Islamic banking solution by oracle
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The document summarizes an international conference on Islamic microfinance in Mauritius organized by the Center of Islamic Banking & Economics. It discusses technology for Islamic finance and whether it is time to invest. The conference will discuss Oracle and Islamic finance, the need to re-architect Islamic banking technology, and the benefits of a re-architected technology platform. It concludes by outlining how a re-architected platform can provide benefits such as being designed for universal banking, end-to-end integration, and regulatory and Shariah compliance.
Islamic banking solution by oracle
- 1. International Conference on Islamic Microfinance in Mauritius Organized By : CENTER OF ISLAMIC BANKING & ECNOMICS
- 3. 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.
- 4. <Insert Picture Here> Technology for Islamic Finance – Is it time to invest? Sugato Banerjee, Senior Manager, Southern Africa Sales International Conference on Islamic Banking Mauritius, 6 April, 2011
- 5. Discussion Topics Oracle and Islamic Finance Background Re-architecting of Islamic Banking Technology Benefits of Re-architected Technology Platform Conclusion
- 6. Oracle Corporation Track Record of 30+ Years of Innovation • 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 6 © 2011 Oracle Corporation – Proprietary and Confidential
- 7. Oracle’s Strategy in Financial Services including Islamic Finance COMPLETE OPEN INTEGRATED BEST OF BREED #1 Comprehensive Standards-Based Designed to Offering Architecture Work Together Industry Leader Broad & Deep More Choice Less Effort Robust, Proven Offering Maximizes Existing Industry leading Investments More Value Lower Cost, Lower Software Risk © 2011 Oracle Corporation – Proprietary and Confidential 7
- 8. Oracle FLEXCUBE Delivers Significant Business Benefits via Comprehensive Range of Functionalities and Features ARCHITECTURE / FRAMEWORK Business Straight Universal Extensive Faster Product Accelerator Process Through Extensibility Banking Parameterization Launch Pack Orchestration Processing Sophisticated Enterprise Customer Pricing Comprehensive Limits Wide Limits Integrated GL Centricity Flexibility MIS Management Management REPORTING / STATEMENTS Multi Currency/ Statements/ Comprehensive Flexible SOA-enabled Branch & Entity SECURITY / USABILITY Advices Security Deployment Architecture Support MULTI FUNCTION TECHNOLOGY DEPLOYMENT Multi-Currency Flexible Audit Trail and Flexible Multi Lingual Foreign Branch Reporting Controls Interface Operations Regulatory Task Based UI Departmental Multi Channel Scalability Reporting and Usability Servicing 8 © 2011 Oracle Corporation – Proprietary and Confidential
- 9. Oracle FLEXCUBE Islamic Banking Product Coverage Origination Workflows Murabaha Tawarruq Istisnaa Mudarabah Musharaka Ijarah 9 © 2011 Oracle Corporation – Proprietary and Confidential
- 10. Oracle FLEXCUBE’s Life Cycle Support for Financing Flexible Pre- Process Operational Product Pricing Packaged Flow Framework Configuration Controls Products Enabled Payments Acquisition Initiation Servicing and Tracking Closure Settlements Lifecycle Support Lead Booking Repayments Agents/Groups Management Penalty Computation Configurable Credit Policies & Simulation Schedules Pre-payments Queue Management Checklist Auto/Manual Status Tracking (Individual/Group) Disbursements Collection Credit Rating Life Cycle SWIFT Dashboards Provisioning Application Entry Profit Processing Multi-Mode Customer Interactions Settlements & Follow ups Charges and Fees Renegotiation PTP/ Underwriting Commitment Rollover Broken Promise Rate Revisions Document Value Dated Consolidated Rollover Partial Write off Agent Commissions Verification Amendments Holiday Limits SWIFT Processing Accounting Treatment /Collaterals Advices Promotions Intermediary Processing Reporting 10 © 2011 Oracle Corporation – Proprietary and Confidential
- 11. Sharia Compliance Verified & Confirmed As Part of Product Deployment at Leading Institutions Oracle FLEXCUBE for Islamic Banking Customers Sharia Board Members of User Institutions Sh Dr Hassan Sh Nizam Sheikh Dr Shaikh Ajeel Shaikh Dr. Sh Abdulla Sh Dr M Abdul Sh Dr Daud Hussain Hamid Naquby Abd Sattar Jasim Al- Mohamed Ali Bin Sulaiman Rahim Sultan Bakar Abu Nashmi Al Qari Al Manea Al Olamaa Ghuddan © 2011 Oracle Corporation – Proprietary and Confidential 11
