3/8/2018 /chapter: How-To-Manage-Variable-Loan-Installments / Mifos user manual

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Mifos user manual

Introduction

Welcome to Mifos How to manage Variable

Loan Installments
How to set up Mifos
overview

How to use this

manual How to create a variable installment loan product
How to log in and log How to create a new loan account with variable installments
out How to create a new loan account with variable installments and cash flow
comparison
How to change your
password

How to navigate within How to create a Variable Installment Loan product

Mifos
Overview: Often times, MFIs face the need to tailor loan disbursement, loan
Data entry repayment recovery and loan maturity to suit the cash flow patterns of the
Administration tasks borrower. This is especially true of products like agricultural loans where clients
repayments can be quite volatile. The volatility arises due to increased vulnerability
How to set up MFI of the agricultural industry to factors like inclement weather. Consequently returns
operations: Overview
in such sectors are seasonal, unpredictable and often lower than those of the
How to switch between regular commercial enterprises for which MFIs disburse loans. This necessitates
languages the need for MFIs to have customized loans products, which allow for more
How to create and flexibility with the installment schedule.
view the office
structure The Variable Installment Loans feature of Mifos enables MFIs to accommodate this
flexibility by specifying different gaps between installments, as explained in the
How to work with sections below.
offices

How to work with Configuring variable installments when defining a new loan product.
roles, permissions and
system users To configure variable installments, the checkbox 'Can configure variable
installment' must be enabled.
How to define, change,
apply fees

How to apply
fees/charges

How to set up and

configure automatic
late penalties For the checkbox to be enabled, the following two conditions must be set:

How to work with The loan product must have a ‘Declining balance' or 'Flat' selected in Interest rate
funds (define, view, type drop-down list:
assign)

How to work with user

checklists
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How to work with

holidays

How to define
accepted payment
types

How to view
organization settings

How to set rules for

data display

How to Suspend
Scheduled Batch Jobs Mifos should have the LSIM feature turned ON. LSIM stands for Loan Schedule
Independent of Meeting and if this feature is enabled, repayment schedules and
How to close month loan disbursals no longer need to coincide with meeting schedules. LSIM is set at
How to use User the database level.
interface for Chart of
Accounts creation In other words, when the LSIM feature is ON and the selected interest rate type is
other than ‘declining’, ‘can configure variable installment’ checkbox will get
How to upload disabled.
attachments

How to upload new

logo
How to configure variable installments when defining a new loan
How to manage product.
products
1. Under section Repayment Schedule, check the 'Can configure variable installments'
How to set product checkbox.
rules and attributes
2. The following parameters will be displayed:
How to define new and
change existing loan
products

How to manage the

product mix

How to view system

information and
manage a Mifos shut
down

How to define and

change new savings
products Minimum Gap between Installments - This is the minimum gap, in days, that is required
between two consecutive installments. This is a required field.
How to sort client and
loan fields
Maximum Gap between Installments - This is the maximum gap, in days,
How to manage between installments. This value is optional.
groups, centers, and
clients Minimum Installment Amount - The minimum amount that needs to be repaid at
each installment. This value is optional.
Centers, groups, and
clients overview

How to create a new

center Compare with Cash Flow settings:

How to create a new Mifos provides MFIs the option to compare loan installments with customer's cash
group flow. This option allows MFIs to specify conditions with regard to customers' cash
flow and loans are created in accordance with these conditions. This feature is
How to create a new
client available for loans with variable installment and without.

