This chapter contains the following sections:
This section contains details of the suggested accounting entries that can be set up, for the Microfinance module of Oracle FLEXCUBE. The details of the suggested accounting entries are given event-wise.
The following is an exhaustive list of events that can take place during the lifecycle of a microfinance contract. In the subsequent paragraphs we shall examine the accounting entries and advices for each of the events listed below.
Event Code |
Event Description |
ACCR |
Accr |
ADCH |
ADHOC |
ALIQ |
Auto Liquidation |
ARVN |
Automatic Rate Revison |
BADJ |
Back Dated Adjustment |
BNTC |
Billing Notice Event |
BOOK |
Booking Of Contract |
CAMD |
Contract Amendment |
CLOS |
Closure for off balance sheet comp |
CLOC |
Closure of Commitment |
DLINK |
Payment made against a loan linked to a revolving commitment contract |
DNTC |
Delinquency Notice Event |
DSBR |
Disbursement |
INIT |
Contract Initiation |
ISTM |
Interest Statement Event |
LCYP |
LCY update processing |
LIQB |
Liquidation Tanking |
LSTM |
Loan Statement Event |
LINK |
Linking a commitment to a microfinance account |
MLIQ |
Manual Liquidation |
NOVA |
Novation |
PROV |
Provisioning |
READ |
Readjustment Processing |
REOP |
Reopen of microfinance account |
REVC |
Reversal of Contract |
REVD |
Reversal Of Disbursement |
REVN |
Rate Revision |
REVP |
Reversal of Payment |
RNOG |
Re-Negotiation |
ROLB |
Roll Over Booking |
ROLL |
Roll Over of Contract |
REVL |
Reversal of Linked Microfinance account |
SROL |
Special Roll Over |
STSH |
Instalment Status Change |
TAXC |
Specific Tax Calculation |
UDCN |
UDC Cascade Change |
USGR |
Un-secured GL Transfer Reversal |
USGT |
Unsecured GL Transfer |
VAMB |
Value Dated Amendment Booking |
VAMI |
Value Dated Amendment Initiation |
YACR |
Yield to Maturity based Discount Accural |
INLQ |
Intermediary Liquidation |
IMST |
Intermediary Statement |
PWOF |
Partial Write Off |
In this section we have provided a list of sample accounting roles.
Accounting Role |
Description |
ASSETGL |
The Customer GL to which the Microfinance account movements are reported. |
PRINCIPAL_LIQD |
Principal Liquidated |
PRINCIPAL_INCR |
Principal Increased |
COMPONENT _INC |
Component Income |
COMPONENT EXP |
Component Expense |
COMPONENT RIA |
Component Received in Advance |
COMPONENT PAY |
Component Payable |
COMPONENT REC |
Component Receivable |
COMPONENT PIA |
Component Paid in Advance |
BRIDGE GL |
Intersystem Bridge GL |
SETTLEMENT ACCOUNT |
Customer Account Settled From / To |
FEES_REC |
Fees Receivable |
CHARGES_REC |
Adhoc Charges Receivable |
IN_INTER_STMT |
Intermediary Statement |
PRINCIPAL_EXP_D |
Principal Expense Doubt |
LOAN_AC_DOUB |
Microfinance account Doubt |
CONT_W_DOUB |
Contingent Write Off Doubt |
CONT_SUBS |
Contingent Substandard |
MAIN_INTEXP_DOUB |
Maintenance Interest Expense Doubt |
MAIN_INTREC_DOUB |
Maintenance Interest Receivable Doubt |
Sl No. |
Accounting Role |
Acquisition Type |
Role Type |
1 |
EIMDISCRIA |
Discount |
Asset |
2 |
EIMDISCINC |
Discount |
Asset |
3 |
EIMPREMPIA |
Premium |
Asset |
4 |
EIMPREMEXP |
Premium |
Asset |
5 |
EIMINTADJREC |
Par |
Asset |
6 |
EIMINTADJINC |
Par |
Asset |
In this section we will discuss the suggested events and advices that should be generated for that particular event in the life cycle of Microfinance.
The system uses this event to enter details of a microfinance account. However, at this stage the account is not initialized thus there will not be a change in the balance but you can perform other activities (processing fee etc) for the microfinance account. The accounting entries passed will be either Contingent Entries for disbursement or component liquidations entries.
