Money Transfer Item General introduction / Role in Simfi Where?
Calculations
Description The trainer has the option to include the Money transfer option in the simulation game. Once this feature is enabled, the MFIs receive extra revenue from their clients’ money wires. Institution>Exponential factor on … Institution>Weighting factor on … Setup>Other parameters>Exponential factor on … Setup>Other parameters>Weighting factor on … Market information>(Main parameters>)Macro-economy>Average amount money transfer Decisions>Assets>Fee percentage money transfer Financial statement>Profit and loss (P&L)>Net financial margin (after provisions)> Other operating income (non-extraordinary) For money transfers, the number of allocated clients depends on the fee percentage. The cutting cake formula is applied to calculate the number of allocated clients, see also chapter 2: ‘Cutting the Cake: Allocation of Clients to Participants’. In chapter 2, it is explained how the cutting cake formula is applied to loans and deposits. The application to money transfers is a little bit different, because there is no deposit or loan amount. The average amount of money transfers is not chosen by the participants and does not influence the number of allocated clients. It only depends on the fee percentage, staff expenses and IT investments. If a participant chooses a lower fee percentage than other participants, his service is more attractive, resulting in a higher number of clients. The percentage of allocated clients Ptrans ( p, i) of participant i , depends on the fee percentage calculated by the following formula:
Ptrans ( p, i ) = Wtrans ×
C trans (i ) N
∑C j =1
trans
( j)
where:
Ctrans (i) = competitive advantage of fee for participant i Wtrans = weight factor competitive advantage of fee N = total number of participants. The background teams are included in N . In the instructor site, the weighting factor Wtrans can be filled out in the setup of the menu item “Other parameters” or the menu item “Institution”. The competitive advantage Ctrans (i ) is calculated by the following formula:
Ctrans (i) = (2 × Max( Fee( j , p)) − Fee(i, p)) Etrans j
Where:
Fee( j, p) = fee percentage filled out by participant j , in period p , in the decision screen. In the formula, the maximum fee percentage of all participants j is chosen and multiplied by 2.
Etrans = Exponential factor, which can be filled out in the setup of menu item “Other parameters” or the menu item “Institution”. Both Wtrans and Etrans determine the influence of fee percentage on the allocation of clients. In the formula of the percentage of allocated clients Ptrans ( p, i ) , it is seen that it only depends on fee percentage. In the decision screen, the participant can choose the amount of staff expenses and IT investments for each period. These staff expenses and IT investments have an impact on performance, which is modelled by increasing the number of allocated clients if staff expenses or IT investments are increased, with respect to other participants. So, in Ptrans ( p, i ) additional terms must be added:
Cint (i )
Ptrans ( p, i ) = Wint ×
N
∑C j =1
WheadqIT ×
CheadqIT (i ) N
∑C j =1
WmangIT ×
headqIT
CmangIT (i ) j =1
mangIT
( j)
j =1
amount
CnetwIT (i )
+ WnetwIT ×
N
∑C j =1
+ WtelcIT ×
Camount (i ) N
∑C
( j)
( j)
N
∑C
int
+ Wamount ×
netwIT
+ Wstaff ×
( j)
Cstaff (i ) N
∑C j =1
staff
+
( j)
+
( j)
CtelcIT (i ) N
∑C j =1
telcIT
( j)
where:
C staff (i) = competitive advantage of staff expenses for participant i Wstaff = weight factor competitive advantage of staff expenses C headqIT (i ) = competitive advantages of expenses in headquarter IT for participant i WheadqIT = weight factor competitive advantage of expenses in headquarter IT
C netwIT (i) = competitive advantage of expenses in network IT for participant i WnetwIT = weight factor competitive advantage of expenses in network IT C mangIT (i ) = competitive advantage of expenses in management IT for participant i WmangIT = weight factor competitive advantage of expenses in management IT CtelcIT (i ) = competitive advantage of expenses in telecommunication IT for participant i WtelcIT = weight factor competitive advantage of expenses in telecommunication IT
The competitive advantage of staff expenses C staff (i) is calculated by:
C staff (i ) = Exp(i, p)
Estafft
where:
Exp(i, p ) = Total staff expenses chosen by participant i in period p E staff = Exponential factor The competitive advantage of the IT expenses is calculated in the same way. The IT expenses are added to “Net property and equipment” in the balance sheet. These are depreciated on a five year basis. The total IT expenses from the balance sheet are used to calculate the competitive advantage. In this way, the IT expenses in the current and previous periods contribute to the competitive advantage. For staff expenses, only the current period contributes. The weighting factors Wstaff , WheadqIT , WnetwIT , WmangIT , WtelcIT and exponential factors E staff , E headqIT , E netwIT , E mangIT and E telcIT can be filled out in the setup menu item “Other parameters”, or the menu item “Institution”. The percentage of allocated clients Ptrans ( p, i ) must always be 100%. If we sum this up for all participants: N
Ptot = ∑ Ploan ( p, i ) = 100% j =1
In some cases, the weights W fee , Wstaff , etc. can be chosen such that Ptot differs from 100%. To avoid this problem, a correction is carried out where each percentage of allocated clients Ptrans ( p, i ) is divided by Ptot :
Pcorrection ( p, i ) =
Pcorrection ( p, i ) Ptot
In that case, the sum of corrected percentages is always 100%: N
∑P j =1
correction
( p, i ) = 100%
In the simulation, we always use the corrected percentages. In the decision input screen, (if the instructor has made money transfers available) the participant can fill out “Fee percentage money transfer”. For each financial transaction, the bank receives a fee. In the simulation, each active client carries out one financial transaction at a certain bank. The bank to which an active client is assigned to, is determined by the cutting cake formula, which is explained in detail in this chapter. The total revenues from money transfers is calculated by the formula:
This total fee is booked in the P&L statement under “Other operating income (non-extraordinary)�.