ISLAMIC BANKING

PMS & MUDARABA

USER GUIDE

Information in this document is subject to change without notice.

No part of this document may be reproduced or transmitted in any form or by any means,
electronic or mechanical, for any purpose, without the express written permission of TEMENOS Holdings NV.

Copyright 2002-2003 TEMENOS Holdings NV. All rights reserved.

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The Programs (which include both the software and documentation) contain
proprietary information of Temenos Holdings NV and they are provided under a
license agreement containing restrictions on use and disclosure and are also
protected by copyright and other intellectual and industrial property laws.

Reverse engineering, disassembly or de-compilation of the Programs, except to the

extent required to obtain interoperability with other independently created software or
as specified by law, is prohibited.

The information contained in this document is subject to change without notice.

If you find any problems in the documentation, please report them to us in writing.
Temenos does not warrant that this document is error-free.

Except as may be expressly permitted in your license agreement for these Programs,
no part of these Programs may be reproduced or transmitted in any form or by any
means, electronic or mechanical, for any purpose, without the express written
permission of Temenos Holdings NV.

T24 and jBASE are registered trademarks of Temenos Holdings NV. Other names
may be trademarks of their respective owners.

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Item Detail

DEVELOPMENT NAME PMS & Mudaraba

DOCUMENT TYPE User Guide
SPECIAL COMMENTS (1) If a Field Information is Crossed Out,
it implies that the field is Not used under
the current version of the Development.

( Document Specific )
SPECIAL COMMENTS (2) This development is to manage the profit
distribution for Mudaraba deposits(Through
Savings account, call account and Money
(Development / Support) Specific market Deposits)
SPECIAL COMMENTS (3)

(Client Specific)

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Serial No Last Updated Doc Version Author Comments

1 06 May 2007 1.0 J.Jude Roy Jaideep New

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Table of Contents
Overview of this guide ............................................................................................................................. 6
Assumptions ........................................................................................................................................ 6
Scope of this guide .............................................................................................................................. 6
Introduction .............................................................................................................................................. 7
Document Purpose .............................................................................................................................. 7
TEMENOS T24 TM Modules Supported ............................................................................................... 7
Multi Threading Supported .................................................................................................................. 7
Abbreviations used in this Guide ......................................................................................................... 7
Work Flow ................................................................................................................................................ 8
Overview .............................................................................................................................................. 8
PMS Parameter Tables:....................................................................................................................... 9
Concat Files Used:............................................................................................................................. 12
Mudaraba Deposits ............................................................................................................................... 14
Mudaraba Investment Deposits ......................................................................................................... 14
New Deposit ................................................................................................................................... 14
Amendment Deposit ....................................................................................................................... 16
Early Maturity ................................................................................................................................. 17
Reverse Deposit ............................................................................................................................. 18
PMS Processing: ............................................................................................................................... 19
Simulation (Action 1): ..................................................................................................................... 19
Distribution (Action 2) ..................................................................................................................... 21
Capitalisation (Action 3) ................................................................................................................. 24
Calculation of Average Balance: ........................................................................................................ 25
Calculation of Minimum Balance: ...................................................................................................... 25
Parameters considered while arriving at the Average/Minimum Balance: ........................................ 25
Basic Set up for PMS in T24 ................................................................................................................. 26
Mudaraba Accounting Entries ............................................................................................................... 32
For Term Deposits ............................................................................................................................. 32
For the Other Deposits (Savings/Call Accounts) ............................................................................... 32
PMS Enquiries ....................................................................................................................................... 33

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Overview of this guide

The Purpose of this guide is to explain the calculations and methods used in the Islamic Profit
management system and Mudaraba system.

Assumptions
It is assumed that the reader of this guide has knowledge of the following.

 Fair knowledge in TEMENOS T24 TM

Scope of this guide

User Reference information of this particular development is the only scope of this guide.

Installation, Customization Procedures, Release Information, Guidelines for testing,

Operation and Migration procedures are NOT under the scope of this Document

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Introduction
Profit management system was designed and developed to handle the distribution of profit for the
Mudaraba Deposits.

Document Purpose
The Purpose of this development is to manage the calculation and processing of the profit distribution
for deposits made using the following accounts:
- Savings
- Call
- Money Market Deposits

TEMENOS T24 TM Modules Supported

The following Files in the following modules are supported or used by this module.

