R14 - UG - Retail Service Ijara

TEMENOS T24
Islamic Banking
User Guide
Retail Service Ijara
Information in this document is subject to change w ithout notice.
No part of this document may be reproduced or transmitted in any form or by any means,
electronic or mechanical, for any purpose, w ithout the express written permission of TEMENOS Headquarters SA.
Table of Contents
Preface ...................................................................................................................................... 3
Overview ................................................................................................................................... 3
Retail Service Ijara .................................................................................................................. 3
Work Flow ................................................................................................................................. 3
Prerequisites............................................................................................................................. 4
Parameter setup ................................................................................................................ 4
Getting Started ......................................................................................................................... 8
What if Scenarios..................................................................................................................... 8
What if – Negotiation (Flat rate/ reduced rate/ Profit amount) ................................... 8
What if – Negotiation (Manual schedule) .................................................................... 10
Retail Service Ijara ................................................................................................................ 12
Workflow diagram ........................................................................................................... 12
Asset request ................................................................................................................... 13
Asset Purchase ............................................................................................................... 17
Payment Activities........................................................................................................... 19
Asset Sale ........................................................................................................................ 23
Amend – Asset Sale ....................................................................................................... 26
Asset Sale – Manual schedule...................................................................................... 30
Amend – Asset sale – Manual schedule ..................................................................... 31
Past due Ops ................................................................................................................... 32
Repossess Ops ............................................................................................................... 33
Enquires .................................................................................................................................. 34
Limits ....................................................................................................................................... 38
Delivery ................................................................................................................................... 38
Services................................................................................................................................... 39
Accounting Process............................................................................................................... 39
Troubleshooting ..................................................................................................................... 42
Example for inputting different type of repayment schedules .................................. 42
Glossary .................................................................................................................................. 57
Index ........................................................................................................................................ 57
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Preface
The scope of the user guide is to explain the functionalities/ workflow for Retail Ijara.
The reader needs to have the basic understanding in Islamic banking, T24 –
LD.LOANS.AND.DEPOSITS and T24 – Past due applications.
Overview
Ijara is defined as a transaction in which the bank (Lessor) leases an asset owned by
it to the customer (Lessee). This is a well-known technique of financing the use of
movable and immovable property including heavy equipment, large and expensive
means of transport such as airplanes.
Ijara is an agreement wherein the bank leases movable or immoveable property to a

customer against a fixed or variable rental charge. In case the bank does not
possess the required movable or immovable property, it may purchase it, at the
request of the customer, and then lease it to him. Through this deal, the bank
becomes the Lessor, and the customer becomes Lessee.

Service Ijara finance is a lease contract, where the bank (the lessor) leases to a
customer (the lessee) a specific service to exist in the future, such as education and
travel for a specific period of time with specific regular instalments. The service is
provided by the bank to the customer in exchange for the agreed rental as per the
Ijara agreement between lessor and lessee.
Work Flow
Customer will apply to the bank for leasing of asset for their personal needs. The
asset could be available in local market or could be imported from abroad or could be
manufactured or build by another party. Customer will also furnish the specification of
required assets (Property or Equipment) along with supplier details and quotation.
 Bank will evaluate the market price of the asset through bank consultant
(especially for real estate)
 Bank will approve the customer’s request and give an acceptance to initiate the
transactions to customer.
 Customer will sign the promise agreement for the lease. At this stage, bank may
take a certain amount as down payment to ascertain customer’s seriousness
about the agreement. It will be re-funded if customer signs Lease Contract and
Bank can collect the following from the customer
 Administration fees ( as bank product policy)
 Down-Payment (based on customer scenario)
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 All necessary external costs incurred by the bank to bring the asset to its intended
use will be added to the total cost of the asset. But based on the agreement this
cost may or may not be collected from the customer
 Once the asset as per agreed specifications is in possession of the bank, bank
will enter into a lease agreement with the customer and customer will sign an
agreement for the Lease value based on the terms contained in the Ijara lease
agreement.
 The lease amount will be fixed for the asset by a monthly or quarterly or half-
yearly or annual basis. Customer will provide the letter of authorisation to the
bank to debit his account or will provide the post-dated cheques equivalent to the
agreed rental amount.
 Lease agreement cannot be amended / cancelled without mutual agreement of
two parties.
 Customer shall maintain an account with the bank. In case of default in repayment,
the system will calculate the penalty charges after the given grace period.
However, these charges will not be debited to customer account but be available
for information.
 On the repayment date if the customer does not have funds to repay the
instalment amount then the sale contract would move to past due.
 Past due repayment can be performed online using customer PD repayment
 Repossess of asset in Past due is not applicable for service Ijara product.
Prerequisites
Install Islamic banking pack as per the details provided in the installation guide.
Parameter setup
Basic parameters are already setup for Corporate Murabaha product.
Product Type - IS.H.PRODUCT.TYPES, ISB
The description of the product is pre-defined as shown below.
Products - IS.H.PRODUCTS, ISB

