Fees Definitions
Introduction
MFIs can charge fees for various services offered, such as membership fees, account charges, etc. Fees can be applied to loan accounts, and to client, group, and center accounts. At this time, Mifos does not support savings account fees.
In addition to fees, penalties can be charged on loan accounts. While fees are charged for the various services offered by an MFI, penalties are charged to penalize the customers for deviating from the rules of repayment.
Specific types of fees, such as a monthly membership fee for client accounts, are referred to as fees. For loan accounts, fees are included in the product definition. Mifos does not match the periodicity of a fee with a loan repayment schedule.
Fees are defined using the Define new fees link on the Admin tab. In addition to naming the fee and identifying the type of account it applies to, a frequency is specified. For fees that are to be applied periodically, the schedule is defined. For fees to be applied on a one-time basis, the time is defined. The fee and amount and the accounting code to which it should be applied is also defined.
Fee Attributes
An MFI defines a fee according to the attributes provided in the following table. All attributes in the table are mandatory.
S. No. | Attribute | Data Type | Range | Description |
|---|---|---|---|---|
| 1 | Fee Name | Alphanumeric (50 characters) | N/A | Fee Name is not unique. Duplicate fee names are allowed. * Once defined, this attribute cannot be modified. |
| 2 | Fee Category | Drop- Down | * All Customers * Client * Group * Center * Loans | Once defined, this attribute cannot be modified. |
| 3 | Frequency of fee charged | Radio button | Single Charge; * Periodic Charge | Once defined, this attribute cannot be modified. |
| 4 | Time of charge | Drop-Down for Single charges; * Number and Unit for periodic charges | For Single Charges, the options are: For Periodic Charges, periodicity can be: * Monthly | For Single Charges, options 2 and 3 are applicable for Loan Accounts only For periodic charges, the max amount of weeks or months the fee can be applied is 999. |
| 5 | Default fees | Check Box | Yes; No | If selected, the fee is attached to the category by default. * For example, if fee category is “Client” and Default fee is selected, this fee is included by default as “Admin set fees” for every new client record created. * This option will not be available for “Loan” fees. |
| 6 | Currency | Dropdown | Currencies set in Configuration | Only appears if Mifos configuration has multiple currencies. Currency selected is the currency for the fee. Only applies to fees that are a flat amount. See CDLP for more details. |
| 7 | Fee Calculation Method | Drop-Down | Amount; * Amount calculated as % of a loan amount; * Amount calculated as % of (loan amount +interest); * Amount calculated as % on interest | Options 2-4 are available and visible only for Loan Product fee category. Once defined, this attribute cannot be modified. * * Amount: Amount in the currency used by the HO. For example, $50. * * Loan Amount: The total loan amount (Principal) approved * * Interest: Total interest due across the duration of the loan as calculated at the beginning of the loan. This applies to both Flat and Declining Balance loans. |
| 8 | Fee Amount/Rate | Number or % | 0-999% or Amount | Amount, is a flat amount. For other fee calculation methods, this is a % amount. |
| 9 | State | Drop-Down | Active; Inactive | Fee is created in “Active” state by default. It can be made inactive also |
| 10 | Fee GL Codes | Drop-Down | List defined by HO (from Chart of Accounts) | Only one GL code is associated to a fee. |
Edits. Users with appropriate permissions can make changes only to the state of the fee and to the fee rate. A fee can be changed from Active to Inactive or vice versa, although fees cannot be deleted from Mifos. For fees attached to loans, changes can be made to the flat rate or to the percentage and base used for calculating the fee. When a fee is changed, the change is automatically applied to new accounts and must be reapplied to existing accounts.
General process for applying fees
Once a fee is defined, it appears as an option whenever a user creates an account of the type for which the fee was defined. For example, for client accounts, only fees assigned to categories Clients and All Customers are visible. Users can attach any of the available fees to the account. If the fee is a Loan fee and defined as a calculated value, then the amount is then calculated per the fee definition and added into the repayment installment schedule.
An LO can apply multiple fees to an account, and can waive the next installment only of a fee payment. An LO cannot waive an amount that has already been paid. An LO can also remove a fee from an account altogether. Interest is never charged on a fee amount.
Note the following:
- Overdue fees. A fee amount is considered overdue when the fee payment is not entered in Mifos on the expected payment date. For example, a periodic fee type with periodicity of one month is applied to a loan account, and the next payment date is October 15th; if the payment is not received on October 15th, the system considers this fee amount as overdue.
- One-time fees. A user can also charge a one-time miscellaneous feel to a loan account or a client account. This amount is added to the next payment amount.
For specific information about applying fees to different types of accounts, see Account Management
Out of Scope
- Amortization of fees over account term.
- Different grace period for fees vs. loan.
- Combination of periodic fee type and frequency equals to % of the amount.
- Group of fees like client creation fee bucket, training fee bucket, etc
- Fees waived for all clients/accounts for a limited period of time.
- New fee type to bulk accounts, after an account is instantiated
Automatic late penalties
In Mifos, there is possibility to define late penalties for overdue payments for Loan account. There is an option to define fixed or percentage penalties which are calculated at the end of day by the Batch Jobs and automatically added to Loan repayment schedule. Once calculated and applied, penalties can be removed and the transaction may be reversed.
Penalties may be added when Loan product is created or by using ‘Apply charges’ link on Loan details page in Transaction box.
There are two options to repay penalties:
- ‘Apply payment’ link located on Loan details page
- ‘Collection Sheet Entry’ which is located on left menu on Home or Clients&Accounts pages
Basic flow to define new penalties:
1. User enters Admin page and clicks Define new penalties.
2. User enter all mandatory information and clicks Preview and Submit.
3. Newly added penalty is created.
Basic flow to configure a loan product with late penalties:
1. User enters Admin page and clicks Define new Loan product.
2. User enters all necessary fields and adds appropriate penalty and clicks on Add button to add it to the right box.
3. User clicks Preview and Submit.
Basic flow to create a new Loan account with penalties:
1. User selects Group or User and clicks on it.
2. User under ‘Account information’ section clicks on ‘Open new account’ > Loan.
3. User selects Loan product (with previously added penalty) from the drop-down list and clicks Continue.
4. User enters all necessary information.
5. In ‘Administrative Set Penalties’ section you user sees all penalties added to Loan product with amount and calculation frequency.
6. User fills all mandatory information and clicks Preview and Submit.
Example how automatic penalties are being applied
If repayment of instalment is specified on the day and it won’t be repaid on this day, then, after a period time defined for this penalty (daily, weekly, monthly), penalty is calculated and applied by batch jobs.
Example:
Weekly loan has defined penalties amount (fixed $5) with weekly application frequency and Grace period time type: ‘Number of installments=1’.
Repayment is set on 01/04/2012 with amount $450. If repayment is not paid, then at the end of the day (01/04/2012), the daily batch jobs runs but the penalty is not calculated as there is a grace period time defined.
Amount due on 01/05/2012 is still $450. If the loan installment continues to remain unpaid until 01/11/2012, the batch job adds $5 to penalty column as the first time penalty amount.
Loan due on 01/12/2012 is: $450+$5+$450=$905.