AC – Accounts
MM – Money Market
BM – Balance Movement

Multi Threading Supported

Not Applicable

Abbreviations used in this Guide

S – Single Value Field

M – Multi Value Field

AMS – Associated Multi Value Starts Here

AM – Member of Associated Multi Value

AMC – Associated Multi Value Closes Here

OFS – Open Financial Service

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Work Flow
Overview

Clients will make Mudaraba deposits with the bank through one of the following options:
1. Call Accounts
2. Savings Accounts
3. Money Market contracts
These account categories are set to be Non-Accrual. There will be no accruals on the Mudaraba
deposits.
Profit will be distributed for these accounts/deposits during periodical announcement.
Profit Management system will calculate the profit for these accounts/deposits based on the
corresponding parameters setup in PMS.
The bank will decide what categories to be considered for P&L, Bank Capital, Savings & Call account
and Money Market deposits.

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PMS Parameter Tables:

IS.H.PMS.CALC.PARAMETER
This is the main parameter file for the PMS.
Bank will specify the categories and conditions that are to be considered for the PMS calculations and
distribution.

AP.CATEG – This field is used to define the PL categories. The movement on these PL within the
announcement period will determine the profit rate that will be sued to calculate the profit amount of
each of the deposit.

AP.CATEG M PL categories
ASSET.BC.CATEG AMS Bank capital categories that are considered as ASSET will
be defined here.
ASSET.BC.WEIGHT AMC Percentage of the Bank capital account that will be used
for the calculation.
LIAB.BC.CATEG AMS Bank capital categories considered as LIAB will be defined
here.
LIAB.BC.WEIGHT AMC Percentage of the Bank capital account that will be used
for the calculation.
ID.CATEG AMS All the Money market categories that has be taken for
PMS calculation should be defined here.
ID.TENURE.TO AM Tenor
ID.PRIN.TO AM Principal amount
ID.WEIGHT AM Percentage to be considered/taken for PMS calculation in
the average balance
ID.REST.WEIGHT AM If above conditions do not match , then weight will be used
from this field.
ID.MUD.CONTRIB.PCT AMC Mudaraba contribution percentage
OD.CATEG Savings or call account categories
OD.WEIGHT Weights for the accounts
OD.MUD.CONTRIB.PCT Mudaraba contribution percentage
EXPENSE.CATEG Not Used
PAYABLE.CATEG Account category that will be used to pay the profit to MM
deposits
SUSPENSE.CATEG PMS suspense account
CURRENCY Currencies that will be considered for PMS
RATE Currency rates
MS.RATE Mudaraba share percentage

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ZAKAT.RATE Zakat rate

ZAKAT.ACCOUNT Zakat Account
BANK.PL.CATEG PL category for the bank – Used in Zakat/Profit
reserve/IRR entries
PAYABLE.DR.CODE Transaction debit code
PAYABLE.CR.CODE Transaction Credit code
PAID.DR.CODE Transaction debit code
PAID.CR.CODE Transaction Credit code
LAST.DIST.END.DATE Previous distribution date
PFT.UPGRD.RESERVE Account for Profit reserve
PFT.UPGRD.RESRV.AMT Profit reserve amount
INVEST.RISK.RESERVE Investment risk reserve account
INVEST.RISK.RESRV.AMT Amount of investment risk reserve (IRR)

Difference between the Average balances of both the Asset and Liab bank capital categories will be
taken as the BANK CAPITAL for the PMS calculations.

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IS.H.PMS.CATEGORY

This file will define whether the savings account / call accounts that are defined in the
IS.H.PMS.CALC.PARAMETER should use AVERAGE or MINIMUM balance for profit distribution.

IS.H.PMS.CUSTOMER

Customer based weights can be defined here. This will override the weights defined in
IS.H.PMS.CALC.PARAMETER for this customer.

Concat Files Used:

IS.H.PMS.ACTION.PARAMETER

This file will store the copy of IS.H.PMS.CALC.PARAMETER at the time of simulation.

IS.PMS.ACC.CONCAT

Calculations made for the PMS simulation will be stored in this file. This file contains the
Savings/Call account details

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IS.PMS.DEP.CONCAT
Calculations made for the PMS simulation will be stored in this file. This file contains the
MM deposit details

IS.PMS.SH.ASSET.LIAB

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Mudaraba Deposits
Mudaraba Investment Deposits

The options available in Mudaraba Investment Deposits are:

 New Deposit
 Amend Deposit
 Early Maturity
 Reverse (cancel) Deposit

New Deposit

This is a customized version of MONEY.MARKET module of T24

The basic information that is required to be input is:

CUSTOMER - the owner of the deposit, valid Customer CIF.
CURRENCY - the currency of the deposit.
AMOUNT - the Amount of the deposit

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START.DATE - Value Date of the start date will be defaulted to TODAY.

