There are similar competitive advantages for investments and for the number of loan officers. Apart from these competitive weighting factors, the trainer can set an impact weighting factor that shifts the weight from one factor to another. The default settings for these impact weights are 0.50%.
The result of the formula above is a percentage, which is added as percentage points to the recovery rate. Penalty regulatory requirements
In case the MFI does not meet the regulatory requirements, there is a penalty of a 2% point increase in the interest rate of the following liabilities: 1. Short term borrowed funds 2. Long term borrowed funds 3. Quasi capital accounts. This penalty is incurred in the following cases: 1. The minimum cash of total deposits percentage is not met 2. The capital adequacy ratio is insufficient 3. The liquidity ratio is insufficient. The minimum capital adequacy and liquidity ratios are set by the trainer and depend on the MFI’s regulation type.
Penalty insufficient lending activity
Penalty for jumps in loan size
Penalty for not enough cash with respect to the total amount of assets
In order to encourage the MFI to allocate its funds toward lending rather than investing elsewhere, there is a penalty if the following balance sheet items combined exceed a limit: 1. Interest bearing deposits and investments < 1 year 2. Investments > 1 year. The limit is set by the trainer as a percentage of the total gross loan portfolio. The penalty is also determined by the trainer as a percentage of the sum of point 1) and 2), above. In order to discourage MFIs from changing the average loan size too abruptly, there is a penalty if any of the loan sizes in one round exceed a change of more than 25%. The penalty is an increase of the probability of default for all lending activities, with one percentage point in the current quarter and next quarters. So, even if a trespassing of the 25% limit only took place for one type of loan, all loans will still be confronted with a higher PD. In order to encourage the MFI to have enough cash, there is a penalty if in the balance sheet the amount of cash is less than 1% of the total amount of assets. The penalty amount is 1% of the total assets which could have a large impact on the net profit in the P&L statement. In the P&L statement this amount is booked in “Other financial expenses” under header “Total financial expenses”. During initialisation this penalty is always zero, see also chapter 26 “Initialisation”.