Islamic banking solution by oracle

International Conference onIslamic Microfinance in Mauritius

CENTER OF ISLAMIC BANKING & ECNOMICS

Organized By :

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions.The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

<Insert Picture Here>

Technology for Islamic Finance – Is it time to invest?

Sugato Banerjee, Senior Manager, Southern Africa Sales

International Conference on Islamic BankingMauritius, 6 April, 2011

Discussion Topics

Oracle and Islamic Finance Background Re-architecting of Islamic Banking

Technology Benefits of Re-architected Technology

Platform Conclusion

• Scale• $27.0B in revenue for FY10• #1 in 50 product or industry categories• 370,000 customers in 145 countries• 30,000 partners • 106,000 employees• 10 million developers in Oracle online communities

• Innovation and Investment• Annual R&D investment of over $3.0B. About 150-200K person days

per year in Oracle FLEXCUBE enhancements.• 29,000 developers and engineers. 4000+ FLEXCUBE resources.• 15,500 customer support specialists, speaking 27 languages• 20,000 implementation consultants• 1 million students supported annually• 870 independent Oracle user groups with 355,000 members

Oracle CorporationTrack Record of 30+ Years of Innovation

© 2011 Oracle Corporation – Proprietary and Confidential6

Broad & Deep Offering

Lower Cost, Lower Risk

Comprehensive Offering

COMPLETE

Less Effort

More Value

Designed toWork Together

INTEGRATED

More Choice Maximizes Existing

Investments

Standards-Based

Architecture

OPEN

Robust, Proven Industry leading

Software

Industry Leader

BEST OF BREED

#1

Oracle’s Strategy in Financial Services including Islamic Finance

7© 2011 Oracle Corporation – Proprietary and Confidential

Oracle FLEXCUBE Delivers Significant Business Benefits via Comprehensive Range of Functionalities and Features

8

ARCHITECTURE / FRAMEWORK

MU

LTI

FU

NC

TIO

N

RE

PO

RT

ING

/ S

TAT

EM

EN

TS

SE

CU

RIT

Y /

US

AB

ILIT

Y

DE

PL

OY

ME

NT

TE

CH

NO

LO

GY

Universal Banking

Extensive Parameterization

Faster Product Launch

Business Process

Orchestration

Straight Through

ProcessingExtensibility Accelerator

Pack

Customer Centricity

Sophisticated Limits

Management

Enterprise Wide Limits Management

Pricing Flexibility Integrated GL Comprehensive

MIS

Multi Currency/ Branch & Entity

Support

Multi Lingual

Multi Channel

Statements/ Advices

Flexible Reporting

Regulatory Reporting

Comprehensive Security

Audit Trail and Controls

Task Based UI and Usability

Flexible Deployment

Multi-Currency Foreign Branch

Operations

Departmental Servicing

SOA-enabled Architecture

Flexible Interface

Scalability

© 2011 Oracle Corporation – Proprietary and Confidential

Oracle FLEXCUBE Islamic Banking Product Coverage


Murabaha

Origination Workflows

Tawarruq

Istisnaa

Mudarabah

Musharaka

Ijarah

Oracle FLEXCUBE’s Life Cycle Support for Financing


Acquisition

Lead Management

Credit Policies & Checklist

Credit Rating

Application Entry

Underwriting

Document Verification

Initiation

Simulation

Commitment

Servicing

Booking

Configurable Schedules

Auto/Manual Disbursements

Life Cycle

Profit Processing

Charges and Fees

Rate Revisions

Value Dated Amendments

Payments and

Settlements

Repayments

Pre-payments

SWIFT Multi-Mode Settlements

RolloverConsolidated

Rollover

Tracking

Penalty Computation

Status Tracking (Individual/Gro

up)

Provisioning

Renegotiation

Partial Write off

Closure

Agents/Groups

Queue Management

Collection Dashboards

Customer Interactions &

Follow ups

PTP/ Broken Promise

Agent Commissions

Accounting

Holiday Treatment

Flexible Product

Configuration

Pricing Operational Controls

Pre-Packaged Products

Process Flow

Enabled

Lif

ecy

cle

Su

pp

ort

Framework

Processing

Sharia Compliance Verified & Confirmed As Part of Product Deployment at Leading Institutions

Sh Dr HassanHussain Hamid

Sh Nizam Naquby

Sh Dr Daud Bakar

Shaikh Ajeel Jasim Al-Nashmi

Sheikh Dr Abd Sattar

Abu Ghuddan

Shaikh Dr. Mohamed Ali

Al Qari

Sh Abdulla Bin Sulaiman

Al Manea

Sh Dr M Abdul Rahim Sultan Al Olamaa

Oracle FLEXCUBE for Islamic Banking

Customers

Sharia Board Members of User Institutions


http://www.islamicbankasia.com/Pages/home.aspx









Oracle FLEXCUBE’s Islamic Banking Capabilities: Key Takeaway

Accelerator Pack with factory shipped product configurations.

