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Introduction

Loans in microfinance are typically given out for:

  • Micro-enterprise loans
  • Agricultural loans
  • Housing Improvement loans

Loan Application Process

The process of attaining a loan from an MFI begins with a loan application.

  1. An MFI will offer have some financial credit service offering or loan products that may be suitable for a range of customers.
  2. Potential customers (loan applicants) who are interested in praticular loan product will submit an application for a loan (most likely through the help of a loan officer)
  3. This loan application will be reviewed. The loan application process can differ widely from MFI to MFI depending on their business process and the microfinance credit methodology they employ. But eventually a person or persons (credit committee) take a decision to approve the loan application.

In Mifosx, on the platform we support the following loan application process:

Loan Application StateActionResultant Application Status
BeginingSubmit Loan Application

State: ['Submitted and Pending Approval']

  • Date application submitted on captured, Application user that sumbitted loan application captured
  • 'proposed repayment schedule' based on the 'expected disbursement date' and 'loan terms' entered
  • optional: Loan charges (disbursement fees, service fees)
  • optional: Loan collateral (add collateral items related to loan application)
  • optional: Loan purpose (Use field to flag purpose of loan)
  • optional: Loan notes (add notes about loan application)
 
State: ['Submitted and Pending Approval']Modify Loan Application

State: ['Submitted and Pending Approval']

  • Update details about the loan application (if you made mistake or new information available)

  • loan terms (impacts proposed loan schedule)

  • add/update/delete loan charges (impacts loan schedule)

  • add/update/remove loan officer, fund, loan purpose

  • add/update/delete collateral

 Add/Update/Delete Guarantors

State: ['Submitted and Pending Approval']

 Add/Update/Delete Case notesState: ['Submitted and Pending Approval']
 Delete Loan Application

State: []

Completely removes the loan application from the information system

 Approve Loan ApplicationState: ['Approved']

State: ['Approved']

  • No longer allowed to use 'modify loan application' api
  • Charges (fees, penalities) can still be added/updated/removed
Undo Approval

State: ['Submitted and Pending Approval']

  • Useful if a mistake is made during data entry or a loan is wrongly approved by accident on the system

Loan Disbursement Process

Once the loan application has been approved the next step is for the MFI to disburse the funds/money to the loan applicant. In microfinance this can be done a number of ways:

  1. Full loan amount is handed over in cash to loan applicant (in local mfi branch, or in the field)
  2. Full loan amount is disbursed to applicant through a third party like a local bank or post office, possibly through a cheque

In mifosx at present we support the following around loan disbursement:

Loan Application StateActionResultant Application Status
State: ['Approved']

Diburse Loan

  • Not possible to change amount
  • Disbursement is for full amount
  • Actual date of disbursement can be chosen

State: ['Active']

  • Date loan disbursed on captured, Application user that disbursed loan application captured
  • 'Repayment schedule' updated e.g. if actual disbursement date differed from 'expected disbursement date'
 
State: ['Active']Undo Loan Disbursement

State: ['Approved']

  • Useful if a mistake is made during data entry or a loan is wrongly disbursed by accident on the system

Note: Support for multiple disbursements: Tranche loans or Top-up loans

At present this feature isnt support but are aware of their suitability to microfinance so are looking to implement and add these features in if we can get a customer on the other end to validate and test our approach to these features from their point of view.

Loan Monitoring Process (Loan Contract)

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