When creating a Savings Products, the user can define how interest posting (or compounding) and calculation 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.
When a savings product is created, the user defines the frequency of interest posting of which only Monthly is supported in Mifos. Once at least one savings is open for a given savings product, a number of attributes of a savings product cannot be changed. The interest posting frequency and interest calculation frequency are two of this such attributes.
Interest posting always occurs on the end of the month and the exact dates are determined based on the start of the fiscal year (which is currently always Jan 1st in Mifos) and the chosen interest posting frequency.
For example every 3 months from Jan 1st would product interest posting dates of: |
Interest posting is possible in Mifos from:
Interest is only calculated and posted for the last valid interest posting period for a given savings account. As a result this means the following is also enforced:
When it becomes time to execute an interest posting for a given savings account we do the following:
Interest Calculation Formula |
Balance |
---|---|
A = P(1+r/n) |
Minimum Balance |
A = P(1+r/n) |
Average Balance |
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 n = number of times the interest is compounded per year A = amount of money accumulated including interest |
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
see Interest Calculation For Average Balance By Example
see Interest Calculation For Minimum Balance By Example