International Conference on Islamic Microfinance in Mauritius

Organized By :

CENTER OF ISLAMIC BANKING & ECNOMICS

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 Oracles 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 Banking Mauritius, 6 April, 2011

Discussion Topics

qOracle and Islamic Finance qBackground qRe-architecting of Islamic Banking Technology qBenefits of Re-architected Technology Platform qConclusion

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

2011 Oracle Corporation Proprietary and Confidential

Oracles Strategy in Financial Services including Islamic Finance

COMPLETE

OPEN

INTEGRATED

BEST OF BREED

#1

Comprehensive Offering

StandardsBased Architecture

Designed to Work Together

Industry Leader

Broad & Deep Offering Lower Cost, Lower Risk

More Choice Maximizes Existing Investments

Less Effort More Value

Robust, Proven Industry leading Software

2011 Oracle Corporation Proprietary and Confidential

E / FRAMEWORK

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

Universal Banking Extensive Parameterization Product Launch Process Orchestration Faster Business Straight Through ProcessingExtensibility

Accelerator Pack

Customer Centricity Sophisticated Limits Management Limits Management Flexibility Enterprise Wide Pricing

Integrated GL

Comprehensive MIS

NCTION REPORTING / STATEMENTSSECURITY / USABILITY

Multi Currency/ Branch & Entity Support Statements/ Advices

DEPLOYMENT
Comprehensive Security

TECHNOLOGY
Flexible Deployment SOA-enabled Architecture

Multi Lingual

Flexible Reporting

Audit Trail and Controls Multi-Currency Foreign Branch Operations Flexible Interface

Multi Channel

Regulatory Reporting

Task Based UI and Usability Departmental Servicing

Scalability

2009 Oracle Corporation Proprietary and Confidential

Oracle FLEXCUBE Islamic Banking Product Coverage

Origination Workflows

Murabaha Tawarruq Istisnaa Mudarabah Musharaka Ijarah

2009 Oracle Corporation Proprietary and Confidential

Oracle FLEXCUBEs Life Cycle Support for Financing

Li Framework fe c y cl e S u p p or t

Processing
10

2011 Oracle Corporation Proprietary and Confidential

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 Hussain Hamid Sh Nizam Naquby Sh Dr Daud Bakar Sheikh Dr Abd Sattar Abu Ghuddan Shaikh Ajeel Jasim AlNashmi Shaikh Dr. Sh Abdulla Mohamed Ali Bin Sulaiman Al Qari Al Manea Sh Dr M Abdul Rahim Sultan Al Olamaa

2011 Oracle Corporation Proprietary and Confidential

11

Oracle FLEXCUBEs Islamic Banking Capabilities: Key Takeaway

nality for Islamic Core Platform the proven, best selling Oracle FLEXCUBE platform leveraging all its arc Proven Banking built upon

used products, including extensive & configurable profit distribution model for deposits. Features modelled Comprehensive Product Coverage

Ability to Support Integrated Platform both Conventional Banking and Islamic Banking operations from the same

BPEL based process flows forFlows Embedded Process origination of financing contracts under multiple products. Facility to easily ad

Fast Deployment

Accelerator Pack with factory shipped product configurations.

2009 Oracle Corporation Proprietary and Confidential

12

Discussion Topics

qOracle and Islamic Finance qBackground qRe-architecting of Islamic Banking Technology qBenefits of Re-architected Technology Platform qConclusion

2011 Oracle Corporation Proprietary and Confidential

13

Characteristics of Islamic Finance Institutions (IFIs) Customers

Dedicated Customers (15%) Independents (70%) Non Believers (15%)

Compliance
1. Audit 2. Central Bank 3. Risk Mgmt 4. Shariah Audit 5. Shariah Council 6. AAOIFI 7. IFSB

Products
Rapid Evolution Multiple Contracts Debt & Equity & Fee

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

Competitors

Banks (Islamic & Conventional) Non- Bank Financial Institutions

2011 Oracle Corporation Proprietary and Confidential

14

The Reality on Technology Implementation for Islamic Banking as observed by IBS in 2007
q Decision making has been too quick without proper vendor assessment. Many
q banks are paying today for making the wrong choices through extended timelines for implementations they spend in the millions for conventional systems, they tend to budget less than $500,000 for Islamic banking systems. This leads to: q Tweaking of existing systems to cater to the requirement q Shoddy implementation and ill-conceived products q system is unable to meet the short time-to-market requirement for Islamic banks a simple solution similar markets

q Banks have been under-budgeting for Islamic banking systems. Although

q Lack of knowledge amongst vendors often leads to tweaked productsbeing delivered. Often, banks end up doing the work themselves as the
q

q Vendor misleading the customer into believing that their Islamic banking offering is
q