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How to use dashboard To enable comparison with cash flow, mark the checkbox 'Compare with Cash
with metrics Flow'. The following parameters will be displayed:
How to import client
data

How to change a
meeting schedule for a
center

How to view and

change details of
centers, groups, and
clients

How to change the Warning Threshold - This value, expressed as a percentage, is the fraction of a
status of centers, customer's cumulative cash flow and the upper limit for loan installment for any
groups, and clients
period. In other words, this field will be used to alert a user if the loan installment
How to view for any period is above a certain percentage of the cumulative cash flow (cash flow
performance history calculation explained is explained in the following section). The warning threshold
can be between 0 and 99% (It cannot be a 100% because it would then mean that
How to attach and
collect surveys loan installments for any period can be equal to a customer's cumulative cash
flow).
How to link guarantor
to client Indebtedness Ratio - This value specifies the range within which a client's
indebtedness rate can fall (Formula for calculation of indebtedness rate is
Loan accounts
explained in the following section). Mifos allows loans to be created only if the
Introduction to loan calculated Indebtedness Rate for a client is lesser than this pre-specified value.
accounts This value is expressed as a percentage and can be between 0 and 50%.
How to create a new
loan account Repayment Capacity - This value specifies the range within which a client's
repayment capacity can fall (Formula for calculation of repayment capacity is
How to change the explained in the following section). Mifos allows loans to be created only if the
status of calculated Repayment Capacity for a client is is between the pre-specified range.
(approve/close) loan
accounts This value is expressed as a percentage and can be between 150 and 1000%.

How to disburse a loan

How to create a new loan account with variable
How to manage loan
account details
installments
How to import new
loan accounts As discussed in the previous section, variable installment loans can be created
with or without the compare with cash flow option. We first look at the process of
How to make
transactions for a loan creating a variable installment loan without cash flow comparison enabled.
account
Before creating a loan with variable installment, ensure that the required loan
How to track loan product has variable installment option enabled. If variable installment has already
account history been enabled for the loan product, please skip the following steps and move to the
How to manage next section 'Creating New Loan'.
Variable Loan
Installments If a new loan product with variable installment has to be created, follow the steps
mentioned in the previous section to create new loan product with variable
Savings accounts
installments.
Introduction to savings
accounts To have variable installment configured for an existing loan product, follow these
steps:
How to create a new
savings account 1. Click Admin>Manage Loan Products>View Loan Products. A list of existing
loan products is displayed.

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How to change the

status of a savings
account

How to manage
savings account
details

How to import new

savings accounts

How to make
transactions for a
savings account

How to track savings

account history

Bulk transaction
processing

How to enter
Collection Sheet data

How to create multiple

loans (bulk loan
creation)

How to import
transactions (M-PESA)

How to approve
multiple loans (bulk
loan approval)
2. Select the loan product which needs to be modified by clicking on it. The loan
How to import M-
product's details are displayed as shown in the screenshot below.
PESA transactions
using Kopo Kopo

Reports

How to run Reports in

Mifos Business
Intelligence Suite
(Pentaho)

How to manage and

run BIRT reports

How to manage
administrative
documents

Question Groups and

PPI (formerly
Surveys)

Introduction to
question groups

How to view and edit a

question

How to add a new

question

How to view and edit a

question group

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How to add a new

question group

How to activate a
question group (PPI)

How to attach a
question group to a
record

How to assign a
question group to a
different stage of a
workflow

How to link questions

Accessing Mifos via

Mobile Devices

Mifos Android Client

Mobile Browser
Interface

Appendix

Rules for how to

reschedule payment

How to calculate the

EMI

Tips and Techniques

Glossary

Credits 3. Click 'Edit Loan Product Information' on the top right of the page. The loan
product details page appears in Edit mode. Scroll down to section 'Repayment
New Group Loan
Account (New GLIM) Schedule'.

Introduction 4. Check the 'Can configure variable installments' checkbox and fill in the
installment details as explained in the previous section.
How to create loan
product for new GLIM

Grace period in variable installments: To specify grace period for variable

installment loans, the grace period should first be set at the product level. While
creating the loan product, under section Repayment Schedule, fill in the grace
period details as explained in the How to Define and Change New and Existing
Loan Products section. This is how grace period is implemented in the case of
variable installment loans:

if Grace period duration = 3 installments

frequency of installments for variable installment loan product = 1 week.

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Then, only after the completion of 3 installments of one week each will the loan
move to active in bad standing.

