Calculating Mandatory Savings Deposit Requirement based on Outstanding Loans

(1.0) Background
Many MFIs require their borrowers to make regular savings deposits, the amount of which is determined by the value of their disbursed loans. For this purpose, a mandatory savings account is opened for the client into which the client must make these deposits. If the client fails to repay the loan, the funds in the savings account can be used as collateral.

Last updated – aditi_sumeethaec - 08 Jun 2007

(2.0) Feature description

To meet the above objective, the loan product definition pipeline should include a component that allows a user to specify the mandatory savings amount required for that loan. He should associate a mandatory savings account to which the deposit will be made. He can make a choice as to whether he wants to do an upfront deposit, deposit for each installment or both

(3.0) Product definition flow

(3.1) User: clicks on "Define new loan product".
(3.2) "Fees" bold header is renamed "Fees & Required Savings".
(3.3) System: gives 3 options for calculating mandatory amount: _ (3.3.1) Flat Amount- Absolute amount can be specified. This amount can be modified at account level _ (3.3.2) As % of loan amount * (3.3.3) Tiered Amount: Deposit X per every Y amount of loan
- (3.3.3.1) The equation for this is nX where n = (amount - (amount (mod Y))) / Y
- (3.3.3.2) Example: 5 rupees deposit is required for every 1,000 Rs of loan.
- (3.3.3.3) If loan amount is 4,000 Rs, client must deposit 20 Rs.
- (3.3.3.4) If loan amount is 2600 Rs (ie, between tiers), client must deposit 10 Rs.
(3.4) System: Displays a drop down of mandatory savings products predefined in the system.
(3.5) Optional (we may triage this feature for now): System displays option on whether/not to keep required savings going even after loan is repaid. we'll need more clarity on how this works. Inclined to triage.
(3.6) System: Displays checkboxes to choose Frequency of deposits. the choices include Upfront deposit and Deposit for each installment.
(3.7) User: Selects a method of calcuating required savings, savings product this calculation should apply to and the frequency of deposits to the savings account.

(4.0) System Validations

(4.1) If the user decides to specify a mandatory savings amount for the loan product, he must select a savings product and frequency of deposit
(4.2) The list of savings products displayed will include only mandatory savings products.

(5.0) Loan account flow

(5.1) User: clicks on "Create new loan account" and chooses a loan instance with mandatory savings amount specified
(5.2) System: checks if the account owner has any savings accounts in one of the following states: _ Active _ Inactive (ie, Dormant)
(5.3) If the account owner doesn't have any active/dormant accounts then an error should be given when user tries to create the loan account.
(5.4) Administrative Set Fees bold header is renamed "Required Fees and savings contributions".
(5.5) System: displays amount of mandatory deposit in the above section. If amount is based on a calculation, system calculates the % of this principal outstanding and displays this amount as "Mandatory amount for deposit"-- if it's a tiered amount, system also calculates. This amount will be non-editable. The frequency of deposit and type of calculation will also be displayed.
(5.6) System: stores the amount while creating the loan account.

(6.) Additional Information ++++++++++++++++++++++ _ (6.1) No permissions needed for this feature _ (6.2) If user has multiple loans, all required savings deposits should be summed together as a single deposit for the account. There should not be multiple transactions for each deposit coming from each loan. _ (6.3) If saving account itself has a required deposit amount specified, this will be added together with all other required deposits. _ (6.4) You cannot waive upcoming required deposits for individual loans. You must waive the full sum total. * (6.5) This will not affect the withdrawal restriction from savings account in any manner.

(6.5.1) For every meeting, the mandatory amount will not change. This will be calculated based on the loan amount disbursed only. When any payment is made, it will not affect the savings amount.
(6.6) At loan product definition, if a savings instance is removed from edit loan product page, this should not affect the current loan and savings accounts. It will only affect the future accounts.
(6.7) If a savings product is marked as Inactive, it should be removed from all existing loan product definition as accounts for this savings product cannot be created anymore.
(6.8) If a member has two savings accounts for the savings product associated with a loan product, one of them will be used as the account to which the deposit will be made.
(6.9) A mandatory savings account can be associated with more than one loan account

(7.0) Open Issues

(7.1) Options 2 and 3 to calculate savings amount are - As % of loan and Tiered amount are the same- Aren't these a different way of saying the same thing. Should we have both the options?
(7.2) Does the system need to automatically close the savings account if the loan account completely paid off?
(7.3) What if the loan account is marked as "Rescheduled' or "written off"?
(7.4) Can this savings account be closed manually irrespecive of the loan account status?
(7.5) Should the savings account status be changed to Active once the loan is disbursed and is in "Active in good standing" status?

– Main.aditi_swatirathi - 10 Oct 2006

From tomb Thu Aug 30 17:17:24 -0700 2007 From: tomb Date: Thu, 30 Aug 2007 17:17:24 -0700 Subject: Section 3.3.2 Message-ID: <20070830171724-0700@www.mifos.org>

Tom Bostelmann: When you say 'amount' I'm assuming you mean the original loan principle - or does this include fees/interest?*

From tomb Thu Aug 30 17:18:12 -0700 2007 From: tomb Date: Thu, 30 Aug 2007 17:18:12 -0700 Subject: Seciont 3.3.3.1 Message-ID: <20070830171812-0700@www.mifos.org>

Again, 'amount' needs to be clarified.

From tomb Thu Aug 30 17:19:32 -0700 2007 From: tomb Date: Thu, 30 Aug 2007 17:19:32 -0700 Subject: Section 3.5 Message-ID: <20070830171932-0700@www.mifos.org>

Is this in scope or did it get 'triaged'?*

From tomb Thu Aug 30 17:21:19 -0700 2007 From: tomb Date: Thu, 30 Aug 2007 17:21:19 -0700 Subject: Section 5.1 Message-ID: <20070830172119-0700@www.mifos.org>

the term 'Loan Instance' should be changed to 'Loan Product' as the word 'instance' implies the loan itself, not the product (i.e. "an instance of a loan product").

From tomb Fri Sep 7 11:44:36 -0700 2007 From: tomb Date: Fri, 07 Sep 2007 11:44:36 -0700 Subject: Section 6.2 Message-ID: <20070907114436-0700@www.mifos.org>

Are you looking for a specific UI page to summarize the information this way or do you actually want it to be recorded in the database?

Since this appears to be set up as a Loan "fee", the deposit is going to be triggered by the 'applyLoan' action. In the case where there are several loans attached to the same mandatory savings account, the logic for culminating multiple deposits from separate loans would have to take into account the following: 1.) Look at all the deposits made and determine where each deposit originated from (was it a mandatory payment from a loan?). 2.) Do we only pick deposits that were made on the same day? 3.) Do we modify financial transactions and their related data? (this would be non-trivial)

From tomb Fri Sep 14 11:15:47 -0700 2007 From: tomb Date: Fri, 14 Sep 2007 11:15:47 -0700 Subject: Loan rescheduling issue Message-ID: <20070914111547-0700@www.mifos.org>

Assuming we can have more than one loan associated with the same mandatory savings account, how do we handle situations where one loan has a different schedule?

From tomb Fri Sep 14 11:18:20 -0700 2007 From: tomb Date: Fri, 14 Sep 2007 11:18:20 -0700 Subject: Section 6.8 Message-ID: <20070914111820-0700@www.mifos.org>

How do we decide which mandatory savings account should be used? If we need to be consistent about where the money is transfered to then we'll need to come up with some repeatable logic that determines which savings account is specified.

Shouldn't this be part of creating the loan?

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