.5  Performance

Performance Yes/No Comments
Will the feature   be   a high use-case scenario? Yes


Will the   feature   have potential for high   concurrency? No


Does the   feature   include complex UI or data   gathering logic that will be used by a significant   portion of the user base? No


Does the   feature   contain risks of database   connection timeout? No


Will the   feature   contain any bulk   insert/update/delete transactions? No


Will the   feature   contain any caching   mechanisms or cache refreshing mechanisms? No


Could the   feature   result in a large amount of   data being sent to the client or between the     database and web server? No


Would users on   a   low bandwidth connection likely   face issues with a part of this feature? No


Does the feature   affect existing batch jobs or require   adding any new batch jobs? Yes. A batch job is   required to calculate the late payment fees at mid night for accounts which   are due

  6.6  Setup and Installation

  6.6.1 New Installations

New Installations Yes/No Comments
Does this   feature   require both Mifos Business   Intelligence Suite and Mifos Product?
No


Does this   feature   require special work for   hosting?  (sys   admin)
No


  6.6.2 Backward Compatibility and Upgrades

Backward   Compatibility and Upgrades Yes/No Comments
Is there any   data   conversion that needs to be done   as part of an upgrade? No (TODO: DEVS - please comment? - RW)

Will customers   lose   data or will the way existing   data is stored change significantly? NO


Will another   feature, workflow or portion of the data   model be deprecated as a result of     this new feature? No


Will existing   role   permissions be changed or   impacted by this feature? If so provide details in   the security section. No


Will existing   customers need to learn a new UI process   or change the way they use the   system   as a result of this new feature? NO


  6.6.3 Hosting Support

Hosting Support Yes/No Comments
If different   user   groups are using the same   database, are there concerns over the sharing of   data related to the feature? No


Are there expected   to be performance related issues with having     many customers sharing the same hardware in support of this feature? NA


  6.6.4 Configuration

Configuration Yes/No Comments
Does this   feature   require changes to   configuration files?





If so, is this   feature enabled or disabled by default?






Are existing   configuration properties used to control   this feature?  If yes, which ones?






Are new   configuration properties added for this   feature?






  7      Open Issues

1)    How can we adjust Penalties for loans which are closed? (this requirement is being requisitioned by multiple clients)

Comment (RW)
- My gut says their should be an option to apply a penalty to a loan and when the user does this, it re-opens the loan with the penalty due.  This will most likely mean the loan will fall into Active in Bad Standing.  Probably would want/need devs to investigate how this might affect data and reporting.  Some things to consider

  • Does this change reporting for previous days?  For example, if I apply the penalty a week after its paid off does this change reporting only going forward or do we have to change past reports? 
  • How does this affect accounting?  Seems it would change the status of some payments/records

  8      Reviews and Approvals

  • ...

  9 .  Penalty Field definitions

Penalty definition screen

Sl No. Attribute Name Data Type Editable
in state active - inactive 		Range Mandatory/Optional Description/Notes
1 Penalty Name Text Editable NA Mandatory Name of the penalty to be configured
2 Applies To Dropdown NA NA



3 Grace period Type Text Editable

NA

Optional

LOV takes the values
1. None
2. Number of   installments
3. Number of days
4 Grace Period duration Number Editable NA Optional

5 Cumulative Penalty Limit (minimum) Number Editable NA Mandatory To define  minimum allowed   penalty
6 Cumulative Penalty limit(maximum) Number Editable

Mandatory To define  maximum allowed   penalty
7 Interest Rate calculation type List of
Values 		Editable Fixed Amount OR
% of
Outstanding Principal Amount
Outstanding   loan amount
Overdue amount due
Overdue principal 		Mandatory If the penalty is a fixed amount , enter the fixed amount field,   otherwise enter the calculation basis
8 Penalty Application Frequency List of
Values 		Editable Daily
Weekly
Monthly
None 		Optional 1. Daily : Calculate and add penalty daily
2. Weekly : Calculate and add penalty every week
3. Monthly : Calculate and add penalty every month
4. None : for one time fixed penalty
Default value is "None" if nothing is choosen
9 Accounting Details List of
Vaues 		Editable List of GL codes Mandatory List the GL Codes with GL account name “Income from   micro credit & lending activities”   should be displayed here




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2 Comments

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  1. Jan 06, 2012

    Ryan Whitney

    So, General Comments:

    1. I see that you are doing this for loans and savings.  It might make sense to break the savings out as a separate Spec since it operates a bit differently (maybe the Devs can comment).  What do you think?  Also, how many MFI's are asking for this on savings?  Might be easier to do loans first and then savings later.

    2. I see the requirements on how to create the penalties are in the Functional Requirements section - I'm a little worried these are light - where are the details on the limits for the fields?  What errors need to be added?  These might warrant their own Use cases.

    3. Some screen mockups would be helpful for this document I think

    4. It's very important we stress the difference between fees and penalties in this product as that affects the order on how payments are applied.  Are we sure this will be ONLY a penalty? (IE, paid before Fees) - You also talk somewhere about changing the payment order?  That's not clear what that entails.