MATURITY.DATE - Maturity date of the deposit contract
Debit A/C -The Source account number of the Draw down Amount to be used on the Value Date.
PRINCIPAL.PAY.AC - Identifies the account number where entries will be made for the reimbursement
of the principal at liquidation or MATURITY DATE
PROFIT.PAY.ACC - The account in which the profit calculated of this deposit will be paid
PROFIT.PAY.METHOD - The Payment method can be
- EPA Every profit Announcement
- OM on Maturity

LAST.PERIOD.PAY - This is a flag to define whether the profit will be paid for the last period or not
(after the maturity date of the contract), it can be YES or NO
This field can be entered only in case of PROFIT.PAY.METHOD is selected as EPA or OM only
To understand these methodologies, let's consider that the profit announcement is made as at the end
of each month.
If we take a deposit placed from 06-Mar-06 to 06-Apr-06, In this case, the profit announcement prior to
maturity will be on 31-Mar-06
Profit Payable on Maturity and Profit Payable for the last period (OM and YES)
The principal and the profit up to 31-Mar-06 will be paid on 06-Apr-06. The profit for the period 01-Apr-
06 to 06-Apr-06 will be calculated and paid on the Profit announcement as at 30-Apr-06.

Profit Payable on Maturity and Profit not payable for the last period (OM and NO)
The principal and the profit up to 31-Mar-06 will be paid on 06-Apr-06. The profit for the period 01-Apr-
06 to 06-Apr-06 will not be paid to the customer.

On Every Profit Announcement and Profit Payable for the last period (EPA and YES)
The Principal would be repaid on maturity only i.e. 06-Apr-06, but Profit would be payable on monthly
basis. The Profit for the period 01-Apr-06 to 06-Apr-06 will be calculated and paid on the Profit
announcement as at 30-Apr-06.

On Every Profit Announcement and Profit not Payable for the last period (EPA and NO)
The Principal would be repaid on maturity only i.e. 06-Apr-06, but Profit would be payable on monthly
basis. The Profit for the period 01-Apr-06 to 06-Apr-06 will not be paid to the customer account.

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Amendment Deposit
Any time during the life of the deposit, the user can make an amendment to it by clicking on the
'Amend Deposit' screen.

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Early Maturity

The user can force the contract to mature early by changing the maturity date to TODAY.
The user will decide whether the profit amount accrued till the early maturity date is to be paid or not
by inputting YES or NO in Pay Accrued Profit field. If it is to be paid then the amount that is to be paid
is to be input in Pay Amount field because there might be a scenario wherein the bank may decide to
pay only a part of accrued profit amount in case of early maturity.
The user will also decide whether profit for current period will be paid or not upon subsequent
announcement by inputting YES or NO in Pay For Current Prd On Announcement field.

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Reverse Deposit
The user can reverse the contract by choosing the option “Reverse Deposit” under “Mudaraba
Investment Deposits”

Mudaraba Savings/Call Accounts

This is a normal account opened with Zero Interest under ACCOUNT module in T24.
Following screens will be used to input/Create an account under Mudaraba.

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Money Market Deposits

PMS Processing:

Simulation (Action 1):

This option is used to simulate the profit distribution, based on the parameters set up in
IS.H.PMS.CALC.PARAMETER.

PL category:
Movements on the PL category for the announcement period (between the START.DATE and the
END.DATE) will be considered for this PMS distribution.
Entries on this PL are returned by the core routine "GET.CATEG.MONTH.ENTRIES". Sum of all these
entries will be considered as the total PL amount for the PMS calculation.

Bank Capital:
Average balance of the accounts belonging to the categories defined in ASSET.BC.CATEG and
LIAB.BC.CATEG will be used to determine the total BANK CAPITAL.
Average balance is read from the BALANCE.MOVEMENT file.

Savings/Call Accounts:
Accounts with categories defined in the OD.CATEG will be selected from the BALANCE.MOVEMENT.
1. Weights defined for each category will be applied on the Average balance or Minimum
balance calculated using the BALANCE.MOVEMENT file.
2. PMS can be set up to use either the Average or Minimum balance of the accounts, based on
the set up in file IS.H.PMS.CATEGORY.
By default, only accounts in local currency will be taken for calculation. To include the Foreign
currency accounts, corresponding currency

Money Market Deposit:

1. Accounts with categories defined in the ID.CATEG will be selected from the
BALANCE.MOVEMENT.
2. Weights defined for each category will be applied on the Average balance read from the
BALANCE.MOVEMENT file.

