Offsetting

Feature Overview
Offsetting is the term used to describe the application of whole/part of client/member's savings balance to clear unpaid loan amortizations. It is applicable for both individual clients as well as those that are part of Groups.

• Offsetting can be either voluntary or mandatory. _ Voluntary offsetting can be requested by a client. Voluntary offsets can be applied to a loan at any time-- no matter what state the loan is in (overdue or current). It can also be used to pre-pay a loan. _ Mandatory offsetting can only be applied to due and overdue loan amounts-- either due, past due but within maturity, and past due and over maturity date.
• Savings balance of one member can be applied to offset loan balance of another member of same group

Note on priority: Support for: 1/ "voluntary" offsets and 2/ using the savings balance of one member to pay for a loan of another member are less important features and should be developed only after "mandatory offsetting" has been built. The UI screens is available in the /documents/ui-workspace directory. Select the most recent dated folder, unzip directory, and navigate to client details page. "Offset" link is in the upper right hand corner.

Feature Summary

User Flow: Applying an offset

• A user can apply an offset by clicking on the "Apply offset" link present on the loan details page. He should have the required permissions to do the same.
• Following information should be captured when a payment is made by offsetting from a savings account _ Date of transaction: By default, the current date _ Amount: Amount due as of current date should be displayed. _ Transfer from: This indicates the client whose savings account is being used to apply the offset. _ Account: The savings accounts (both active and dormant) of the chosen client are displayed with the balance existing in the account. The user can make a choice from which the offset will be applied * Offset type: Whether mandatory or voluntary.
• Following information will be recorded by the system _ Recorded by (username) _ Mode of transaction: Offset
• User will be asked to "Preview" the entries before saving the same
• Following actions will be taken once the entries have been made: * Record transaction with data listed above
• Update account balance, transaction history and account history of the loan. The account history will indicate an entry showing the payment was by offsetting. It will also be specified whether the offset was mandatory or voluntary. _ Update the withdrawl and balance of the savings account from which the offset was applied. The account history will indicate an entry showing an offset was done from the savings account to a loan account _ Performance history on the loan details page would be updated accordingly
  • Scenario: Performance history on the loan detail page reflects these values

    of payments: 21

    of missed payments: 3

    Days in arrears: 12

    Loan maturity date: 12/12/2005

MFI processes an offset for the 3 overdue loan payments. Once offset is applied, the loan would move out of arrears and the number of payments would increase accordingly

of payments: 24

of missed payments: 3

Days in arrears: 0

Loan maturity date: 12/12/2005

• Mifos should be able to report on the number and amount of both voluntary and mandatory offsets

System Validation

Following are the system validations that will done. It also includes the validations done during a normal payment for loan repayment, fees etc:

• Date of transaction, Amount, Transfer from and Account fields are mandatory.
• Offset cant be for a negative amount
• The amount being offsetted should be only equal or less than the amount currently due.
• 0 amount payments not allowed.
• Date of transaction cannot be a future date.
• Amount due would be as of date of transaction.

Desired functionality

• Offsetting loans through another client's savings account: This is a scenario where Client A's loan could be paid using Client B's savings account if they both belong to the same group. ("Transfer from" dropdown in the "Apply Offset" flow would list the client's belonging to that group and default it to the client whose loan payment is being made.)
• Configuration of offsetting: If the value is set to NO, the system will not allow an offset transaction to be performed and the "Apply an offset" link would not be displayed on the loan detail page. If set to YES, both voluntary and mandatory offsetting will be allowed for a user with the required permission.
• Backdating an offset: This feature is low on priority. It can be achieved through a partial payment scenario. However, in a scenario where the user would specifically want to do a back-dated transaction (e.g delays in offline approval process), this feature would be needed.