    5. I updated Use cases 4.1 and 4.2 - I've been looking at this for awhile, so taking a break.  Look at those and see what you think, I was trying to flesh out a bit more.  I also think you were a bit confused on what the validation part is for.  See if that makes sense and we can alter the rest and add more. 

    Some Open Questions (for you and the community)

    1)  Do we want to break out penalties from Fees in the UI?  This would be in the admin page, loan creation, savings creation, etc.  For now, I've updated as it saying Fees/Penalties in the document, but I see here that you list it as a new section in the Admin page.  If we decide to separate it, remove the (Late Fees) section as Penalties could apply elsewhere and aren't just limited to late payments.  Personally, I'm inclined to keep them together, but that may create more design/coding issues.

    2) Is this for Individual only?  Can you apply this to groups?  Centers (for savings accounts) - We may need a lot fleshed out here as well - should be specific here.

    In response to your Questions

    1) This would mean re-opening a loan and applying a one time penalty?  Or is this to go back and change records entered in the past?  I think the way to do this would be to add an option on the closed loan page to "Add Penalty", and after going through the workflow, the loan would be re-activated and the fee applied.  This might be a lot of work - could be some accounting considerations to think of.

    2) I'm not sure I'm clear on this question - but off the top of my head I see there being two kind of late payment penalties.  One is based on the number of days you are late and the amount that is late, right?  So every day I'm late, it incrementally goes up.  The second option I see is that a general penalty is add whenever I'm late (Missed a payment, get knocked 5, miss another, get knocked another 5).  Does that sound about right?

    3) I noted in the document that I don't think you need to get specific about that - instead you need to detail how you expect this to work and the devs will figure out if it needs to be a batch job or something else (I believe the desire is to move away from batch jobs...)

    4) Good question - I can see both being useful.  Cumulative makes sense, especially in regards to a maximum penalty.  But the limit per penalty application makes sense too as a lot of organizations have a fee that is stated as the user either pays X or a percentage of the amount overdue, whichever is higher.  Do we have any feedback from users how they'd like this applied?

    Last Comment - One thing to consider and maybe some of the devs can weigh in is how can we simplify the feature?  I only say this as there is a LOT to this, I'm not sure this will be a simple job based on all the detail I see in the spec and what more we need to add.  May just be quicker to get something simpler in first (that meets most needed requirements), start getting users to use that and work on the next version that gets more into the weeds.  Just a thought.

    Ryan

    On Jan 6, 2012, at 1:08 AM, <Chetan.Bekkinkeri@sungard.com> <Chetan.Bekkinkeri@sungard.com> wrote:

    Dear all,

    I have come up with a DRAFT version of the FS for this functionality and  have tried to cover as many scenarios as I can taking into consideration the inputs from Mifos 3384 and other general Mifos requirements. Here is the wiki link to the FS

    [http://mifosforge.jira.com/wiki/display/MIFOS/Functional+Spec+Automatic+Application+of+Late+Payments+Penalties |../../../../../../../../../../display/MIFOS/Functional+Spec+Automatic+Application+of+Late+Payments+Penalties]

    I am sure this will undergo more changes based on feedback from the users. Can you please go through the Wiki and let me know if there are changes required or if some feature which you as an user wanted but has not been addressed ?

    I do have a couple of open issues which I have marked red and also have listed below the issues.

    1)      How can we adjust Penalties for loans which are closed? ( this requirement is being requisitioned by multiple users) . Any pointers /workarounds here will be useful.

    2)      Need to review the savings penalty calculations? If two consecutive mandatory deposits are missed, do we apply one single penalty or multiple penalties?. For loans, we have clear use cases which we can look up to from the banking scenario but not sure for savings.

    3)      Batch job for penalty calculations : do we create a new batch job or modify one of the existing batch jobs for this ?

    4)      How do we want to handle the minimum and maximum penalties ? Should we have a cumulative limit on the penalties or a limit per penalty application ? Right now I have added the cumulative case and made the use case examples for it.

  2. Jan 19, 2012

    Ryan Whitney

    Posting more of my comments that I sent to the mailing list

    1) I see for Actors that "Mifos Administrator and User" is still listed.  I believe these should all be very specific about the permissions that are required (I had changed this in the first few stories last time).  I believe this is important so the devs know what permissions to work with and we can tell if we need to add any new ones.  - This also brings up the question - do penalties fall under the Fee permissions or not?  It might be good to initially have that and see what users say and then if they'd like separate permissions, add them later (Devs - please weigh in)

    2) Section 5.1.5 - I think it may help to define a little more when penalties are applied.  For Daily, does it happen at the end of the day the payment is due?  At 5pm?  Does grace period affect this?  Just might be helpful so we're all on the same page on when and how its applied

    3) Section 5.2 - Are there some limits on how we add penalties?  For instance, can we add a weekly penalty to a monthly loan?  This may need to go somewhere else, not sure

    4) Section 5.4.2 - I don't understand this at all.  When using apply payment, I don't know where we've had the option to define where its being paid too - whether its a penalty, fee, principal, etc - we just take the payment - unless I don't understand this.

    5) Section 7 - Adding penalties to closed loans - can we get a list of the MFI's so we can understand how much this is requested?  I know Al Majmoua would like this.