IBS Journal November 2015
4D approach to selecting the right Islamic banking system
While there are over 75 recognised core banking solution platforms across the world, it is a smaller subset of this number that qualify to provide end to end Islamic banking features. If one considers the selection of a core banking system as a science in itself, it would be only fair to say selecting an Islamic core banking platform is a shade more complex – both from the standpoint of defining the expectations clearly, and making the right choice of an application that best meets the requirement. How does one go about determining the best fit solution for the bank?
Here is a quick guide with four dimensions of focus: ‘the 4D approach’ to selecting the right Islamic banking system.
1. Define your needs
The requirements from an Islamic banking standpoint tend to be specific based on both the region in which it operates, and also the directives as provided by its Shari’ah Board. A well-defined requirement document would need to focus on the Islamic products and processes that are key for the bank. A good business requirement specification (BRS) document, which in- cludes all key requirements would typically have 5000+ features typically listed, which forms the basis for the detailed evaluation. This includes developing and managing Islamic asset products, finance scheduling, and also the origination, maintenance and termination of contracts. Similarly, on the liability side, the approach and methodolo- gy related to the profit calculation – includ- ing the frequency of profit calculation and disbursement, profit calculation approach and provisions such as charity contribu- tions are key to be well defined upfront. In addition to the needs of Islamic
products, a BRS document would also need to address other typical features expected of a solution – CIF (customer information file), credit, operations, branch functional- ity, GL, channel integration, MIS (manage- ment information system) and reporting, among others. To make a holistic and bal- anced evaluation, it is important to also
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classify the requirements into three buck- ets – critical to have, good to have and nice to have, ideally with a 30% to 35% distribu- tion in each bucket.
2. Determine the shortlist
Although historically banks have adopted an approach to building Islamic features around conventional core banking platforms, a whole new breed of Islamic banking solutions is now available for banks to make an informed choice from. While the large conventional core banking solution providers such as Infosys, Misys, Oracle FSS, Silverlake Axis, TCS Financial Solutions and Temenos have all built an offering for the Is- lamic banks complimenting their respective conventional offering, we also find solution providers such as BML Istisharat, ITS, Path Solutions and ICSFS with offerings that are more Islamic focused. The key here is to de- termine the right shortlist from the vendors from the above list, to whom the request for a proposal (RFP) is sent, inviting a formal proposal for a deep dive evaluation. In order for the determining the short-
list of vendors, defining the context is criti- cal. There could be three typical scenarios, when it comes to the context of an Islamic banking system selection: a. The bank is a pure-play Islamic bank b. The bank has two separate offerings – one is conventional and the other is Islamic
c. The bank is conventional, but looking to also have an Islamic window
analysis: system selection
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