Embedded Oracle BPEL based process flows for origination of financing contracts under multiple products. Facility to easily adapt or build upon the available process flows.

Ability to Support both Conventional Banking and Islamic Banking operations from the same installation.

Support all commonly used products, including extensive & configurable profit distribution model for deposits. Features modelled as per requirement of leading Islamic institutions.

Fast Deployment

Embedded Process Flows

Integrated Platform

Comprehensive Product Coverage

Proven Core Platform

Functionality for Islamic Banking built upon the proven, best selling Oracle FLEXCUBE platform leveraging all its architecture and technology features.


Discussion Topics



Platform Conclusion


Characteristics of Islamic Finance Institutions (IFIs)

Islamic Financial Institutions Established within the last 5 years Less than 1m customer accounts Less than 50 branches Asset Size of USD5b or less Limited budget on Technology Inadequate IT Expertise

Compliance

1. Audit

2. Central Bank

3. Risk Mgmt

4. Shariah Audit

5. Shariah Council

6. AAOIFI

7. IFSBCompetitors

Banks (Islamic & Conventional)

Non- Bank Financial Institutions

Customers

Dedicated Customers (15%)

Independents (70%)

Non Believers (15%)

Products

Rapid Evolution

Multiple Contracts

Debt & Equity & Fee


The Reality on Technology Implementation for Islamic Banking as observed by IBS in 2007

Decision making has been too quick without proper vendor assessment. Many banks are paying today for making the wrong choices through extended timelines for implementations

Banks have been under-budgeting for Islamic banking systems. Although they spend in the millions for conventional systems, they tend to budget less than $500,000 for Islamic banking systems. This leads to:

Tweaking of existing systems to cater to the requirement Shoddy implementation and ill-conceived products

Lack of knowledge amongst vendors often leads to ‘tweaked’ products being delivered. Often, banks end up doing the work themselves as the system is unable to meet the short time-to-market requirement for Islamic banks

Vendor misleading the customer into believing that their Islamic banking offering is a simple solution

Varied interpretations of the Shari' a across geographies and banks operating in similar markets

Source: IBS Guide on Islamic Banking - 2007


Islamic Banking Technology Implementation 2007 vs Now

In 2007 Now (2011)

1 Decision Making Has Been Too Quick Less prevalent now. However cases of new banks making decision over short (1-2 days) presentation are still observed

2 Banks have been under-budgeting for Islamic banking systems

Still prevalent in start up banks; however significant reduction seen on banks that are migrating to new Islamic banking systems

3 Lack of knowledge amongst vendors often leads to ‘tweaked’ products

Marked improvements. vendors have been exposed to more implementations and have recruited experienced resources over the last few years

4 Vendor misleading the customer into believing that their Islamic banking offering is a simple solution

Vendors taking a different stance; Islamic banking systems are now showcased as comprehensive and complex solutions to meet the demanding requirements of Islamic banking