Advice Name |
Description |
Format Name |
CL_CONT_ADV |
Contract Advice |
CL_CONTR_STMT |
On BOOK event of a commitment contract the following accounting entries are passed:
Accounting Roles |
Amount Tag |
Dr./Cr. Indicator |
CONTGL |
PRINCIPAL_FWD |
Debit |
CONTOFF |
PRINCIPAL_FWD |
Credit |
The system uses this event to initiate a loan with a value date as the date of initiation. However, you can not disburse the loan under this event.
Advice Name |
Description |
Format Name |
CL_INIT_ADV |
Initiation Advice |
CL_INIT_ADV |
CL_CAP |
Capitalization Advice |
CL_CAP_ADV |
CL_CONT_ADV |
Contract Advice |
CL_CONTR_STMT |
CLST_SUMMARY |
Loan Summary Statement Advice |
CL_LOAN_SUMMARY |
COUPON |
Coupon Advice |
ADV_COUPON |
This event is marked by the disbursement of the loan amount. The disbursement may be done manually or can be triggered by a disbursement schedule. The microfinance account will have debit balances after total disbursement.
Advice Name |
Description |
Format Name |
CR_ADV |
Credit Advice |
CL_CR_ADV |
CLST_DETAILS |
Loan Detailed Statement Advice |
CL_LOAN_DETAIL |
CLST_SUMMARY |
Loan Summary Statement Advice |
CL_LOAN_SUMMARY |
TAX_ADVICE |
Tax Advice |
CL_TAX_ADVICE |
The entries passed are:
Accounting Role |
Amount Tag |
Dr/Cr |
LOAN_AC |
PRINCIPAL |
Dr |
CR_SETTLEMENT_BRG |
PRINCIPAL |
Cr |
Note
The accrual of the various components will be triggered based on the accrual parameters you maintain at the product level.
The following accounting entries are passed for this event:
For Interest Accrual
Accounting Roles |
Amount Tags |
Dr/Cr |
INT_REC |
INT_ACCR |
Dr |
INT_INC |
INT_ACCR |
Cr |
For Penalty Interest Accrual
Accounting Roles |
Amount Tags |
Dr/Cr |
PENAL_INT_REC |
PENAL_INT_ACCR |
Dr |
PENAL_INT_INC |
PENAL_INT_ACCR |
Cr |
This event is triggered as a batch process for the Intermediary Liquidation based on the product event advice maintenance. It provides basic information about the Intermediary and the corresponding commission settlement.
Advice Name |
Description |
Format Name |
IN_INTER_CR |
Intermediary Credit |
INTER_CR_ADV |
This event is triggered as a batch process for the Intermediary Liquidation based on the product event class maintenance. It provides basic information about the Intermediary and charge collected because of pre-payment and late payment by the customer.
Advice Name |
Description |
Format Name |
IN_INTER_DR |
Intermediary Debit |
INTER_DR_ADV |
This event is triggered as per the statement frequency maintained at the Intermediary Level. It provides basic information about the Intermediary and the corresponding commission/charge settlements.
Advice Name |
Description |
Format Name |
IN_INTER_STMT |
Intermediary Statement |
IN_INTER_STMT |
Depending on the mode of liquidation opted for, whether automatic or manual, the appropriate event is triggered. A batch process will be triggered at EOD for payments that are marked for auto liquidation.
ALIQ
Advice Name |
Description |
Format Name |
DR_ADV |
Debit Advice |
CL_DR_ADV |
DELINQYADV |
Delinquency Advice |
CL_DELQ_ADV |
MLIQ
Advice Name |
Description |
Format Name |
BILNOTC |
Billing Advice |
CL_BILL_ADVC |
DELINQYADV |
Delinquency Advice |
CL_DELQ_ADV |
PAYMENT_ADVICE |
Payment Advice |
CL_PMT_ADV |
The accounting entries for these events will be as follows:
Principal Repayment
Accounting Role |
Amount Tag |
Dr/Cr |
DR_SETTLEMENT_BRG |
PRINCIPAL_LIQD |
Dr |
LOAN_AC |
PRINCIPAL_LIQD |
Cr |
Interest Repayment
Accounting Role |
Amount Tag |
Dr/Cr |
DR_SETTLEMENT_BRG |
INT_LIQD |
Dr |
INT_REC |
INT_LIQD |
Cr |
INTERNAL_GL |
MAIN_INT_WHLD |
Dr |
MAIN_INTREC |
MAIN_INT_WHLD |
Cr |
Penalty Interest Repayment
Accounting Role |
Amount Tag |
Dr/Cr |
DR_SETTLEMENT_BRG |
PENAL_INT_LIQD |
Dr |
PENAL_INT_REC |
PENAL_INT_LIQD |
Cr |
Following are the accounting entries passed for the manual repayment of loan by cash:
Accounting Role |
Amount Tag |
Dr/Cr |
DR_SETTL_BRIDGE |
PRINCIPAL_LIQD |
Dr |
LOAN_ACCOUNT |
PRINCIPAL_LIQD |
Cr |
DR_SETTL_BRIDGE |
MAIN_INT_LIQD |
Dr |
MAIN_INT_REC |
MAIN_INT_LIQD |
Dr |
This event is triggered when a commitment is linked to a microfinance account. LINK event increases the utilization of the commitment amount and the contingent entries passed at the time of INIT is reversed upto the extent of linked amount.
