Finacle Islamic Banking Solution for Tomorrow's Banking

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Finacle Islamic Banking Solution

Shariah-compliant solutions for tomorrow’s banking

T

oday, Islamic banking is a rapidly developing area and it can no longer be ignored by banks that want to stay competitive. A growing number of banks are already

responding to the opportunities presented by this new customer segment with a range of Shariah-compliant products. Over the past decade, assets of financial institutions offering Islamic products and services have soared by almost 25% year-on-year. Islamic financial services are nearing USD 1 trillion in reported managed assets. The total market size for Islamic banking systems is expected to grow from USD 1.1 billion in 2010 to about USD 1.6 billion in 2014. Governments and central banks have taken a lead in supervising Islamic banks, encouraging their growth and have passed Islamic banking and insurance laws in their countries.

In such a scenario, conventional banks cannot afford to ignore the growing demand for Shariah-compliant products. They must leverage the wealth of information presented

by Shariah scholars who have identified financial solutions that conform to Islamic ethics and the contractual mechanisms that bind them. A comprehensive Islamic banking solution that provides banks with end-to-end functionality to define and offer Shariah-compliant products will play a very critical role in addressing the needs of the burgeoning Islamic banking segment.

Finacle Islamic banking Finacle Islamic banking solution offers an

Islamic banking unit, if required. Finacle

display unified customer information

integrated and comprehensive approach

Islamic banking solution is developed from

enterprise-wide

for banks to define and present Shariah-

incisive insight into the Middle East, Far

compliant products to customers.

East, and European markets, and is truly

Differentiated because of its strong

geared to address region-specific Islamic

product definition and audit features, the

banking requirements.

ability to provide comprehensive control and support Islamic accounting, the solution is completely self-contained. It

•

Extensive parameterization for business rules definition of multi-currency Islamic products

•

Robust framework for automated as well as manual application of charges

A comprehensive end-to-end solution

•

Comprehensive description of underlying asset such as commodity,

is replete with the accounting backbone to support back office functionalities and

Finacle Islamic banking solution is suitable

real-estate, vehicles, consumer

provides Straight Through Processing

for both conventional banks that offer

durables

(STP) capabilities on a Service-Oriented

Islamic products as well as purely Islamic

Architecture (SOA) platform.

institutions. It supports the definition

A modular solution built on the standard technology infrastructure, Finacle Islamic banking solution addresses current requirements while factoring in flexibility to change the structure with scaling business needs. This means Islamic

of business rules pertaining to Islamic accounting, profit-sharing and Hirji date based processing. This comprehensive solution provides best of breed functionality including:

•

Products and solutions that cater to

banking can be initiated as an add-on

Islamic part of retail, corporate and

product offering in a branch of choice, and

trade banking space

eventually converted to an independent

•

Customer centric capabilities to

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Multi-currency, multi-branch enabled accounting backbone

•

Pool management and profit sharing principles

•

Validations on pool restrictions and commodity linkages to accounts

Functional architecture

Enterprise CRM

Origination

Marketing

Sales

Service

Islamic Investments

Functional Services

Reusable Business Components

360 Degree View

Islamic Financing

Mudarabah Term Deposits Murabaha Deposits Wakalah Deposits Wadiah Demand Deposits Product Factory

Knowledge Base

Communication Channels

Interaction

Enterprise Customer Information

Murabaha, Tawarruq, Ijarah, Musharaka, Mudarabah, Istisna, Salam, Bai Bithaman Ajil Bai Al Ina

Pool Management

Islamic Treasury**

Standing Orders

Sweeps/ Pooling

Payment Systems

Transaction Manager

Limits / Collaterals

Bill Payments

Liquidity Management

Clearing

Inventory

Referral

Pro t Module

Exchange rates

Bank Management

Channel Rules

Discounts/Preferential Pricing

Tax

General Ledger

Multi-Currency

Fees/ Charges Signature Veri cation

Multi-Branch

Accounting Backbone 24/7

Infrastructure

Multi-Lingual

Finacle Studio

Single Sign On

Integration Framework

Purge

Access Control

Work ow (BPEL/BMPL)

Reporting

Audit

Menu Manager

Batch Job Scheduler

**Supported through a partner solution.

Key modules Islamic financing products The module enables the bank to define and offer a range of asset products including

monthly, half yearly, and yearly frequency-based profit or rent

•

Disburse payments in currencies other

Murabaha, Tawarruq, Musharaka, Ijarah,

than the loan account currency for

Istisna, Salam, and financing in addition to

bankers check, cashier check, ACH, and

Qard Hasan. Key features include the ability

SWIFT

to:

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Capture commodity and asset details,

• •

including those related to the seller and customer

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Capture the schedule of payment for asset purchase in accordance with the stage of construction or deal

