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http://mifosforge.jira.com/browse/MIFOS-5182?page=com.atlassian.jira.plugin.system.issuetabpanels:comment-tabpanel&focusedCommentId=70859#comment-70859
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Binny Gopinath Sreevas commented on MIFOS-5182:
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The most immediate need is for scenario 2 (either 2a or 2b) as this is what the
client needs. I assume this will work well in the scenario where I want to
collect the principal fully in the last installment and only interest in the
first n-1 installments by giving a principal only grace period. My client
always collects the outstanding principal with the last installment, with the
facility for customer to prepay if needed.
The last scenario is different from the current interest recalculation scheme
that we have currently. Currently, Mifos internally does a daily reducing
balance. Which means that the interest for February will be less than interest
for April. What customer wants is that the calculated interest amount should be
same for each of the monthly installments. This can be done only by having the
formula based on (interest / 12) instead of (interest / 365 * days).
We can take up scenario 1) and scenario 2a) in a later release. We can
implement 2b) first if that is easier. I am ok with that.
> Declining balance with interest recalculation - need to support monthly option
> ------------------------------------------------------------------------------
>
> Key: MIFOS-5182
> URL: http://mifosforge.jira.com/browse/MIFOS-5182
> Project: mifos
> Issue Type: Improvement
> Reporter: Binny Gopinath Sreevas
> Priority: Major
> Fix For: Release 2.2.2
>
> Attachments: SampleLoanCalculation_MonthlyReducing_V02.xlsx,
> SampleLoanCalculation_MonthlyReducing.xlsx
>
>
> Currently "declining balance with interest recalculation" does a daily
> interest recalculation. There is a need to have an option to do a "monthly
> interest calculation". Detailed requirement and example below:
> There are 2 loans (with monthly installments) which are handled as follows in
> real-life:
> Loan 1:
> February-2011 - Disbursed - 10,00,000 at 2% per month
> March-2011 - Interest paid - 20,000
> April-2011 - Interest paid - 20,000
> May-2011 - Loan repaid paid with interest - 10,20,000
> I schedule this as a loan product with interest type as "diminishing
> balance" and with 2 "principal-only grace" periods. This works fine in Mifos.
> Loan 2: Is similar, except that the customer does some prepayments.
> May-2011 - New Loan disbursed - 40,00,000 at 2% per month
> June-2011 - Interest paid - 80,000
> July-2011 - Interest paid - 80,000
> August-2011 - Interest paid - 80,000, Principal repaid 5,00,000
> (principal outstanding is now 35,00,000)
> September-2011 - Interest paid - 70,000, Principal repaid 10,00,000
> (principal outstanding is now 25,00,000)
> October-2011 - Interest paid - 50,000, Principal repaid 15,00,000
> (principal outstanding is now 10,00,000)
> Nov-2011 - Interest paid - 20,000
>
> I am not able to configure Loan-2 in Mifos. Ideally, the pre-payments should
> be adjusted to the principal. But mifos accounts prepayments against future
> interest, if I use interest type as "diminishing balance".
>
> If I use the interest type as "diminishing balance with interest
> recalculation", Mifos computes the interest based on daily-reducing balance.
> So the interest due for Feb, will be less than interest due for April. Which
> will not help implementing the above scenario. And with this type of
> interest, Grace periods are not supported. So it is impossible to implement
> such a loan in Mifos.
> My understanding of the solution in Mifos, will need 2 enhancements:
> a) Along with "daily declining balance with interest recalculation", we need
> a "monthly declining balance with interest recalculation"
> b) We need "Principal Only Grace periods" to be allowed for interest type
> "Declining balance with interest recalculation". Currently, Mifos does not
> allow this. There is already a ticket for this at: MIFOS-4742
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