Accounting Role |
Amount Tag |
Dr/Cr Indicators |
ASSETGL |
COMMUTIL_INCR |
Credit |
ASSETOFF |
COMMUTIL_INCR |
Debit |
This event is triggered when payment is made against a loan, which is linked to a revolving commitment contract, Delink decreases the utilization of commitment amount.
Accounting Role |
Amount Tag |
Dr/Cr Indicators |
ASSETGL |
COMMUTIL_DECR |
Debit |
ASSETOFF |
COMMUTIL_DECR |
Credit |
This event is triggered when a status change occurs. It could be a Forward Status Change (FSTC) where the loan moves from one adverse status to another or a Backward Status Change (BSTC) wherein, on repayment of overdue instalments, a reversal of status takes place. The status derivation rule is used to resolve the status. The change may occur due to a status rule being activated. If the number of days by which a component becomes overdue, exceeds the allowed number of days (may be referred to as the grace period), the component can undergo a status change if a status rule is defined with such a criteria. A status change is triggered if any condition defined for the rule is satisfied.
The accounting entries, if maintained for the events (FSTC and BSTC) will be triggered. The accounting role provided will be the same for all the changes. However, the Role to Head mapping rules will resolve the entries to the appropriate accounts for each status.
Interest accrual for status ‘ACTIVE’
Accounting Role |
Amount Tag |
Dr/Cr |
INT_REC |
INT_ACCR |
Dr |
INT_INC |
INT_ACCR |
Cr |
Interest accrual for status ‘PAST DUE’\
Accounting Role |
Amount Tag |
Dr/Cr |
INT_REC |
INT_ACCR |
Dr |
INT_INC |
INT_ACCR |
Cr |
These statuses are triggered as a result of making amendments to a loan.
CAMD (Account Amendment)
Any amendment to the parameters of the account will create a new version of the loan. These changes will not have any implications on the financial attributes of the loan.
Advice Name |
Description |
Format Name |
CLAMDADV |
Amendment Advice |
CL_AMD_ADV |
VAMB (Booking of a Value Dated Amendment)
This event is triggered when you book a value dated amendment.
You can book for an amendment of the following:
The batch program will identify the changes booked and the same is triggered appropriately on the value date by the VAMI event.
Advice Name |
Description |
Format Name |
CLAMDADV |
Amendment Advice |
CL_AMD_ADV |
VAMI (Initiation of a Value Dated Amendment)
This event will pick up the future dated VAMBs and on the value date, initiate the same.
The accounting entries for an increase in principal will be as follows:
Accounting Role |
Amount Tag |
Dr /Cr |
LOAN_AC |
PRINCIPAL_INCREASED |
Dr |
CR_SETTLEMENT_BRG |
PRINCIPAL_INCREASED |
Cr |
Any change to Rate and Tenor (Maturity Date) will alter the original loan schedules.
This event is triggered when a loan is renewed with new terms. Rollover will have either a combination of liquidation and rollover of Principal. It can also have liquidation of Interest and penalty Interest.
