T24 for Islamicbanking

T24 for Islamic Banking

Overview Temenos T24 (T24) is a complete front to back oÔce, CRM and product lifecycle management platform that powers retail, corporate, wholesale, universal and private banking operations. Running 24/7 and in real-time, T24 combines comprehensive business functionality with an advanced, secure, scalable and modular architecture that future-proofs your banking operations to meet the infrastructure and market challenges of today and tomorrow. Consistently ranked as the leading core banking platform worldwide, Temenos T24is developed using a complete serviceoriented architecture (SOA) that is modular so it can be deployed and integrated to deliver the comprehensive functionality needs of the bank. Integrating seamlessly with existing banking systems, T24 enables eÔcient, secure, cost-eÖective and proÑtable deployment and control of a Òexible range of multi-channel, next generation banking services for the bank’s customers. T24 can be implemented as a ‘model bank’ version with built-in industry best practice processes, or as a highly conÑgurable solution that can be tailored to speciÑc requirements. Temenos is a recognized world leader in banking software technology with over 700 installations in over 125 countries, and more than 50 installations in the Middle East, Asia, Africa and Europe for Islamic Banking. The Temenos core banking solution, Temenos T24, supports Shari’a compliance across the world. Temenos T24 for Islamic Banking delivers real-time Islamic Banking services across a bank’s deposits Ñnancing, treasury, trade Ñnance and investment operations, with built-in Shari’a compliant workÒows. This enables banks to serve their customers with total transparency and professional conÑdence.

Temenos T24 for Islamic Banking Designed speciÑcally for Islamic banks and conventional banks oÖering Islamic Ñnancial services, Temenos T24 for Islamic Banking is both Shari’a -compliant and commercially Òexible. It enables banks to oÖer a true range of the latest competitive Islamic Ñnancial products based on the award-

winning success of the Temenos T24 banking software platform. Temenos T24 for Islamic Banking is a single core banking software system that handles Islamic Ñnancial services together with non-Islamic ones. This helps banks to maintain tight control over operational costs while remaining focused on serving customers.

T24 for Islamic Banking

T24 for Islamic Banking functionality includes: Istisna’a Temenos T24 Istisna’a enables Ñnancing of assets under construction. This allows the bank to order the goods or equipment required for a construction project according to the choice of the client, including delivery to the client. The client agrees to pay in instalments at speciÑed dates. There are two sub-types of Istisna’a contracts which are classiÑed based on the construction period disbursements: planned disbursements and unplanned disbursements.

Forward Ijarah The Temenos T24 forward Ijarah contract allows the bank to Ñnance assets under construction that will be leased once completed. Temenos T24 manages asset details, disbursements and calculates proÑt during the construction period. The bank can choose either to receive advance rentals during the construction period or to collect the calculated proÑt once the Ijarah contract starts.

Financing Ijarah Temenos T24 enables the bank to order the capital assets required for the customer’s rental agreement. Temenos T24 manages asset purchase and leasing by the bank in addition to residual value calculation. At the end of the term the bank can retain the asset and lease it again or sell it to the client. Temenos T24 manages all accounting entries including sale at the end of term.

Services Ijarah Tememos T24 enables the bank to Ñnance services provided by individuals or consultants in the form of a Ijarah contract. In such contracts the proÑt amount is Ñxed over the term of the lease. Temenos T24 converts the proÑt amount into a rate to manage accrual and proÑt recognition during the Ijarah term.

Murabaha The Temenos T24 Murabaha contract revolves around the bank’s purchase and onward sale of an asset. The purchase may involve commodities, homes, real estate, vehicles etc. The Bank makes a proÑt on the transaction, which is the diÖerence between the price which it pays to the supplier for the goods and the price at which it sells the commodity to the customer. This mark-up is agreed between the bank and the customer in advance. The

Ñnanced amount and proÑt are due and payable on terms agreed between the two parties. The Shari’a principles require that goods have to be purchased and owned by the bank and therefore the bank bears all the risks related to unforeseeable events (for example, goods damage, war, customer bankruptcy) until the goods are sold to the customer.