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PMS Rate Calculation:

Investor deposit = Money Market Deposit + Savings/Call Accounts

Total Deposit = Bank Capital + Money Market Deposit + Savings/Call Accounts

Share holder deposit percent = Bank Capital / Total Deposit

Investor deposit percent = Investor deposit / Total Deposit

Profit After Reserve = PL amount – Profit reserve amount (If defined)

Share holder profit share amount = Profit after reserve * Share holder deposit percent
Investor profit share amount = Profit after reserve * Investor deposit percent

Share holder reserve = Investor profit share amount * MS.RATE (If defined)

PMS profit amount = Investor profit share amount - Share holder reserve
PMS profit after Investment risk reserve = PMS profit amount – IRR (If defined)

PMS Profit rate announced = PMS profit after Investment risk reserve / Investor Deposit

Screen shot of the SIMULATION screen is given below:

User has to input the following fields:

- Start Date
- End Date

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Following screen shows the IS.H.PMS.ACTION record after authorisation of Simulation

Distribution (Action 2)

Savings/Call Accounts:
Profit amount will be calculated based on the Average balance of the account and the PMS
announcement rate for that period.
Accounts that are to be considered for profit distribution (in Action 2) are stored in the
FBNK.IS.PMS.ACC.CONCAT file. This is a JBase level file.

Profit Amount = Account Average Balance * PMS announcement rate/100

Where,
Account Average Balance is picked from FBNK.IS.PMS.ACC.CONCAT
PMS rate is picked from IS.H.PMS.ACTION.

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The calculated profit amount will be stored in the ACCOUNT record, in the local
reference field ACCR.PROFIT.AMT.

Money Market Deposit:

Profit amount will be calculated based on the Average balance of the contract and the PMS
announcement rate for that period.
Deposits that are to be considered for profit distribution (in Action 2) are stored in the
FBNK.IS.PMS.DEP.CONCAT file. This is a JBase level file.

Profit Amount = Contract Average Balance * PMS announcement rate/100

Where,
Contract Average Balance is picked from FBNK.IS.PMS.DEP.CONCAT
PMS rate is picked from IS.H.PMS.ACTION.

The calculated profit amount will be stored in the MM.MONEY.MARKET contract, in the local
reference field ACCR.PROFIT.AMT.

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Screen shot of the DISTRIBUTION screen is shown below:

User has to open the SIMULATION record in this option and COMMIT.

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Capitalisation (Action 3)

Savings/Call Accounts

All accounts with ACCR.PROFIT.AMT greater that Zero will be selected and following accounting
entries will be raised:
DR – PMS PL account (Picked from the parameter field BANK.PL.CATEG)
CR – Customer account (ID of the account)
There is a field in IS.H.PMS.ACTION, CAP.CATEG where the user has the option to specify the
account categories that they wish to Capitalise. This option is available only for Savings/Call accounts.
ACCR.PROFIT.AMT in the Account record will be cleared after raising the entries.

Money Market Deposit:

All Deposits with ACCR.PROFIT.AMT greater that Zero will be selected and following accounting
entries will be raised:
DR – INT.LIQ.ACCT picked from MM contract
CR – Customer account (PRIN.LIQ.ACCT from MM contract)

ACCR.PROFIT.AMT field in the contract will be cleared after raising the entries.

User has to open a new record and specify the categories that has to be capitalised now. This input is
done in the field "Account Category"

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Calculation of Average Balance:

Scenario:
Account opened on 4th August, with Zero Balance
Credit on that account on 10th August for BHD 100
Another Credit on that account on 20th August for BHD 300

Average Balance = (100 * 10 + 300 * 12) / 31

= 148.387

Calculation of Minimum Balance:

Scenario:
Account opened on 4th August, with Zero Balance
Credit on that account on 10th August for BHD 100
Another Credit on that account on 20th August for BHD 300

Minimum Balance = (100 * 22) / 31

= 70.968

Parameters considered while arriving at the Average/Minimum

Balance:

If the Account balance for a particular day is negative, then the Minimum balance for that account will
be ZERO.
If the Account balance has remained below the MIN.BALANCE (read from IS.H.PMS.CATEGORY)
during any specific day, then the Minimum balance/Average balance for that Account will be ZERO.

If the Account has more debits than the allowed number of debits specified in IS.H.PMS.CATEGORY,
then the Minimum balance/Average balance will be ZERO.
Number of debits on that account for the specific period is read from the STMT.ENTRY.