Creating New Loan Account with Variable Installments

For a detailed explanation on how to create new loan, refer to section section "How
to Create a Loan Account" under chapter "Loan Accounts". The loan creation
process is also explained below briefly, including the variable installment feature.

Loans can be created for individual clients or groups. The process of creating loans
is the same for both clients and groups.

1. Click Clients & Accounts on the main panel. The following screen
appears.

2. Client/ group search can be done with the name, system ID, phone
number or account number. When you type this information and
click Search, a list of all possible choices matching the search
information is displayed. Click the correct one, or (if you don't see the
customer you were expecting) try retyping the search information
carefully and then click Search again. A screen similar to the following is
displayed:

3. Select the required client by clicking on the client's name in the list. The client's details
are displayed, similar to the screenshot below.

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4. To create a new loan, click on Loan on the top right of the Account Information
section. The following screen is displayed. Select the required loan product (the
product with variable loan installment in this case). Click Continue.

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5. The Loan Account information page is displayed. The loan product summary
shows the variable installments configuration details (minimum and maximum gap
between installments, etc).

6. In the account details section, enter the account details.

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7. Enter information using the descriptions in the following table (note

that these fields may vary somewhat, depending on the details of the
loan product itself.):

1.
Field name Description Example

Amount The loan amount for the client, 100.00

limited to the minimum and
maximum amounts shown in
brackets.

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Field name Description Example

Interest Rate Applicable interest rate, limited to 18

the minimum and maximum values
shown in brackets. If a default
field was defined for the product,
this field shows the default interest
rate value.

The rate field can be zero but

cannot be left blank.

You may not change the interest

rate once the loan has been paid
out to the client.

No. of The number of installments in 12

Installments which the loan will be repaid,
limited to the values shown in
brackets.

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Field name Description Example

Disbursement The date when the loan is likely to 02/07/2006

Date be disbursed (paid out). If the
client/group has a meeting date,
the date must be one of the
meeting dates.

This date will be used as a Loan

Start Date to generate the
repayment schedule. This field can
be updated with the Actual
disbursement when the loan is
actually disbursed to the client. ??
This date can be in the past. The
repayment schedule will be
regenerated when this date is
updated.

If a client has no meeting date, this

date will not be checked against
the meeting date schedule.

History information about the date

change will not be available
except in the change log.

You may not change this date after

the account is set to "active in good
standing" status.

Grace Period Type how long to wait for late

for Payments repayment: that is, how many
installments.

If the loan product specifies "No

grace" or if interest is automatically
deducted at the time of disbursal,
this field cannot be used.

You can extend or reduce the

length of the grace period if the
grace period has not yet expired.

The grace period starts as of the

day the loan is disbursed to the
client.

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Field name Description Example

Source of Click the applicable source of funds Tsunami

Funds for the loan as defined by the MFI.

Purpose of The purpose for which the loan has Material

Loan been disbursed Purchase

Business work The type of activity the client is Farming

activities engaged in.

Collateral type The type of collateral the client has Type 1

provided for the loan.

Collateral Explanatory notes about the Land title

notes collateral type applicable to the deed
loan. verified by
loan officer

External ID If this loan has an ID number from

some other system, type it here.

Additional Enter any additional information

information: required by your MFI in the custom
Custom fields fields.

Administrative Apply any set fees for this loan, as

Set Fees defined by your MFI.

If you want to change the default

fee amount for any fee displayed,
type the amount in the box. If you
want to remove this fee, check
the Check to Remove Box.

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Field name Description Example

Additional Fee Apply up to a maximum of 3

type different fee types, as defined by
your MFI.

Click Submit after entering the required details.

8. The loan installment schedule for the client is summarized and displayed. The
screen looks something like this.

The installments table displays the following fields:

Installment - The installment month

Due Date - The date when the installment is due. This field can be edited, as
explained below.
Principal - The principal amount for that particular installment
Interest - The amount of interest for that particular installment.
Fees - Fees, if any, imposed on the loan repayment for that particular installment
Total - The total repayment amount for that particular installment. (Principal +
Interest + Fees)

Editing Installment Due Dates and Installment Amounts

The Due Date field is editable and the dates can be modified, in keeping with the
variable installment conditions specified while creating the loan (specifically the
minimum gap between installments field which is the required field).

