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Interest Calculation and Posting
Introduction
When creating a SavingsProduct, the user can define how interest calucation and posting will happen.
Mifos out-of-the-box currently supports two types of interest calculation; Average Balance and Minimum Balance.
The user may also choose from two types of time period for interest calculation; Days and Months
For interest posting, only Months are supported.
Interest Calculation
At present interest calculation is carried out by an overnight batch job (SavingsIntCalcTask). It determines when to run based on the next interest calculation date value stored in savings_account -> next_int_calc_date datable table/column.
When a savings account goes active for the first time, an initial next calculation date is determine based on the start of the fiscal year which is fixed at January 1st and the interest calculation time period chosen in the savings account product definition. For interest calculation, this can be Daily (e.g. every x days) or Monthly at the end of the month (e.g. every x months on last day of month).
So interest is only calculated for any transactions that occur within a given 'interest calculation period'. The interest calculated for a given period is stored (savings_account -> int_to_be_posted) until the next interest posting date is reached whereby the sum of all calculated interest is posted to the savings account.
Interest Calculation Dates in Months
Example:
Interest calculation is determined every 3 months so based on starting from Fiscal start of year, the valid interest calculation dates are:
Jan-01 to Mar-31
Apr-01 to Jun-30
July-01 to Sep-30
Oct-01 to Dec-31
Interest Calculation Dates in Days
Interest calculation is determined every 28 days (4 weeks) so based on starting from Fiscal start of year, the valid interest calculation dates are:
Fri Jan-01 to Fri Jan 29
Sat Jan-30 to Fri Feb 26
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Interest Posting
Interest posting always occurs on a monthly basis on the last day of the month.
When interest is due for posting, its takes the value from (savings_account -> int_to_be_posted) and posts it the date of last day of month.
Interest posting is handled overnight by batch job (SavingsIntPostingTask).
Interest Posting Dates in Months
Interest calculation is determined every 1 months so based on starting from Fiscal start of year, the valid interest posting dates are:
Jan-01 to Jan-31
Feb-01 to Feb-28/29
Mar-01 to Mar-31
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Dec-01 to Dec-31
Interest Calculation Formula
Interest Calculation Formula | Balance | Table Used |
|---|---|---|
A = P(1+r/n) | Minimum Balance | SAVINGS_TRXN_DETAIL |
A = P(1+r/n) | Average Balance | SAVINGS_TRXN_DETAIL |
| Panel |
|---|
r = R/100 x D/F P = AvB/D or MB/D I = P(r) only if P is greater than or equal to minimum balance required for interest calculation otherwise the interest (I) will be zero. AvB = Total Average Balance for duration D MB = Minimum Balance for duration D D = Duration/Interval (Days) for which the interest is being calculated F = Number of Days in Financial Year P = Principal amount (initial amount) (Average/Minimum Balance) R = Annual rate of interest (as a decimal) (defined during savings product creation) r = Effective interest rate for the duration D I = Interest Amount |
Interest Calculation Examples
The purpose of these interest caluclation example is to describe by example how savings work in mifos. From reading through these, you should be able to understand
- How and when dates for interest calucation and posting are determined
- How the Average Balance algorithm works
- How the Minimum Balance algorithm works
- How and when interest is calculated for a given Interest Calculation Period
- How and when interest is posted to a savings account
see Interest Calculation For Average Balance By Example
see Interest Calculation For Minimum Balance By Example
Interest Calculation/Posting (Notes)
Interest Calculation Date: SAVINGS_ACCOUNT.LAST_INT_CALC_DATE (fromDate), SAVINGS_ACCOUNT.NEXT_INT_CALC_DATE(toDate)
Interest Posting Date: SAVINGS_ACCOUNT.LAST_INT_POST_DATE, SAVINGS_ACCOUNT.NEXT_INT_POST_DATE
Based on the interest calculation meeting from Savings Product Offering "next interest calculation date" is set during interest calculation.
The interest calculation is done for the period determined by fromDate and toDate.
Initial (first) interest calculation has LAST_INT_CALC_DATE as null, in this case the activation date account is taken as fromDate.
Interest calculation takes place when the NEXT_INT_CALC_DATE is older than currentDate.
Interest calculation takes place when principal (P) is greater or equal to the Minimum balance required for interest calculation(Savings Product has property miniBalForIntCalc)
Calculated interest is saved in SavingsBO.interestToBePosted field after every interest calculation.
e.g. if there interest calculation period is 1 month and posting frequency is 3 month then the interest will be calculated 3 times and stored in SavingsBO.interestToBePosted. Interest Posting Batch job will pick the interest from SavingsBO.interestToBePosted.
This makes a necessary condition that Interest calculation batch job should always run before interest posting batch job.
If one interest calculation fails interest posting job has no way to determine and it will still post the interest as SavingsBO.interestToBePosted which could be zero if interest calculation job fails.
| Warning | ||
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At present, once interest for a given calculation period is calculated it will never again be recalculated however it is possible for users to adjust their last transaction which could well be in the last 'calculation period' and thus the previous interest figure would be wrong. |
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| title | Handy Hint |
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see Savings Interest Calculation and Posting
Savings Schedules (Notes)
- While creating Mandatory Savings Product, you can not enter a zero amount for "Recommended amount for deposit at every meeting". But during creation of Savings Account it allows to enter zero as "Recommended amount for deposit at every meeting" which results in zero amount schedule. The transaction gets recorded for that zero due, this is probably not a bug, but it can be improved. Same situation is for Voluntary Savings Account