Customizing Index Interest Rates & Tax Rates
  • 31 Aug 2020
  • 3 Minutes To Read
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Customizing Index Interest Rates & Tax Rates

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Index Interest Rates

It's a common practice in some organisations to fix their internal interest rates to a standard rate determined periodically by an external entity, such as a central bank.

The interest rate source is defined when creating a Loan Product using declining balance methods as explained in Interest Calculation Methods in Loans.

All the accounts created under a loan product using Index Interest Rate will be reviewed regularly. The review frequency is determined when creating the product.

When the accounts are reviewed, if the Index Rate remains the same, there will be no changes in the repayment schedules. On the other hand, if the Index Rate has changed since the latest review, the repayment schedules will be updated to reflect the new interest rate.


Adding a new Rate Source

Before you add a new Index Interest or Tax Rate, you must first create your Rate Sources. To add a new Rate Source in Mambu:

  1. On the main menu, go to Administration > General > Rates.
  2. Under Rate Source, click on the gray plus icon.
  3. Give your Rate Source a relevant name.
  4. Choose the Rate Source's type from the dropdown.
  5. Click on Save Changes.

Add a new rate source. The Type drop-down contains the following values: Interest Rate, Value Added Tax and Withholding Tax

Adding an Index Interest Rate

Before you add an Index Interest Rate, you must specify a Rate Source. The available Rate Source types are:

  • Interest Rate
  • Value Added Tax
  • Withholding Tax

To add an Index Interest Rate:

  1. On the main menu, go to Administration > General > Rates.
  2. Under Rate Source, choose the appropriate Rate Source from the dropdown.
  3. Click on Add Index Interest Rate.
  4. Enter the rate and the start date.
  5. Optional: Add a note about the rate you are creating.
  6. Click on Save Changes.

Index Rate Screen. All previous index interest rates are views on the main screen. By clicking the Add Interest Rate button a pop-up will be displayed. In the pop-up the fields New Rate and Valid From are mandory while the Notes text area is not.

There are a few aspects to take into account when adding a new Index Interest Rate:

  • The first index rate can be added with a start date in the past.
  • All other index rates should have either the current or a future date.

Editing and deleting Index Interest Rates

Index Rates cannot be edited or deleted if the start date is in the past or if the rate has already been used by any account.

The editing/deleting of an Index Interest Rate can be done by pressing the Action button and Edit or Delete.

To edit an Index Interest Rate:

  1. On the main menu, go to Administration > General > Rates.
  2. On the right hand side of the corresponding rate, click on Actions > Edit.
  3. Edit the Index Rate.
  4. Click on Save Changes.

To delete an Index Interest Rate:

  1. On the main menu, go to Administration > General > Rates.
  2. On the right hand side of the corresponding rate, click on Actions > Delete.
  3. Confirm.

Tax Rates

Organisations might be required to collect taxes on the income generated from loans interest, fees or penalties, and/or to withhold taxes on interest paid to deposit accounts. These taxes are usually called Value Added Tax (VAT) in the case of Loan Products and Withholding Taxes in the case of Deposit Products.

Please Note
Taxes are set up at the Product level, using a previously defined Tax Rate. For Tax details, please see the relevant sections in the Loan Product Setup and Deposit Product Setup articles.

Adding a Tax Rate

Before you add a Tax Rate, you must specify a Rate Source. The available Rate Source types are:

  • Interest Rate
  • Value Added Tax
  • Withholding Tax

To add a Tax Rate:

  1. On the main menu, go to Administration > General > Rates.
  2. Under Rate Source, choose the appropriate Rate Source from the dropdown.
  3. Click on Add Value Added Tax or Add Withholding Tax.
  4. Enter the rate and the start date.
  5. Optional: Add a note about the rate you are creating.
  6. Click on Save Changes.

Store Rate screen, where New rate and Valid from fields are mandatory.

Please Note
You can't enable or disable taxes on a product that already has active accounts.

Ask the Mambu Community

If you have a question about how anything works or have come across something you haven't seen explained here, get in touch with our community of fellow users and Mambuvians where someone will lend a hand.

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