• • •

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Settlement of financing accounts through Equated Installments (EI) and non-equated installment payments

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Corporate and consumer personal loans (as applicable in Tawarruq financing)

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Pool restriction validation at the time

Define and collect late payment

of commodity detail specification like

charges for installments

project and sector

Define mark-up and rebate amount in percentage and absolute terms in case of early settlement of financing

its parameters

accounts

•

•

Accept repayments through cash,

Define multiple products and modify

Track and create asset products using

Generate advices for customers

It also supports:

Define repayment holidays

transfer, postdated checks, and ACH

•

•

Murabaha and Tawarruq financing

•

the asset being financed and details of purchase, delivery, offer, and

Compute and report profit accrued on

Mudarabah pool-based funds

finance accounts funded under various

Apply daily, weekly, fortnightly,

pools

Capture of asset details–the details of

acceptance can be maintained

•

Support the commodity purchase and

sale transactions for Murabaha and

•

Tawarruq financing concepts

•

Support rebate definition, computation, and accounting in case of

•

early settlement

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Reschedule and defer the accounts keeping the unearned income

postponement, partial and complete

and forward Ijarah accounts. Calculate

early settlement

monthly lease rentals applicable for

Support the selling price and unearned income accounting entries

•

EI and non EI calculations for Ijarah

•

asset leased including the fixed rental

Salam and parallel Salam financing

and variable rental

This product can:

Collection, processing, and

•

agreement details at account level

supplementary rent

including commodity and seller details

Collection and refund of Hamish processing of residual value in case of

Ijarah and forward Ijarah financing This product supports:

•

financial Ijarah

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The lifecycle workflow and accounting

procurement to closure of financing account

repayment models for Salam financing

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Support deferment of installments and rescheduling of accounts. The option to charge or skip the profit for the

including progressive disbursements,

deferred period is parameterizable

and residual value

• •

Support EI and non-equated

Calculation of repayment schedule supplementary rent, advance fixed rent

entries applicable for Ijarah and forward Ijarah concepts, from asset

•

Jiddiyah. Support the collection and

unchanged

Capture Salam sale and parallel Salam

treatment of advance fixed rent and

Defining of rent renewal period Rescheduling, deferment,

Istisna and parallel Istisna financing With this product, banks can:

•

Maintain the details for Istisna and origination level like the builder details,

•

defined using a wide range of parameters.

period and settlement period with

•

doing the adjustments based on the

Define a disbursement plan for the terms in the parallel Istisna contract

actual shared details

•

Compute the ownership ratios based on the capital shares held. Facility

Support the single and progressive

to re-compute the ratios on each

collection and accounting of margin

repayment/ buyback of capital share

money amount

•

Define whether the construction

Bai-Bithaman-Ajil and Bai-Al-Inah financing

period profit computation should be based on disbursed amounts as per

This product can:

disbursement schedule or based on full

•

financing amount. It also facilitates recomputation of the un-earned income for any change in the release plans

•

Compute and account for early settlement rebate based on defined rules

Musharaka and diminishing Musharaka financing This product can:

•

Capture partnership details, profit and loss sharing details, and the buyback plan details at the financing origination

•

including term deposits, demand

• •

Introduction of multiple products for different market segments

•

Opening of time deposit and demand deposit accounts linked to a pool

•

Ad-hoc funding of time deposit accounts

•

Auto-rollover and auto-closure during product definition

•

Pre-mature and part closure with the facility to collect fee

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Reinvestment or distribution of profit depending on parameter at the deposit level

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Payment of profit for the broken period

Define the Bank Selling Rate (BSR) and

(between the last profit distribution

the Effective Rate (ER) for an account

date and withdrawal date) on the

Calculate and account for selling price

following profit distribution date or on

using the bank selling rate

the date of withdrawal, based on the profit rate of the previous period or on

Support rebate computation and accounting

•

•

Support the commodity purchase, sale, and buy back transactions

•

deposits, and savings bank

Support profit accrual and charging on projected/ expected profit rate, and

Murabaha term deposits, demand and time-bound Mudarabah products

details, profit adjustment is due as per

different profit rates

financing account as per the agreed

•

Support user reports to list accounts

the defined frequency Define the two periods–construction

Key features include support for:

where sharing of actual profit/ loss

and profit

•

profit/ loss details. The fee charging defined

retention details, asset details, costs,

•

demand deposits. These products can be

takes into account the grace period parallel Istisna contracts at the

•

define a fee for late submission of

Reschedule and defer the accounts keeping the unearned income unchanged

an indicative profit rate

•

Simulation of the profit to be paid to the accounts

•

Distributing final proceeds of matured deposits or profit payout based on

Islamic investment products

different options

•

level

The module supports definition and

Define the frequency and the grace

monitoring of Mudarabah investment and

accounts or a combined statement for

period for the customer to share the

savings products, Murabaha investment

all accounts of a customer. Customers

actual profit/ loss details facility to

product, Wakala deposit, and Wadiah

can exclude and include specified

Account statements for individual

• •

accounts from participating in the

normalization contribution as required

the calendars are the Saudi calendar (Um

combined statement

by the bank

Al Qura calendar) and the Kuwaiti calendar.