Similarly, the total installment amount field is also editable - all installment amounts
except the last installment are editable. The installment amounts can be modified,
in keeping with the conditions specified at the time of creation of the loan product
(minimum installment amount). Also ensure that the installment amount entered for
a period is not any lesser than either the sum of Fee and Interest for that period or

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the Minimum Installment Amount specified during product creation, whichever is

greater.

After the edits are done, click Validate. This function will check if the modified due
dates and modified installment amounts are in accordance with the conditions
specified. Possible errors are as follows:

The first installment date could be before the loan disbursal date.
The gap between two installments is less than the allowed minimum.
The due date falls on a pre-specified holiday.
The installment amount is less than either the minimum installment amount or sum
of fee and interest for that period, whichever is greater.

Below are two sample error screens:

Error Type - Gap between installment due dates less than allowed minimum

Error Type - Installment due date falls on holiday

9. After the errors are resolved and the due dates adjusted, click Preview. A
screen similar to this will be displayed.

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10. If any of the above details need to be edited, click Edit account
information or Edit Loan Schedule Information depending on what needs to be
edited.

11. When you are satisfied with all changes, click Submit for
Approval (or, if you want to wait to submit this loan, click Save for

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Later). (If you decide not to create the loan at all at this time,
click Cancel.)

Creating New Loan Account with

Variable Installments and Cash Flow
Comparison configured
Overview: Cash Flow comparison feature enables MFIs to first assess if their
clients have enough money to repay loans. This assessment is done by comparing
the client's overall cash flow with his/ her monthly installment.

Creating a new Loan account: Before proceeding with creating a new loan
account with cash flow comparison, ensure that the specific loan product has cash
flow comparison feature enabled. To enable this, refer to section "Cash flow
comparison settings".

Once the cash flow comparison settings have been enabled at the loan product
level, follow these steps to create a new loan account with variable installments.

The process of creating a new loan account with cash flow comparison is
similar to what has been outlined in the previous section ("Create a new loan
account with variable installments"). For clarity, the steps are stated again
with the new inclusion, cash flow comparison. Skip down to Step 7 to view the
cash flow comparison section.

Loans can be created for individual clients or groups. The process of creating loans
is the same for both clients and groups.

1. Click Clients & Accounts on the main panel. The following screen
appears.

2. Client/ group search can be done with the name, system ID, phone
number or account number. When you type this information and
click Search, a list of all possible choices matching the search
information is displayed. Click the correct one, or (if you don't see the
customer you were expecting) try retyping the search information
carefully and then click Search again. A screen similar to the following is
displayed:

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3. Select the required client by clicking on the client's name in the list. The client's
details are displayed, similar to the screenshot below.

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4. To create a new loan, click on Loan on the top right of the Account Information
section. The following screen is displayed. Select the required loan product (the
product with variable loan installment in this case). Click Continue.

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5. The Loan Account information page is displayed. The loan product summary
shows the variable installments configuration details (minimum and maximum gap
between installments, etc).

6. In the account details section, enter the account details and click Continue. To
cancel and return to the previous page, click Cancel.

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7. The Cash Flow Details screen is displayed. The screen will look something like
this.

All the months which fall between the first and the last installments, including the
first and the last installment months are displayed. In addition, the month
immediately preceding the first installment month and the month immediately
following the last installment are displayed.

Example 1: Disbursal date: 26-Aug-2010, No. of Installments: 3, Frequency of Loan

Installments: 1 month

Installment Months: September, October and November.

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Cash flow months will be captured for months : August, September, October,
November, December.

Example 2: Disbursal date: 26-Aug-2010, No. of Installments: 8, Frequency of Loan

Installments: 2 Weeks

Installment Months: September, October, November and December.

