islamic banking solution by oracle
DESCRIPTION
International Conference on Islamic Banking & Finance in MauritiusTRANSCRIPT
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
© 2011 Oracle Corporation – Proprietary and Confidential9
Murabaha
Origination Workflows
Tawarruq
Istisnaa
Mudarabah
Musharaka
Ijarah
Oracle FLEXCUBE’s Life Cycle Support for Financing
© 2011 Oracle Corporation – Proprietary and Confidential10
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
11© 2011 Oracle Corporation – Proprietary and Confidential
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.
12© 2011 Oracle Corporation – Proprietary and Confidential
Discussion Topics
Oracle and Islamic Finance Background Re-architecting of Islamic Banking
Technology Benefits of Re-architected Technology
Platform Conclusion
13© 2011 Oracle Corporation – Proprietary and Confidential
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
14© 2011 Oracle Corporation – Proprietary and Confidential
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
15© 2011 Oracle Corporation – Proprietary and Confidential
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
16© 2011 Oracle Corporation – Proprietary and Confidential
Discussion Topics
Oracle and Islamic Finance Background Re-architecting of Islamic Banking
Technology Benefits of Re-architected Technology
Platform Conclusion
17© 2011 Oracle Corporation – Proprietary and Confidential
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
18© 2011 Oracle Corporation – Proprietary and Confidential
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
© 2011 Oracle Corporation – Proprietary and Confidential
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
© 2011 Oracle Corporation – Proprietary and Confidential
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
© 2011 Oracle Corporation – Proprietary and Confidential
22
The Outcome - Customer CentricityCustomer based Pricing, Processing and Tracking
Customer
Limits & Exposures
Profitability
Pricing
Product Eligibility
Relationship Views
© 2011 Oracle Corporation – Proprietary and Confidential
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
© 2011 Oracle Corporation – Proprietary and Confidential
24
Javascript & XML
Client Tier
Oracle BPELProcess Tier
J2EE 1.4
Application Tier
Oracle 11g R2Data Tier
The Outcome – Scalable Architecture (N-Tier)
© 2011 Oracle Corporation – Proprietary and Confidential
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
© 2011 Oracle Corporation – Proprietary and Confidential
Discussion Topics
Oracle and Islamic Finance Background Re-architecting of Islamic Banking
Technology Benefits of Re-architected Technology
Platform Conclusion
© 2011 Oracle Corporation – Proprietary and Confidential26
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
Oracle and Islamic Finance Background Re-architecting of Islamic Banking
Technology Benefits of Re-architected Technology
Platform Conclusion
© 2011 Oracle Corporation – Proprietary and Confidential28
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