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https://issues.apache.org/jira/browse/FINERACT-2062?page=com.atlassian.jira.plugin.system.issuetabpanels:comment-tabpanel&focusedCommentId=17827633#comment-17827633
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ibrahim kimbugwe commented on FINERACT-2062:
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[~kigred.developer] This is a nice issue as it affects many clients most
especially those that use the Grameen lending. However, the common practice is
that the interest rate is calculated monthly, and it is to the benefit of the
customer since he is taking a loan for 28 days, not the conventional 30 days.
Some institutions complain of revenue leakages but this is the practice, as
interest calculation is driven down to the number of days with the loan. I
would maybe recommend weekly interest calculation as suggested by [~bgowda] but
again, our small MFI usually calculates interest either annually or monthly.
[~francisguchie] and [~adamsaghy] hope this helps.
Thank you
> Use 48 weeks in a year when interest rate is per month
> ------------------------------------------------------
>
> Key: FINERACT-2062
> URL: https://issues.apache.org/jira/browse/FINERACT-2062
> Project: Apache Fineract
> Issue Type: Improvement
> Components: Loan
> Affects Versions: 1.9.0
> Reporter: Kigenyi Wilfred
> Priority: Minor
> Fix For: 1.10.0
>
>
> Given that the interest rate period on a loan is monthly and client has
> chosen to make weekly repayments, it makes more sense to assume that there
> are 4 weeks in the month and 12 months in the year which comes to 48 weeks
> rather than assuming the traditional 52 weeks in the year.
> For example if a loan has a flat interest rate of 2% Per month and the
> principal is 1000 and the repayments are weekly, weekly interest is currently
> computed as follows:
> interest per week = (0.02*12*1000)/52 = 4.61538
> it would make more sense if interest per month is computed as follows:
> interest per week = (0.02*12*1000)/48 = 5
>
> In other words there is no need for computing weeks in a year when we are
> dealing with a month. There are 4 weeks in a month and this assumption
> calculates a more reasonable figure as compared to when we compute weeks in
> year.
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