Along with interest, MFIs may need to use extra charges as a means of covering the costs of providing their credit service. The types of charges associated with loans are often called fees and penalties.
For example a 'processing fee' is often charged with a loan, typically at the time of disbursement of the loan. Often these Fees are one-time fees but some MFIs may need to have recurring fees e.g. loan officer costs to visit rural areas to administer credit services.
Another type of charge is a penalty which is often imposed when late repayments occur.
MFIs apply charges to loans in following situations:
Defined charges such 'processing fee' which is charged with each and every loan (or in product): Usually want these applied automatically with option to waive
In mifos x, we allow a user to associate charges against a loan product by default.
Right now we have a table called m_product_loan_charge that is simply a join table between a m_product_loan and m_charge. No other information is captured when associating charge with product.
Note: The properties of the defined charge may change over time but their is no impact on the association between a given defined charge and a loan product until someone modifies the loan product to remove the defined charge. If the charge is 'de-activated' or 'deleted' then the charge should no longer be associated with the product.
Example UI of possible fields for creating loan product with ability to define default charges against the loan product
In mifos x, we want to support maximum flexibility in what users can do with regards loans and loan charges (fees and penalities). Charges can be associated (or removed) with a loan at the following stages:
When a defined charge is associated with a new loan application or loan, it becomes a loan charge. All details of the defined charge are captured along with the value or amount of the charge. As such when a defined charge is changed, the details of the charge as created against the loan do not change.
Right now we have a table called m_loan_charge that holds all the related information.
At present we only support charges:
If a client is late in paying, many MFI's want the penalties associated with this automatically applied.
Consider:
- allow the penalties to be waived/forgiven at their discretion (or partially waved for some of the days)
- allow penalty payments to be made after loan is closed
- Calculation of Fee:
Some MFI's want it a percentage of the principal overdue, some outstanding principal,
others want it a flat fee over a period of time (AlMajmoua charges $1 USD for every day late on a payment) - like by day, per month, or per cycle
- Grace Period:
Some MFI's do offer clients a grace period on lateness. IE, they may have up to 5 days to pay before the penalties are applied.
- Flex Payment: Most will want to collect upon payment of the loan, but others collect at other times. Al Majmoua will collect all the late payment fees as a lump sum AFTER the loan has been paid.