5 Varied interpretations of the Shari' a across geographies and banks operating in similar markets

Reduced significantly due to the need to comply to AAOIFI and IFSB standards


Discussion Topics



Platform Conclusion


The Need to Re-Architect Islamic Finance Technology

Vendor

Costly to maintain Islamic &

Conventional versions

Inappropriate initial architecture adopted

Long lead time to develop support for

new products required by market

Bank

Older Islamic banks started to replace legacy systems

Unable to offer sophisticated

Islamic products required by the

market

Changes to support Islamic windows

impacted stability of operation of

conventional banks

Technology

Java Technology adopted by all

vendors – others considered legacy

Flexibility of system via use of object

oriented technology and components

Move from proprietary to open

system

Competition

New Islamic banks taking away market from older banks

Islamic banks use technology to lure

customers

Customers demand excellent service

from Islamic banks

Regulatory

Standardization to AAOIF and IFSB

Standards

Shariah Audit becoming stringent and more frequent

Islamic banks not given preferential treatment by the

Central banks


19

Demand DepositAccounts

& Deposits

Saving Deposit

Time Deposit

The Outcome - Comprehensive Functionality – Covers all Prescribed Products

Financing

Mudarabah Financing

Musharakah Financing

Murabaha Financing

Salam Financing

Istisnaa Financing

Ijarah Financing

Qard Financing

Letters of Credit, Guarantee

FX Cash, FX Spot

Trade Finance

Treasury


20

The Outcome - Advanced Functional Features with Readiness for Localization

New Core Banking System

Efficient Workflows for Automation

Strong Core Services

Localization Readiness

Advanced Functional Features

Customer Profiling

Risk Management

Accounting

Regulatory reporting

Payments & Clearing

Processing Prescriptions

Document Management

Scoring

Business Activity Monitoring

Relationship / Channel based Pricing

Straight through Processing

Customer Service Alerts


21

The Outcome - Product Launch – Quick Go to MarketConfigurable Transaction Processing Rules Across Modules

Eligibility Criteria

Modules: Base Transaction Types Product Variants

Accounts, Deposits

Transactions

Accounting Rules

Availability

Pricing

Special Terms

Lifecycle Events Processing

Exception Handling

Validations

Default Pricing, Charges &

Terms

Journal Postings

Event Handling

Transaction Characteristics,

Processing Requirements

Module Parameters


22

The Outcome - Customer CentricityCustomer based Pricing, Processing and Tracking

Customer

Limits & Exposures

Profitability

Pricing

Product Eligibility

Relationship Views


23

The Outcome – Integrated Workflow and Origination FeaturesProcess Efficiency, Automation, End-to-End Processing

Integrations with Channels / Agents for

Sourcing

Credit Bureau Interface / Internal

Rating Model based Credit Scoring

Configurable Rule based Work

Progression & Decisioning

Documentation Generation and

Archival

Work Monitoring, SLA tracking,

Exception Handling, Escalations


24

Javascript & XML

Client Tier

Oracle BPELProcess Tier

J2EE 1.4

Application Tier

Oracle 11g R2Data Tier

The Outcome – Scalable Architecture (N-Tier)


25

SHARIAH COMPLIANCE

Shariah Compliance

AAOIFI and IFSB as basis for compliance; flexibility to support

other authorities

Built-in tools to support Shariah Audit

activities

Extensible process flow framework to support additional

future Shariah requirements


Discussion Topics



Platform Conclusion


Benefits of Re-Architected Islamic Finance Technology

Designed for

Universal Banking

System ready to respond to any

business initiatives in retail,

commercial, or corporate

Best practices from conventional banking made accessible to Islamic banks

Periodic updates ensure banks are

equipped with market leading features and capabilities

End to End Integration

Complete banking operation supported

on one platform – eliminates

redundancy and improves control

Uniform processes across product and operational areas –

improves staff productivity and

morale

Speedier customer service as most processes are

automated

State-of-the-Art

Technology

Adoption of latest technology and open standards

ensure longest life span and lowest

TCO

More customers can be reached without

brick and mortar set-up

Technology becomes enabler for

business growth

Competitive

Advantage

Extreme agility in responding to

competitive pressures from other players

Ability to match services offered by

international players

Excellent customer service can readily

be offered to customers

Regulatory and

Shariah Complianc

e

Designed to comply to AAOIF and IFSB

Standards

Designed to facilitate Shariah

Auditing

Incorporate Best practices of

Operation Auditing

Discussion Topics



Platform Conclusion


The Right Time To Invest in Islamic Finance Technology

Re-architected Islamic Finance Technology (IFT) is designed for Islamic Universal Banking entities to compete effectively against conventional and other Islamic banks

Islamic banks with re-architected IFT is ready to be Shariah-compliant and equipped for Shariah Auditing – providing added confidence to their stakeholders.

With access to best practices adopted by highly successful banks, Islamic banks can operate with precision and ensure customers are served promptly and accurately, enhancing customer loyalty

Use of the latest technology enables Islamic banks to offer new products rapidly so as to fend off competitors and reach new customers without having to build brick and mortar infrastructure

Islamic banks with re-architected IFT is ready to gain market share and beat the competitors away.

Thank You!

Jamil Hassan

Principal Consultant, Islamic [email protected]

Sugato Banerjee

Senior Manager, Southern Africa [email protected]

ALHUDA CENTER OF ISLAMIC BANKING & ECNOMICS

Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan

Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056

E-mail : [email protected]

Web: www.alhudacibe.com

mailto:[email protected]

mailto:[email protected]

http://www.alhudacibe.com/

Islamic banking solution by oracle

Education

Transcript of Islamic banking solution by oracle