Advice Name |
Description |
Format Name |
CLAMDADV |
Amendment Advice |
CL_AMD_ADV |
CL_ROLL_ADV |
Rollover Advice |
CL_ROLL_ADV |
PAYMENT_ADVICE |
Payment Advice |
CL_PMT_ADV |
The entries passed for rollover of the Principal are as follows:
Accounting Role |
Amount Tag |
Dr/Cr |
CR_SETTLEMENT_BRG |
PRINCIPAL_ROLL |
Cr |
LOAN_AC |
PRINCIPAL_ROLL |
Dr |
For liquidation of Principal, the following entries are passed:
Accounting Role |
Amount Tag |
Dr/Cr |
DR_SETTLEMENT_BRG |
PRINCIPAL_LIQD |
Dr |
LOAN_AC |
PRINCIPAL_LIQD |
Cr |
For liquidation of Interest and Penalty Interest, the entries are:
Accounting Role |
Amount Tag |
Dr /Cr |
DR_SETTLEMENT_BRG |
LIQD_AMT |
Dr |
INT_REC |
INT_LIQD |
Cr |
PENAL_INT_REC |
PENAL_INT_LIQD |
Cr |
INTERNAL_GL |
MAIN_INT_WHLD |
Dr |
MAIN_INTREC |
MAIN_INT_WHLD |
Cr |
You may encounter the following cases:
Case 1: Rollover only Principal Outstanding; Pay Interest & Penalty Outstanding
In this case, both ‘PRINCIPAL_LIQD’ and ‘PRINCIPAL_ROLL’ will be zero and hence the ‘MICROFINANCE ACCOUNT’ balance is not affected.
The Outstanding Interest and Principal will be liquidated. Referring to the accounting entries above,
Case 2: Rollover Principal + Interest Outstanding; Pay Penalty Outstanding
In this case,
Case 3: Rollover Principal + Interest + Penalty Outstanding
PRINCIPAL_ROLL = INT_ROLL + PENAL_INT_ROLL
LIQD_AMT = 0
Case 4 - a: Rollover Special Amount, Amount > Principal Outstanding
This is in effect a disbursement. Therefore,
PRINCIPAL_ROLL = SPECIAL_AMOUNT – PRINCIPAL_OUTSTANDING
Since the rolled over amount is greater than the outstanding principal, it will be positive and hence an increase in the loan amount is registered.
Case 4 – b: Rollover Special Amount, Amount < Principal Outstanding
This results in a decrease in Principal and hence
PRINCIPAL_ROLL = SPECIAL_AMOUNT – PRINCIPAL_OUTSTANDING will lead to a negative amount which will reduce the Dr Balance on the Microfinance account.
This event is triggered when a roll-over is done and it involves a change in the currency, product and customer.
Advice Name |
Description |
Format Name |
CLAMDADV |
Amendment Advice |
CL_AMD_ADV |
CL_ROLL_ADV |
Roll-over Advice |
CL_ROLL_ADV |
This event is triggered when a customer is not being able to honor the terms and conditions of the credit. In such a situation, the client re-negotiates the terms and conditions of the credit before maturity date.
Advice Name |
Description |
Format Name |
CLAMDADV |
Amendment Advice |
CL_AMD_ADV |
PAYMENT_ADVICE |
Payment Advice |
CL_PMT_ADV |
This event is triggered when a primary customer is changed.
Advice Name |
Description |
Format Name |
CLAMDADV |
Amendment Advice |
CL_AMD_ADV |
This event is triggered when a loan is withdrawn. This will pass the DSBR entries with a reversal of signs (-ve) for the amounts, as follows:
Accounting Role |
Amount Tag |
Dr /Cr |
LOAN_AC |
- PRINCIPAL |
Dr |
CR_SETTLEMENT_BRG |
- PRINCIPAL |
Cr |
The latest payment made, both auto and manual, will be reversed during this event. This will pass the ALIQ or MLIQ event selected with a reversal of signs for the amounts.
Reversal of Principal Repayment
Accounting Role |
Amount Tag |
Dr /Cr |
DR_SETTLEMENT_BRG |
- PRINCIPAL_LIQD |
Dr |
LOAN_AC |
- PRINCIPAL_LIQD |
Cr |
Reversal of Interest Repayment
Accounting Role |
Amount Tag |
Dr /Cr |
DR_SETTLEMENT_BRG |
- INT_LIQD |
Dr |
INT_REC |
- INT_LIQD |
Cr |
Reversal of Penalty Interest Repayment
Accounting Role |
Amount Tag |
Dr /Cr |
DR_SETTLEMENT_BRG |
- PENAL_INT_LIQD |
Dr |
PENAL_INT_REC |
- PENAL_INT_LIQD |
Cr |
This will change the Floating Interest Rates based on the periodicity that you maintain.