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Basic Set up for PMS in T24

ACCT.GEN.CONDITION
The purpose of this table is to define the rules for grouping together the accounts for which the
same interest and charges conditions apply.
Before any Account can be opened in T24, a suitable General Condition record must exist in this
table, in order to determine the Group to which this Account belongs.
In PMS, We will consider two types of Profit calculation for the accounts, MINIMUM or AVERAGE.
So we can define two group conditions in this table, one for Average Account categories and other
for Minimum Account categories.
A sample screen shot is given below:

Note: Only those categories mentioned in the Value field will be considered for the PMS system,
i.e., the categories defined in IS.H.PMS.CATEGORY table should have an entry in this table.

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GROUP.CAPITALISATION

The purpose of this table is to specify the next date and subsequent frequency of application of debit
and credit interest for a group of Accounts. Create records for Minimum and Average. Sample screen
shots are given below

GROUP.CREDIT.INT

The Group Credit Interest Table allows the specification of a calculation method for credit interest for
groups of accounts. Sample screen shots are given below:
This is a General Condition code and date, which identifies the Group, Credit Interest record and the
date from which it applies. Create records for Average and Minimum in this table.

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GROUP.DEBIT.INT

The Group Debit Interest Table allows the specification of a calculation method of debit interest for
groups of accounts. This is a General Condition code and date, which identifies the Group Debit
Interest record and the date from which it applies. The General Condition code must have an
associated record present on the ACCT.GEN.CONDITION file. Create records for Average and
Minimum in this table.

ACCOUNT.ACCRUAL

The purpose of the Account Accrual table is to provide the system with information at Company level
about how and when to process Accruals of interest and charges on Customer Accounts and whether
interest capitalisation is inclusive or exclusive of the balance on capitalisation date, the value dates of
interest entries generated and the day on which the entries are booked. Set the ACCOUNT.ACCRUAL
table for the Company as given below:

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MI.DATES

Set up MI.DATES table in order to update the BALANCE.MOVEMENT file. T24 PMS will calculate the
Average / Minimum balance based on the BALANCE.MOVEMENT file.

MI.PARAMETER

This file holds the system level parameters for the Management Information module. Give the values
“YES” in Val Date Bal Upd field and “ALL” in Bal Mvmt Apps field as shown in the screen shot
below:

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BASIC.RATE.TEXT
This table defines Descriptions of the Basic Interest Rate table IDs to enable the user to identify each
one of them easily. A sample screen shot is given below: Each Description must be defined prior to
creating Rates records for the corresponding ID in the BASIC.INTEREST rate table and will be used
as the enrichment to the corresponding ID when it is displayed

BASIC.INTEREST

This table allows various frequently used floating Rates, e.g. Base Rate, Prime Rate, Overnight Rate
etc., to be defined separately for each Currency and stored in a central place where they can be
accessed by T24 Applications as required. This table has to be set up for the MM Contracts in PMS
system for the currency mentioned in the contracts. A sample screen shot is given below:

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BATCH RECORDS

The following BATCH records are to be set up for PMS processing.

 IS.PMS.END.OF.DAY

 MI.ONLINE
 MI.BUILD.PL.ENTRIES
 MI.BUILD.DATABASES
 MI.BUILD.BAL.MVMT
 MI.CAPTURE.BVAL
 SYSTEM.END.OF.DAY5

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Mudaraba Accounting Entries

Contract opening and closing entries will be the same as conventional.
When PMS Distribution is run, the profit will be distributed to the Investment deposit contracts
according to the PROFIT.PAY.METHOD defined in the contract as follows and again based on the
average balance for every contract

For Term Deposits

For the EPA contracts:

At distribution level:
Dr. Mudaraba profit Payable
Cr. Customer Account

For the OM Contracts:

At Distribution level:
The Profit payment will be done at every EOD processing for every contract by Maturity
Dr. Mudaraba profit Payable
Cr. Customer Account

For all the contracts having maturity less than PMS Period End date:
Dr. Mudaraba profit Payable
Cr. Customer Account

For the Other Deposits (Savings/Call Accounts)

The capitalisation for accounts will be done when the user runs the PMS Capitalisation; the user can
select the categories to which he wants to capitalise. When Capitalisation is carried out following
accounting entry will be posted for the accounts that fall under the account categories selected by the
user:

Dr. Mudaraba profit Payable

Cr. Customer Account

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PMS Enquiries

T24 provides the following enquiries:

 PMS Calculation Summary

 Pre-Distribute Entries Summary

 Entries Summary after Distribution

TEMENOS Confidential Page 33 of 33 November 2007