MFIs can charge fee for the various services offered. Reasons for charging a fee can vary from one MFI to another. The Mifos system provides MFIs and branches the flexibility to define fee instances to meet their requirements. Examples of fee instances can be client creation fee, training fee, account creation fee, etc.

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.

Overview

This section covers the concept of fee and its application as treated by the Mifos system. This includes the definition of fee instances, its calculation, and the general rules around fee component.

Fee Instance Definition

Fee instances can be defined at the HO only by users with “Define Fee” permissions.

Attributes for Fee Instance Definition

The following table defines the attributes of a fee instance. All attributes are mandatory. Users at the HO, with the required permissions can modify the status and rate of a fee instance anytime.

• Important: Once a fee instance is defined, changes can be made only to the “state” of the fee instance and the fee rate. No other attributes can be changed.
• When an existing fee instance is modified, that is, either the fee rate or fee state is modified, the changes are applied to all future accounts that inherit this fee (i.e., if fee is made inactive, then that fee option is not available to apply to future accounts; if fee amount is changed, the new amount applies only to future accounts), The change will not impact the existing accounts utilizing this fee

General Rules for Fee Calculation

• A particular fee instance can be applied multiple times to a customer account.
• Interest is never charged on fee amount.
• Fee amount can be waived by the user/LO with required permissions. Also, complete fee instances can be removed.
• Mifos system does not match periodicity of fee with the repayment schedule for the loan repayment of a client.

For Fee Category - Client, Group, Center

• For accounts where a fee has been designated, the fee instance is displayed in the corresponding detail page. For Client, Group, and Center Detail pages only fees at that level is shown. In Product Accounts Detail page like loan accounts, fees applicable to the account are shown.

Applying Fees to Accounts

List of fee instances are visible in the Fee section of the accounts and customer accounts.

Application of Fees in case of Loans

For Loan accounts, fee can be charged in three ways (both at time of account creation and after).

• Fee instances are inherited from the product definition. The LO can remove one or more of these fee instances for a particular account. If a fee instance is removed from an account, it does not affect other accounts.
• Predefined fee instances (not yet associated with the account) can be selected and attached to the account.
• Miscellaneous fee (one time charge) can be charged to an account. The user specifies the amount. This amount is added in the next payment.
• Any modifications to fee definition will be applied to future accounts.

Application of Fees in case of Clients, Groups, and Center Accounts

For Client, Group, and Center accounts, fees can be charged in the following ways:

• HO can specify which fee instances are applicable for all clients. Similarly HO can specify the fee instances, which are attached to all new accounts of groups and centers. The LO can remove one or more of these fee instances for a particular account. If a fee instance is removed from an account, it does not affect other accounts.
• Predefined fee instances can be selected and attached to each client or, group or center account.
• Miscellaneous fee (one time charge) can be charged to a client account. The user specifies the amount. This amount is added in the next payment.

Process Flow for Fee Calculation

• In client account, only fee instances with category “Clients” and “All Customers” are visible.
• Personnel can attach any of the available fee instances to the account.
• When a fee instance is selected and “Attached”, an amount is calculated as per the fee definition.
• A user is able to waive only the next installment due of a fee instance (and not multiple installments due in the future). The user is not allowed to waive an amount, which has already been paid.
• A user with required permissions can remove a fee type completely from an account.
• Overdue fees: Fee amount is considered as “overdue” when the payment for fee is not received by the system on the expected payment date. For example, a periodic fee type with periodicity= one month is applied to a loan account and the next payment date= October 15th; if payment is not received on October 15^th^, system considers this fee amount as “overdue”.

Out of Scope for Version 1.0

• 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