g


it is important to also classify the requirements into three buckets – critical to have, good to have and nice to have, ideally with a 30% to 35% distribution 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 Avaloq, Infosys, Misys, Oracle, SAB, Silverlake, Sopra, TCS and Temenos have all built an offering for the Islamic banks complimenting their respective conventional offering, we also find solution providers such as BML Istisharat, ITS, Path Solutions with offerings that are more Islamic focused. The key here is to determine 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 shortlist of vendors, defining the context is critical. There could be three typical scenarios, when it comes to the context of an Islamic banking system selection: • •


The bank is a pure-play Islamic bank


The bank has two separate offerings – one is conventional and the other is Islamic


•


The bank is conventional, but looking to also have an Islamic window


Each of the above scenarios bring different constraints and requirements, both from a functional architecture and co-existence of multiple solutions, and the technical implications where different platforms would need to interface, especially where the bank is having both a conventional and Islamic offering. In addition to the functional and technical qualifications, the initial shortlist would need to be determined based on the kind of regional presence, successful references with similar banks and the overall comfort that the bank can draw.


2. Deep-dive evaluation Invariably, one would find most of the RFP requirements are claimed to be met by each of the solutions in the market. Validating a vendor’s


claim is both an art and a science. One has to be clear on what you want to see, or you would end up seeing what the vendor would like to show! Remember, demonstrating the solution features is the daily job of the pre-sales team of the supplier, but is almost a once- a-decade event for a bank! Typically, four to five day reviews per solution would be adequate for a reasonable understanding, and the degree of conformance to the claim made on feature availability.


While evaluating the features on both asset and liability products are important, the focus and emphasis in a typical Islamic system evaluation tends to get more skewed on the construct of the asset products, as they generally get to be more complex and bank specific, driven by respective Shari’ah principles. Typical Islamic products functionality that are critical in an evaluation include murabaha, ijarah, istisnaa, musharaka, mudarabaha, tawaruq and salem, among others. Islamic liability products including mudarabah and wakala, profit calculation and distribution methods (pool / fund based) and Islamic trade finance and treasury features also have their unique attributes that need to be evaluated. Another important validation would also include compliance to AAOFI (Accounting and Auditing Organisation for Islamic Financial Institutions) standards that are adopted by most Islamic banks.


Just as the functionality of the solution is critical, it would also be important to validate the technology platform and the architecture of the solution carefully. Typical parameters for an evaluation would include system design, performance and scalability, flexibility for future product development, security, data integrity, integration capabilities and user interface.


Additionally, a good evaluation should also consider the supplier organisation and its financial strength, global and regional experience, implementation track record, kind of support provided and the overall long-term outlook as evidence of its track record. An evaluation ranking should be based on all the three considerations – functional, technical and supplier credentials.


4. Delve into the details – contractual and commercial The devil is always in the detail. While a techno-functional evaluation would help determine and rank the top two or three best-fit vendors,


Islamic Report www.ibsintelligence.com 15


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