Islamic Finance (Shariah-Compliant Financial Services)
The following are the high-level gaps identified for Islamic Finance.
This is based on discussions with the CoorB team who customised Mifos X / Apache Fineract for their requirements:
Discussion details present here and on the relevant Mifos Slack channel.
Sample SAMA compliant repayment schedules are present here
1. Fees payable at the time of first installment
Fees (Admin Fees, Insurance Fees, Valuation Fees etc.) are usually due along with the first installment and not at the time of disbursement.
2. Loan product with regular installment amount for a portion of the loan and a bullet payment at the end of term for any remaining principal
Please refer the section for “Real Estate Finance” in the SAMA compliant calculations for an example of expected repayment schedule:
This may be addressed by the following JIRA: https://issues.apache.org/jira/browse/FINERACT-1348
However, this feature needs to be tested before it can be confirmed whether this Jira addresses the requirement or not. Mifos X front end does not have the required loan product configuration parameter (Fixed Principal % Per Installment) to test and confirm this feature.
3. Account entries done at the time of Loan creation (or “booking” - as referred to in the documentation )
At the time of Loan Creation the following accounting entries are to be made.
Account | Nature | DR | CR |
|---|---|---|---|
Receivables - Principal | Asset | 100,000 |
|
Receivables - Profit | Asset | 36,000 |
|
Deferred Profit | Liability |
| 36,000 |
Deferred Management Fee | Liability |
| 1,000 |
VAT Out - MF | Liability |
| 150 |
Disbursement Clearing Account | Liability |
| 98,850 |
|
| 136,000 | 136,000 |
4. Total fees are capped for a loan (not individual fees)
Total applicable charges are capped. If charges exceed 5,000, the system uses 5,000 as the maximum.
[Note: need a detailed example and how the capping impacts the amount for each fees. CoorB team to provide]
5. Custom logic for applying partial payment and excess payment
[Note: need a detailed example and how the partial and excess payments are handled along with their accounting entries]
6. Calculation of fees based on depreciated value of asset
A fee is calculated (for Auto-Finance) based on the yearly depreciated value and is charged along with the first installment.
Example: Car Price: 350,000. Total Insurance Fee: 36,225 (including 15% VAT)
Year | Insurance Rate | Depreciation | Insurance Charges | Notes |
|---|---|---|---|---|
1 | 3% | 20% | 12,045 | 350000 * 100% * 3% * 1.15 (15% VAT) |
2 | 3% | 20% | 9,660 | 350000 × 80% × 3% × 1.15 |
3 | 3% | 20% | 7,245 | 350000 × 60% × 3% × 1.15 |
4 | 3% | 20% | 4,830 | 350000 × 40% × 3% × 1.15 |
5 | 3% | 20% | 2,425 | 350000 × 20% × 3% × 1.15 |
7. Showing Tax components and Tax Groups break-up along with each transaction
Some fees are inclusive of 15% VAT - Example Admin fees of 1%
Some fees are inclusive of 15% VAT - like insurance fee of 3% depreciated value of asset plus 15% VAT
The payment transaction for a loan account (or savings) should show the split between VAT and the actual fee amount.