Advice Name |
Description |
Format Name |
CL_INT_STMT |
Interest Statement Advice |
CL_INT_STMT |
RATECH_ADV |
Rate Change Advice |
CL_RTCH_ADV |
This will change the Floating Rate as and when the rate changes.
Advice Name |
Description |
Format Name |
CL_INT_STMT |
Interest Statement Advice |
CL_INT_STMT |
RATECH_ADV |
Rate Change Advice |
CL_RTCH_ADV |
This event will be triggered whenever there is a change in the UDE values. This will be required to have Rate revision advices sent to the customers.
This event will be triggered for the computation of IRR. The following accounting entries will be passed:
Accounting Role |
Amount Tag |
Dr /Cr |
EIMDISCRIA |
EIM_ACCR |
Dr |
EIMDISCINC |
EIM_ACCR |
Cr |
EIMPREMEXP |
EIM_ACCR |
Dr |
EIMPREMPIA |
EIM_ACCR |
Cr |
If refunding needs to be done as part of with complete pre-payment, the following entries should be passed in addition to the ones specified above:
Accounting Role |
Amount Tag |
Dr /Cr |
<Charge Comp>_RIA |
EIM_ADJ |
Dr |
CR_SETTL_BRIDGE |
EIM_ADJ |
Cr |
DR_SETTL_BRIDGE |
EIM_ADJ |
Dr |
<Charge Comp>_PIA |
EIM_ADJ |
Cr |
This event triggers the liquidation of charges applicable to the microfinance accounts. You need to set up the following entries for this event:
Accounting Role |
Amount Tag |
Dr /Cr |
DR_SETTL_BRIDGE |
<Charge Comp>_LIQD |
Dr |
<Charge Comp>_RIA |
<Charge Comp>_LIQD |
Cr |
CR_SETTL_BRIDGE |
<Charge Comp>_LIQD |
Dr |
<Charge Comp>_PIA |
<Charge Comp>_LIQD |
Cr |
Accounting Role |
Amount Tag |
Dr./Cr Indicator |
CONTGL |
COMM_UNUTIL |
Credit |
CONTOFF |
COMM_UNUTIL |
Debit |
Accounting Role |
Amount Tag |
Dr./Cr Indicator |
LOAN_ACCOUNT |
PRINCIPAL |
Dr |
CR_SETTL_BRIDGE |
PRINCIPAL |
Cr |
Accounting Role |
Amount Tag |
Dr/Cr |
MAIN_INTREC |
MAIN_INT_ACCR |
Dr |
MAIN_INTINC |
MAIN_INT_ACCR |
Cr |
Accounting Role |
Amount Tag |
Dr/Cr |
DR_SETTL_BRIDGE |
PRINCIPAL_LIQD |
Dr |
LOAN_ACCOUNT |
PRINCIPAL_LIQD |
Cr |
DR_SETTL_BRIDGE |
PRINCIPAL_EXCESS |
Dr |
PRINCIPALPAY |
PRINCIPAL_EXCESS |
Cr |
|
|
|
PRINCIPALEXP |
PRINCIPAL_WAVD |
Dr |
LOAN_ACCOUNT |
PRINCIPAL_WAVD |
Cr |
|
|
|
DR_SETTL_BRIDGE |
MAIN_INT_LIQD |
Dr |
MAIN_INTREC |
MAIN_INT_LIQD |
Cr |
MAIN_INTEXP |
MAIN_INT_WAVD |
DR |
MAIN_INTREC |
MAIN_INT_WAVD |
CR |
This event triggers the Partial Write Off in CL. You need to set up the following entries for this event:
Account Role |
Amount Tag |
Dr/Cr |
PRINCIPAL_EXP_D |
PRINCIPAL_PWOF |
Debit |
LOAN_AC_DOUB |
PRINCIPAL_PWOF |
Credit |
CONT_W_DOUB |
MAIN_INT_PWOF_CONT |
Debit |
CONT_SUBS |
MAIN_INT_PWOF_CONT |
Credit |
MAIN_INTEXP_DOUB |
MAIN_INT_PWOF |
Debit |
MAIN_INTREC_DOUB |
MAIN_INT_PWOF |
Credit |