- 12. Oracle FLEXCUBE’s Islamic Banking Capabilities: Key Takeaway Functionality for Islamic Banking built upon the proven, best Proven Core selling Oracle FLEXCUBE platform leveraging all its architecture Platform and technology features. Support all commonly used products, including extensive & Comprehensive configurable profit distribution model for deposits. Features Product Coverage modelled as per requirement of leading Islamic institutions. Integrated Ability to Support both Conventional Banking and Islamic Banking Platform operations from the same installation. Embedded Oracle BPEL based process flows for origination of Embedded financing contracts under multiple products. Facility to easily Process Flows adapt or build upon the available process flows. Fast Deployment Accelerator Pack with factory shipped product configurations. 12 © 2011 Oracle Corporation – Proprietary and Confidential
- 13. 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 Confidential 13
- 14. Characteristics of Islamic Finance Institutions (IFIs) Customers Dedicated Customers (15%) Independents (70%) Non Believers (15%) Compliance Islamic Financial Institutions 1. Audit Products Established within the last 5 years 2. Central Bank Rapid Evolution Less than 1m customer accounts 3. Risk Mgmt Multiple Contracts Less than 50 branches 4. Shariah Audit Asset Size of USD5b or less Debt & Equity & Fee 5. Shariah Council Limited budget on Technology Inadequate IT Expertise 6. AAOIFI 7. IFSB Competitors Banks (Islamic & Conventional) Non- Bank Financial Institutions © 2011 Oracle Corporation – Proprietary and Confidential 14
- 15. 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 © 2011 Oracle Corporation – Proprietary and Confidential 15
- 16. 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 Still prevalent in start up banks; however Islamic banking systems significant reduction seen on banks that are migrating to new Islamic banking systems 3 Lack of knowledge amongst vendors Marked improvements. vendors have been often leads to ‘tweaked’ products exposed to more implementations and have recruited experienced resources over the last few years 4 Vendor misleading the customer into Vendors taking a different stance; Islamic banking believing that their Islamic banking systems are now showcased as comprehensive and offering is a simple solution complex solutions to meet the demanding requirements of Islamic banking 5 Varied interpretations of the Shari' a Reduced significantly due to the need to comply to across geographies and banks AAOIFI and IFSB standards operating in similar markets © 2011 Oracle Corporation – Proprietary and Confidential 16
- 17. 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 Confidential 17
- 18. The Need to Re-Architect Islamic Finance Technology Vendor Bank Technology Competition Regulatory Costly to maintain Java Technology Older Islamic banks New Islamic banks Standardization to Islamic & adopted by all started to replace taking away market AAOIF and IFSB Conventional vendors – others legacy systems from older banks Standards versions considered legacy Unable to offer Flexibility of system Islamic banks use Shariah Audit Inappropriate initial sophisticated Islamic via use of object technology to lure becoming stringent architecture adopted products required by oriented technology customers and more frequent the market and components Changes to support Long lead time to Islamic banks not Islamic windows Move from Customers demand develop support for given preferential impacted stability of proprietary to open excellent service new products treatment by the operation of system from Islamic banks required by market Central banks conventional banks © 2011 Oracle Corporation – Proprietary and Confidential 18
- 19. The Outcome - Comprehensive Functionality – Covers all Prescribed Products Demand Deposit Accounts & Saving Deposit Deposits Time Deposit Mudarabah Financing Musharakah Financing Murabaha Financing Financing Salam Financing Istisnaa Financing Ijarah Financing Qard Financing Trade Finance Letters of Credit, Guarantee Treasury FX Cash, FX Spot © 2011 Oracle Corporation – Proprietary and Confidential 19
- 20. The Outcome - Advanced Functional Features with Readiness for Localization Document Management Efficient Scoring Workflows for Business Activity Automation Monitoring Customer Profiling Advanced New Core Risk Management Strong Core Functional Banking Services Features Accounting System Relationship / Channel based Pricing Straight through Processing Localization Readiness Customer Service Alerts Regulatory reporting Payments & Clearing Processing Prescriptions © 2011 Oracle Corporation – Proprietary and Confidential 20
- 21. The Outcome - Product Launch – Quick Go to Market Configurable Transaction Processing Rules Across Modules Modules: Base Accounts, Deposits Product Variants Transaction Types Transactions Eligibility Criteria Validations Transaction Availability Characteristics, Processing Requirements Pricing Default Pricing, Charge Special Terms s & Terms Module Accounting Rules Journal Postings Parameters Lifecycle Events Processing Event Handling Exception Handling © 2011 Oracle Corporation – Proprietary and Confidential 21