Specify profit distribution frequency for

Finacle Islamic banking solution supports

a pool

the following banking features on this

Overdraft against term deposit Payment of Hibah (gift) for accounts under Wadiah

• •

Define amount and tenor-based profit sharing percentage (between bank and

Mudarabah pool management and profit sharing

•

Compute profit based on variables like profit and loss from asset investment

by accepting deposits and deploying

and inter-pool investment

investment.

•

Distribute profit to customers based on the cumulative weighted average

This module can:

• •

into consideration the tenor of deposit,

funds, deploy it and also manage profit

amount of deposit, number of days the

distribution for deposits

deposit has run as on profit distribution

unrestricted, based on various pre-

•

− Repayment of loan installments − Disbursement of loan − Deferment − Standing instructions − Batch jobs based on Hijri dates • End-user frontend screens − Enter and display Hijri date − Toggle between Hijri and Gregorian

date, and the profit sharing ratio

•

Opt for automated or manually defined

dates

•

Customer communication at Hijri-

country and sector, which are bank-

closes the pool on the pool end date

based frequency for advices and

definable parameters

based on validations

statements

Specify subscription period for an

with profit distribution in account currency

− Payout at pool frequency, account frequency Specify amount and tenor-wise indicative profit rate, as the

Murabaha deposits

• •

customer

collected for the pool

months based on sighting of the

customer

date shift operation that adjusts events

Commodities sale underlying

Multiple payout options–upfront, frequency based, maturity based

Hijri calendar The module also supports the Hijri calendar. The calendar, based on the lunar

Define management fees to be

Date shift–change in the start of Hijri crescent moon is handled through the

placement of deposit

•

•

Commodities purchase on behalf of

approximate rate applicable to the

•

and standing instructions

pool closure. The automated process

− Single pool with multiple currencies

•

Event processing – financing, deposits,

configured restriction types like

identified pool:

•

balance of customer deposits; taking

Define an Islamic pool to mobilize

Specify a pool as restricted or

•

customer)

The module helps the bank manage funds funds appropriately, for financing and

calendar:

year of 354 days, adjusts the number of days in each month in accordance with the

Define capital loss provision, profit

lunar cycle. The calendar has Hijrah as its

equalization provision, and profit

reference point. The two major variants of

appropriately, based on Hijri dates

Additional features

• • • • • • • • • • •

Asset provisioning and monitoring Standing instructions Statements and reports

a flexible and varied feature repertoire

performance for both conventional and

for banks to design and deploy products

Islamic banking are assured. All of this

for varying market segments, based

results in significantly lowered TCO for the

on different Islamic concepts including

bank.

Funds transfers

Mudarabah, Murabaha, Ijarah, Istisna, and

Common Customer Information File

Tawarruq. The solution also offers a wide

(CIF) across banking channels

range of possibilities for business users at

Process innovation leading to greater productivity and operational efficiency

the bank to create products and embellish Loan Origination System (LOS)

them with innovative features.

Limit and collateral maintenance Check and account number generation Signature verification Dual language support Multi-entity

BPML compliant workflow engine. This,

Lowered total cost of ownership

coupled with high parameterization

The solution’s custom-definable watertight

capabilities, results in greater process

modules address both international and

efficiency, better risk mitigation, and

Islamic banking needs. This empowers

support for rapid roll out of Shariah-

banks with the flexibility to define and

compliant products.

change the organization structure, offering

Business benefits

The solution is powered by the BPEL and

Islamic banking as an add-on product at a branch of choice, and then converting

Innovative product spread

it to an independent Islamic banking unit,

Finacle Islamic banking solution offers

if required. Proven scalability and robust

Finacle helps build tomorrow’s bank Finacle from Infosys partners with banks, the world over, to accelerate innovation and unlock the value levers of their business. It has never been this convenient for banks to adopt an integrated and comprehensive approach to define and present Shariah-compliant products to customers.

Bring customers to tomorrow’s bank with Finacle Islamic banking.

About Infosys Finacle Infosys Finacle partners with banks to transform process, product and customer experience, arming them with ‘accelerated innovation’ that is key to building tomorrow’s bank.

For more information, contact finacleweb@infosys.com

www.infosys.com/finacle

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