Customizing Index Interest Rates & Tax Rates
  • 22 Feb 2021
  • 3 Minutes To Read
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Customizing Index Interest Rates & Tax Rates

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Index interest rates

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

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 an index interest rate will be reviewed regularly. The review frequency is determined when creating the product.

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


Please Note

Before you add a new index interest rate or tax rate, you must first create your rate source.

How to add a rate source

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 a new rate source in Mambu:

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

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

How to add an index interest rate

To add an index interest rate:

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

Index Rate Screen. All previous index interest rates are views on the main screen. By selecting the Add Index Interest Rate button a dialog will be displayed. In the dialog the fields New Rate and Valid From are mandory while the Notes text area is optional.

There are a few aspects to take into account when adding a new index interest rate:

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

How to edit or delete an index interest rate

Index interest 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 selecting Actions and then Edit or Delete.

To edit an index interest rate:

  1. On the main menu, go to Administration > General Setup > Rates.
  2. Under Rate Source, select the rate source in the dropdown that your index interest rate uses
  3. In the list of index interest rates, find the rate you want to edit and select Actions > Edit.
  4. Edit the information.
  5. Select Save Changes.

To delete an index interest rate:

  1. On the main menu, go to Administration > General Setup > Rates.
  2. Under Rate Source, select the rate source in the dropdown that your index interest rate uses
  3. In the list of index interest rates, find the rate you want to edit and select Actions > Delete.
  4. Select Delete.

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 or 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 Setting Up New Loan Products and Setting Up New Deposit Products articles.


How to add a tax rate

Please Note

Before you add a new tax rate, you must first create your rate source.

To add a tax rate:

  1. On the main menu, go to Administration > General Setup > Rates.
  2. Under Rate Source, choose the appropriate rate source from the dropdown.
  3. Select 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. Select 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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