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

Source: IBS Guide on Islamic Banking - 2007

2011 Oracle Corporation Proprietary and Confidential

15

Islamic Banking Technology Implementation 2007 vs Now In 2007

1 2 Decision Making Has Been Too Quick

Now (2011)

Less prevalent now. However cases of new banks making decision over short (1-2 days) presentation are still Banks have been under-budgeting for Islamic observed Still prevalent in start up banks; however significant banking systems reduction seen on banks that are migrating to new Islamic banking systems Lack of knowledge amongst vendors often leads to tweaked products Vendor misleading the customer into believing that their Islamic banking offering Varied interpretations of the Shari' a across is a simple solution geographies and banks operating in similar markets Marked improvements. vendors have been exposed to more implementations and have recruited experienced Vendors over the different stance; Islamic banking resources taking a last few years systems are now showcased as comprehensive and complex Reduced to meet the demanding requirements of Islamic solutions significantly due to the need to comply to AAOIFI and IFSB standards banking

3 4 5

2011 Oracle Corporation Proprietary and Confidential

16

Discussion Topics

qOracle and Islamic Finance qBackground qRe-architecting of Islamic Banking Technology qBenefits of Re-architected Technology Platform qConclusion

2011 Oracle Corporation Proprietary and Confidential

17

The Need to Re-Architect Islamic Finance Technology

2011 Oracle Corporation Proprietary and Confidential

18

The Outcome - Comprehensive Functionality Covers all Prescribed Products

Accounts & Deposits

Demand Deposit Saving Deposit Time Deposit Mudarabah Financing Musharakah Financing Murabaha Financing

Financing

Salam Financing Istisnaa Financing Ijarah Financing Qard Financing

Trade Finance

Letters of Credit, Guarantee FX Cash, FX Spot

Treasury

2011 Oracle Corporation Proprietary and Confidential

19

The Outcome - Advanced Functional Features with Readiness for Localization

Document Management Scoring Business Activity Monitoring

Customer Profiling Risk Management Accounting

Relationship / Channel based Pricing Straight through Processing Customer Service Alerts Regulatory reporting Payments & Clearing Processing Prescriptions

2011 Oracle Corporation Proprietary and Confidential

20

The Outcome - Product Launch Quick Go to Market

Configurable Transaction Processing Rules Across Modules
Modules: Base Transaction Types Product Variants Accounts, Deposits Transactions

Eligibility Criteria Validations Availability Pricing Special Terms Accounting Rules Lifecycle Events Processing Event Handling Exception Handling Default Pricing, Charges & Terms

ansaction Characteristics, Processing Requirements

Module Parameters

Journal Postings

2011 Oracle Corporation Proprietary and Confidential 2011 Oracle Corporation Proprietary and Confidential

21

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

The Outcome Integrated Workflow and Origination Features

Process Efficiency, Automation, End-to-End Processing

2011 Oracle Corporation Proprietary and Confidential

23

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 2011 Oracle Corporation Proprietary and Confidential

24

SHARIAH COMPLIANCE

2011 Oracle Corporation Proprietary and Confidential

25

Discussion Topics

qOracle and Islamic Finance qBackground qRe-architecting of Islamic Banking Technology qBenefits of Re-architected Technology Platform qConclusion

2011 Oracle Corporation Proprietary and Confidential

26

Benefits of Re-Architected Islamic Finance Technology

Discussion Topics

qOracle and Islamic Finance qBackground qRe-architecting of Islamic Banking Technology qBenefits of Re-architected Technology Platform qConclusion

2011 Oracle Corporation Proprietary and Confidential

28

The Right Time To Invest in Islamic Finance Technology

Thank You!

Jamil Hassan Principal Consultant, Islamic Banking Sugato Banerjee Senior Manager, Southern Africa Sales
Sugato.Banerjee@ORACLE.com Jamil.Hassan@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