- 22. The Outcome - Customer Centricity Customer based Pricing, Processing and Tracking Limits & Exposures Pricing Customer Product Eligibility Profitability Relationship Views © 2011 Oracle Corporation – Proprietary and Confidential 22
- 23. The Outcome – Integrated Workflow and Origination Features Process Efficiency, Automation, End-to-End Processing Integrations with Channels / Agents for Sourcing Credit Bureau Work Monitoring, SLA Interface / Internal tracking, Exception Rating Model based Handling, Escalations Credit Scoring Configurable Rule Documentation based Work Generation and Progression & Archival Decisioning © 2011 Oracle Corporation – Proprietary and Confidential 23
- 24. The Outcome – Scalable Architecture (N-Tier) Client Tier Javascript & XML Process Tier Oracle BPEL Application Tier J2EE 1.4 Data Tier Oracle 11g R2 © 2011 Oracle Corporation – Proprietary and Confidential 24
- 25. SHARIAH COMPLIANCE Built-in tools to support Shariah Audit activities Extensible process AAOIFI and IFSB as flow framework to basis for compliance; support additional flexibility to support future Shariah other authorities requirements Shariah Compliance © 2011 Oracle Corporation – Proprietary and Confidential 25
- 26. 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 Confidential 26
- 27. Benefits of Re-Architected Islamic Finance Technology Designed for State-of- Regulatory End to End Competitive Universal the-Art and Shariah Banking Integration Advantage Technology Compliance System ready to Complete banking Adoption of latest Extreme agility in respond to any operation supported on technology and open Designed to comply to responding to business initiatives in one platform – standards ensure AAOIF and IFSB competitive pressures retail, commercial, or eliminates redundancy longest life span and Standards from other players corporate and improves control lowest TCO Uniform processes Best practices from across product and More customers can be Ability to match conventional banking Designed to facilitate operational areas – reached without brick services offered by made accessible to Shariah Auditing improves staff and mortar set-up international players Islamic banks productivity and morale Periodic updates Speedier customer ensure banks are Technology becomes Excellent customer Incorporate Best service as most equipped with market enabler for business service can readily be practices of Operation processes are leading features and growth offered to customers Auditing automated capabilities
- 28. 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 Confidential 28
- 29. 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.
- 30. Thank You! Jamil Hassan Principal Consultant, Islamic Banking Jamil.Hassan@ORACLE.com Sugato Banerjee Senior Manager, Southern Africa Sales Sugato.Banerjee@ORACLE.com 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 : info@alhudacibe.com Web: www.alhudacibe.com
Editor's Notes
- #9: Flexcube leverages of best practices of generic banking and extends these best practices to Islamic banking customers.. Islamic banking customers get the best of both worlds..
- #10: Flexcube handles all products required to support the operation of Islamic banks – Deposits, Financings, Treasury and Money Market and Trade Finance.Islamic banks can rely on Flexcube to deliver end to end services and to compete against other islamic banks and conventional banks..
- #15: This is an interesting slide. Islamic banks are normally small, new and operate with limited budget and technology expertise.Customers – 15% are dedicated Islamist; they will not run away even if products are priced at premium. And 15% will never come to Islamic banks. The 70% is the target group.. Which is also the group that may go to conventional banks if they observe poor service or pricey products.. On compliance, there are extra areas where Islamic banks have to deal with, especially on Shariah etc..
- #17: The situation has changed now.. Things are much better, both at the banks’ side as well as the vendors.. There is hope for everyone.. Of course, this is still work in progress..
- #19: The situation has changed now.. Things are much better, both at the banks’ side as well as the vendors.. There is hope for everyone.. Of course, this is still work in progress..
- #21: System is agile enough to handle both international and local requirements, esp when complying to regulations imposed by local authorities.