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Table of Contents (Online Help)

Disbursement in Kind

Loan Performer allows you to disburse a loan in kind, rather than cash. This is possible for institutions that give out loans to clients in form of equipment or supplies instead of cash. And can team up with a company that can be used to supply the items needed by their clients and all it does is to pay the service provider for items offered as loans to its clients/ members.

Take an example of a Micro Finance Institution (MFI) that buys solar panels from a supplier for disbursement in kind to its clients.

To accomplish this you have to register the supplier (creditor); enter the supplier invoice into Loan Performer and then record the disbursement in kind.

How to register a Supplier (Creditor)

To do this you go to menu Accounts->Purchases and Sales->Creditors and a screen like the one below shows up:

Fill in the suppliers details and click the Save command button to complete the registration.

NB: For further information regarding the registration of creditors refer to Creditors. 

How to enter supplier invoice

To enter the details of an invoice received from the creditor, you go to Accounts->Purchases and Sales->Invoices Received and a screen like the one below shows up:

• Invoice from: Click on the button with dots next to the Invoice from text-box and select the creditor from the Creditors Selection Screen that pops up.
• Name: Once the invoice has been selected, the name of the supplier will be displayed in this field. In case the supplier is not yet registered, from the "Invoice from" field you can select the option "New" the system will lead the user to the Creditors registration screen and register the creditor detail. Then proceed with entering the supplier's invoice details.
• Include paid off invoices: Tick this checkbox to include even invoices that have been paid off: By default only invoices due for payment are displayed.

• Add Line: Click on the Add Line command button. The line in the table becomes highlighted. Move the cursor to the column Line details and enter the details of the first item.

NB: For further information regarding the registration of creditors refer to Invoices Received.

• Save:  Click on the save command button to complete the invoice entry.

How to make a Disbursement in kind

The loan application, loan registration fees (if charged) and loan approval processes are done normally. To make a loan disbursement in kind you go to Loans\Loan disbursement and a screen like the one below shows up:

Tick the check box for the option Disbursement to supplier as shown above: A list of all registered creditors will be displayed in the creditor selection screen that pops up. Select the creditor from the displayed list. The Paid to; Bank Name; Branch Name; and Account No. fields will be refreshed with the relevant creditor information as shown above:

Note:

1. When you select the option "Disbursement to supplier", an additional field "Mark up" and a creditor selection screen appear. This shows you the excess amount that will be booked on the mark up GL account defined under the menu System/Configuration/Loan Product Settings/Loan GL accounts settings part 1. And allows the user to select the creditor to whom the payment will be made as seen below:

2. The mark up is the difference (Excess of the Loan amount) between the loan amount applied for by the client and the amount in the invoice paid to the supplier. The loan amount disbursed must be greater than the supplier's invoice amount.

3. The loan is disbursed against the supplier's invoice entered under the menu Accounting/Purchases and Sales/Invoices Received. In this case you have to tick the option "Disbursement to supplier" under the menu Loans/Disbursement, it is basically the concept of Disbursement in kind in Loan Performer.

4. The concept of mark up is favorable to Micro Finance Institutions practicing Islamic banking. In this case, MFIs do not charge interest on loans given to clients. Instead, they prefer to disburse the money directly to the supplier of the goods for which the client took the loan. The loan amount disbursed must be greater than the supplier's invoice amount so that the excess amount is booked on the GL account defined above as mark up. This is basically revenue to the institution for the services rendered to the client. However, the client will have to pay back the full loan amount and not only the amount disbursed to the supplier. It is basically the concept of Disbursement in kind in Loan Performer.

4. You will be able to see the mark up amount received on each loan disbursed to a supplier by consulting the report on disbursements under the menu Loans/Portfolio Reports/Disbursement Report.

• Invoice No. Select the invoice number from the drop down list box.  

NB: For any other settings refer to Loan Disbursement.

• Save: Click on the save button to complete the disbursement.

• Enter the relevant payment details as shown above:

         NB: For further information regarding the payment of creditors refer to Payments of Invoices Received

• Save: Click on the save command to complete the payment.

Disbursement to a borrower who has supplied goods or services (Mark up)

Loan Performer allows the institution to pay its client who also happen to be its suppliers.

Mark up: This is the amount that is the excess of the loan amount over the invoice amount when a creditor who also supplied the institution is paid by balancing off.

For instance a client (George William) who supplied goods worth 4,400,000 (Invoice amount) also applied for a loan worth 5,000,000. At disbursement and when the option disbursement to supplier is chosen, select the invoice number from the drop down, the excess of 560,000 less any fees or commission will posted to the mark up account. This will be the amount the client will receive

We are looking at the disbursement to Basimba Basimba who takes the Computer but the monetary value is paid into Jogo (Creditor's) bank account in NMB ltd. i.e. the client only takes the product (Computer) but the money is paid into the Suppliers bank account.

Additional notes

To view how this is booked by Loan Performer you go to Accounts\GL Transaction\Transaction. The entry of the received invoice from the supplier is booked as a debit to the stock account and a credit to the creditors account for the amount of the invoice as shown below

Now look at the disbursement: The stock account has been credited with the disbursed amount, the loan account (124010) has been debited, the bank account (126000) has been credited and the creditor’s account (221021) has been debited.

The total balance on the creditors account (i.e. Jogo) is now 100,000 credit while the same balance is found on the Solar Panel account as a debit.

This is the situation after three members have received their solar panels. By the time all members have received all the solar panels, the creditor's account will be zero as well as the stock account.

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