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Murabaha (LC) & Musharaka (LC) The Temenos T24 Murabaha (LC) and Musharaka (LC) functionality is associated with the Ñnancing of Letter of Credits (LC) opened by customers. The Temenos T24 trade Ñnance application automatically creates the Islamic Murabaha and Musharaka contracts. LCs are opened in the name of the bank, and Islamic contracts start on the day the payment is made to the exporter. Temenos T24 maintains the amount shared between the bank and the customer in case of Musharaka, and adjusts it with the contract amount based on the initial sharing. Temenos T24 applies the agreed ‘proÑt rate’ on the contract and accrues regularly on the contract. The application is fully integrated with Temenos T24 limit processing, accounting and security features. It also allows various options on the repayments to the contracts such as instalments (Bay Bithamin Ajil), payments or pre-closure. Products include Against LC – corporate Against inward documentary bills for collection Hamish Jiddiyah Against LC – corporate LC and drawings for purchase of goods Against inward documentary bills for collection

Diminishing Musharaka The Temenos T24 Musharaka contract is based on partnership, normally of a limited duration, formed to Ñnance an asset. The bank enters into a partnership with a client in which both share the equity capital. Temenos T24 converts the share of each party into a number of units. When payments are received from the client, T24 manages the sale of units from bank to client until full ownership is transferred.

Mudaraba Investments The Temenos T24 Mudaraba functionality enables customers to invest funds in Mudaraba transactions which are invested by the bank using Islamic investments. The funds taken from the customer are given to the dealers who make the necessary investments using all or part of the funds in one or more IS contract. Products include: Savings accounts

Current accounts Investment deposits

Tawarruq This product is designed for a bank customer to get an immediate liquidity facility applying Islamic Shari'a rule. With this product the bank owns a position in precious metals or any asset which can be sold in the market by the client. In Tawarruq procedure, a customer can keep his or her asset, or liquidate it to a broker via the bank. Products include: Islamic personal Ñnance Islamic debt take-over Islamic mezzanine Ñnance Islamic clean facility Top-up facility Islamic credit card Islamic covered drawings Mezzanine contracts

Bulk Commodity Trading Temenos T24 supports bulk commodity trading for treasury operations or Islamic credit cards Ñnancing. Bank treasury dealers can buy commodity in bulk quantities. Temenos T24 Islamic Banking manages inventories and sale of those commodities, in addition to broker dealings.

Sukuk Sukuk are securities. In practice most have so far been similar to bonds or mortgage backed securities (MBS), usually Òoating rate based. Just as securities could have an equity proÑle, Ñxed-income or hybrid, Sukuk may also have similar proÑles.

Wakala The customer deposits money with the bank and appoints the bank as agent. The bank can invest this money and generate proÑt. The proÑt given to the customer is pre-agreed and this can be modiÑed later based on pools calculation. The bank has the right to adjust the proÑt percentage or collect early maturity fees.

Hajj Financing Temenos T24 Islamic Banking provides lending to pilgrims who wish to attend the Hajj. The Ñnancing is proÑt free and can be repaid in instalments or as a single repayment. To support such lending, a documentary evidence workÒow can be provided.

Qard Hassan This proÑt free Ñnancing method is given to customers on a hardship and/or charitable basis and is normally sourced from the bank’s own funds. Automated charges relating to the Ñnancing can be added and documentary evidence workÒow if required is supported.

Commodity Murabaha In a Temenos T24 Commodity Murabaha contract, the bank buys a speciÑc commodity from international markets based on the agreement with their clients. The quantity and the purchase price of the commodity is agreed with the client. The bank sells these commodities on behalf of its client, with deferred proÑt and principal payment at maturity. T24 Islamic Banking covers the full workÒow of commodity Murabaha and deals with diÖerent commodity brokers with full straight through processing. All accounting entries, broker commissions and print outs are be automated.

Reverse Murabaha In a Temenos T24 reverse Murabaha contract, the client applies to invest in commodity trading. The bank purchases the commodity for its customer from the international markets with a deferred proÑt percentage in a deferred payment date. The bank sells purchased commodities from the customer to another broker in the international / local market. Temenos T24 Islamic Banking covers the full workÒow of reverse Murabaha and deals with diÖerent commodity brokers. All accounting entries, broker commissions and print outs are automated.

Islamic Derivatives With recent widespread acceptance of Islamic derivatives products, Temenos T24 Islamic Banking is the leading Shari’a compliant platform in this market. Products supported include Islamic FX forwards under promissory contracts, proÑt rate swaps, and Islamic cross currency swaps.

Current Accounts Temenos T24 accounts are Shari’a compliant with no ‘Riba’, including prevention of a debit balance situation. All other features associated with a current account are available. Charges for services provided can be automated or applied manually.

ProÑt Distribution Temenos T24 proÑt distribution application is driven by a set of parameters that allow the users to create multiple pools, grouping assets and liabilities to distribute the proÑt generated from those assets to liabilities in the same pool and based on a set or parameters. The system allows users to set the rules and conditions for payment and gives the user a result on a ‘what if’ scenario before making the payments. The user can do many trials by changing the rules and payable rate until the Ñnal result is approved, and then make the Ñnal posting of the proÑts. The proÑt can be paid online and Temenos T24 generates all needed reports and notiÑcations, then posting all accounting entries.

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