Cash flow months will be captured for months : August, September, October,
November, December, January.

Cash Flow Data

Enter the client's expense and revenue for each of the listed months, in the fields
"Expense" and "Revenue" respectively. In the notes column, enter any comment/
note about the client's revenue/ expense for that particular month. Also enter the
client's Total Capital and Total Liability. Click Continue. The client's cash flow is
calculated, as explained below.

Cash Flow Comparison calculation

In general, cash flow is captured starting one month before the first installment
month to allow the MFI to enter cash in hand thus far leading into the installment
month. On the disbursal month, the loan amount is added to the the cumulative
cash flow for comparison.

The month immediately following the last installment month is added to allow the
MFI to see what sort of an impact loan payment will have on the customer. If there
is a sudden drop of cash of the customer into the month right after the loan
payment, then it may lead to a situation where the customer may default. Thus, to
better understand the customer's position after repayment of loan, MFIs capture
the cash flow for the following month as well.

After the revenue and expenses for each month are entered and you
click Continue, the system calculates the indebtedness rate and repayment
capacity of the client with the information provided in the cash flow capture page. If
the client's indebtedness rate is greater than the allowed value specified during
creation of the loan product or if the client's repayment capacity is less than the
threshold value specified during creation of the loan product, the loan account
cannot be created.

Formula for calculation of Indebtedness Rate:

Indebtedness Rate= (Total liability + loan amount)*100/Total capital

Example:

During loan product definition, the indebtedness rate has been set as 100.

Assume a Rs.1000 loan is being applied for.

Total liability = Rs.5000, Total capital = Rs.4000 (entered by the user)

Indebtedness rate = (5000 + 1000)*100/4000 = 150.

The client's indebtedness rate is greater than the permissible limit, hence Mifos will
not allow the loan to be created. An error message will be displayed as follows.

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Formula for Calculation of Repayment Capacity:

Repayment Capacity=[(Total revenues-Total expenses)+Loan Amount]*100 / Sum

of Installments amount

Example:

During loan product definition, the Repayment Capacity limit has been set as 150.

Assume a Rs.1000 loan is being applied for.

Assume sum of all expenses entered by the user on the cash flow page is Rs.5000
and the sum of all revenues entered is 10000. Assume the sum of all installment
amounts is 1500.

Repayment Capacity = [(10000 - 5000) + 1000] * 100/ 1500 = 400.

The Repayment Capacity of 400 is over the required minimum capacity of 150.
Thus, Mifos allows the loan to be created.

8. After the cash flow details have been entered and the system allows the loan to
be created, the Review Installments page is displayed. The page contains details
of the installments and a summary of the cash flow. A screen similar to this will be
displayed.

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Please refer to the previous section "Creating new loan with variable installments"
for details on how to edit the installment dates and total installment amount.

The Cash Flow summary table displays the following fields:

Months - Name of the installment month

Cumulative Cash Flow - This is calculated as: Cash flow for present installment
+ Sum of cash flows for all previous installments

Cumulative Cash Flow - Total Installment Amount per month - This value is the
difference between the cumulative cash flow for a particular installment month and
the total installment amount for that month.

Total installment amount per month as % of cash flow - If this value exceeds
the warning threshold specified at the time of loan product creation, then Mifos will
not allow the loan to be created.

Notes - Any notes recorded in the system for that particular installment month.

9. To proceed with the loan creation, click Validate. This will validate the edited
installment data against the conditions specified at the time of loan product
creation. (please refer previous section on "Creating new loan with variable
installments" for the various validations performed and possible errors).

10. Click Preview to click the loan account information. A screen similar to this will
be displayed.

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If any of the above details need to be edited, click Edit account

information or Edit Loan Schedule Information depending on what needs to be
edited.

11. When you are satisfied with all changes, click Submit for
Approval (or, if you want to wait to submit this loan, click Save for
Later). (If you decide not to create the loan at all at this time,
click Cancel.)

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