Product Implemented: SIGMA | SHARIAH

Product Category: Integrated Islamic Core Banking

Definition: A core banking system that fully comply with the Islamic banking principles,
known as Sharia, SIGMA | SHARIAH allows banks to capture the immense potential of Muslim
customers who wish to put their financial equity to work based on the principles that they
believe in.

Company Background:

Bank Danamon (also known in this paper as ‘the bank’) was founded in July 1956 with the
name PT Bank Kopra Indonesia, however, later it changed its name to bank Danamon
Indonesia in 1976. Bank Danamon received its permit as a commercial bank the following
September 1956, and became a foreign exchange bank in November 1988, from whence it
grew rapidly to become Indonesia’s second largest private bank in the mid nineties.
Furthermore, in 1989, the bank became a publicly-listed company as it issued 12 million
shares in an Initial Public Offering (IPO).

During the recent Asian financial crisis in 1997, the bank ran into a liquidity insolvency. As a
result, the following year, it had to be taken over by the Indonesian Bank Restructuring Agency
(IBRA) to be included in the bank recapitalization and merger programs.

In order to meet every of the bank’s growing customer’s demand, the bank provides close to
500 branches and more than 700 units on-line ATMs trough out Indonesia.

SIGMA | SHARIAH
Business Challenges

In the past few years, more and more Indonesians have chosen to conduct business with
banking institutions that hold to the principles of Sharia. As a country with the largest Muslim
population (in Indonesia itself approximately 90 percent of the Indonesia population are
Muslims) in the world, retail banks now have a rapidly expanding opportunity to capitalize on
this emerging trend.

Currently, the bank only had utilized a core banking system called Integrated Core Banking
System (ICBS), which specifically designed to be operated by conventional banks such as
Bank Danamon. Hence, many Indonesians who believe in Muslim teachings are reluctant to
do banking at this bank because the conventional banking system does not abide the principles
of Islamic banking, such as making money from money is not permissible, prohibition of
interest, profit and loss sharing, and investments should only support halal activities.
Importantly, according to the bank, conventional banks are more prone to economic crisis,
for example, the recent Asian financial crisis that occurred in 1997, and fluctuations of interest
rates, compare to Islamic banking.

The Solution:

Recognizing the above business challenges, PT Sigma Cipta Caraka (known in this paper
as ‘Sigma’) provided a solution by implementing an integrated core banking system that
specifically comply with the Islamic banking principles called SIGMA | SHARIAH. As a core
banking system, the bank can now absolutely experience tremendous benefits, such as the
scalability to handle the bank’s growing customers and transactions volume, multi-branch
support, multi-currency, and centralized security management. The completion of the
implementation approximately took three months (grand launching May 14, 2002).

SIGMA | SHARIAH offers a comprehensive spectrum of sharia products (retail module called
MUDHARABAH & WADIAH, deposit module called MUDHARABAH, general ledger module,
and financing module, for example, SALAM) to the bank and they are integrated to each
other. With these products, the bank now calculates zakat automatically.

Furthermore, with SIGMA | SHARIAH, the bank’s database is now integrated and online.
This means that every customer data, as well as transaction data, from all the bank’s branches,
sub-branches, and head quarter, can now easily be processed online and immediately are
updated – so that every customer can obtain real time account information. Essentially, since
the implementation of this new system, as well as the inception of Bank Syariah Danamon,
the bank’s sharia account holders have grown to 300 accounts from zero account.

SIGMA | SHARIAH
Business Benefits:

The following are some business benefits that the bank has experienced after implementing
SIGMA | SHARIAH:

· Rapid Implementation Of New Delivery Channel

As an integrated core banking system, such as SHARIAH, the bank can easily and
smoothly expand its services to numerous delivery channels, which include phone
banking, Internet banking, and most importantly, mobile banking, with the sharia
concept in mind .

· Increases Transaction Capacity.

In order to support the bank’s rapid growth of sharia business unit, the bank is now
able to handle large volume of data, such as customers’ daily transactions, without
increasing performance than ever before.

· Delivers Real-Time Information To Clients

Since SIGMA | SHARIAH is a centralized system, one computer is needed to store
all of the bank’s information onto one database. This means that a customer information
is updated immediately every time he performs a transaction regardless of the type of
delivery channels he chooses to utilize. Furthermore, customers can now conveniently
access their information anytime and anywhere.

The Requirements:

At this particular bank, SIGMA | SHARIAH runs under IBM AS/400 server. The bank’s system
requirements are as follows:

Software Requirements:
OS/400 ver 4.7
RPG/LE
CL/400
Cryptographic ( for ATM and Phone Banking )
Clint Access ( SNA or TCP/IP )

Hardware Requirements:
AS/400 type Eiger
AS/400 series 720
Intelligent Router ( for connection to PC-Server )
Modem ( for remote connection )
Comm.Line ( for connection to other AS/400 )
LAN Adapter ( Ethernet )

Devices Requirements for Back-Up:

Cartridge drive type 6380 (cartridge size: 15" )
Cartridge drive type 6390 (cartridge size: 8" )
Real tape drive type 9347 / 9348

Minimum Memory Requirement is 1GB

SIGMA | SHARIAH