The basic product parameters are pre-defined as shown below.
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Category code can be changed if required.
Parameter - IS.H.PARAMETER, ISB

Product level parameter is setup in this file. The defined parameter details can be
amended by the user.
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Update Limit for Profit – This field is used to setup whether Limit needs to be updated
for the Profit amount or not.
Accounting for Profit – This field is used to setup whether accounting entries for Profit
amount needs to be generated during sale booking or not.
Installment round off – This field is used to setup whether installment amount should
be rounded off during profit calculation.
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Commodity – IS.H.COMMODITY, ISB

The commodity codes are defined in this file.
Sub asset types – IS.H.SUB.ASSET.TYPE

Commodity details can be sub classified as shown below.
Additional Costs – IS.H.COST.TYPES, ISB

This file is used to define the additional costs that need to be defined in the purchase
contract. These costs can be added to the purchase price if required. Additional costs
are debited from the Expenses category defined in this file.
Check List – IS.H.CONTRACTS.ACTION.TEXT, ISB

This file is used to parameterize the check list items needs to be displayed in the
Asset purchase stage.
LIMIT.PARAMETER
Product level limit reference can be created by using LIMIT.REFERENCE and this
has to be linked to Retail Service Ijara product by using LIMIT.PARAMETER.
Refer to LIMITS user guide for more information about setting up the Limit parameter.
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Getting Started
What if Scenarios
In order to support the customer enquiries for Retail Service Ijara finance (Murabaha
Model) what if menu is provided. This is to simulate the sale contract creation based
upon the details provided by the customer. This is used to input the Purchase amount,
currency, profit rate, repayment schedule type, down payment amount, repayment
frequency and Term. It will automatically calculate the profit amount and selling price.
The repayment schedules can be printed.
T24 – What if menu structure is shown below.
What if – Negotiation (Flat rate/ reduced rate/ Profit amount)

This screen is used to do the simulation of sale contract by using flat rate/ reduced
rate/ profit amount. User has to input the Total purchase cost, down payment,
repayment schedule type, and repayment frequency, Term, flat rate / reduced rate /
profit amount. Upon committing the repayment schedules are built.
The generated repayment schedules can be viewed by using dedicated enquiries.
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Schedules created can be viewed by inputting the simulation reference number using
enquiry.
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What if – Negotiation (Manual schedule)

This screen is used to do the simulation of sale contract by inputting Manual
repayment schedules. User has to input the Total purchase cost, down payment,
value date, final pay date. User can choose the required schedule definition from the
options available.
1). Installment frequency based
2). Installment Non frequency based
3). Manual
Installment payment date and Installment payment amount can be inputted for
Installment frequency based and Installment Non frequency based schedule
definitions. The reduced rate is calculated based upon the repayment schedules.
In case of “manual schedule” can input principal and profit payment amount for each
installment in the schedule definition screen. The reduced rate is not calculated.
The repayment schedules can be viewed by using dedicated enquiries.
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Workflow diagram
• Customer requests to the bank for purchase of Asset.

• Bank receives the asset details and captures it in Asset request screen (or)Using
Asset What if analysis screen the sale details can be captured to serve the customer
request request.
• Asset request has to be linked to Pre - approval for acceptance to do the Asset
Asset Pre- purchase.
approval
• Profit rate, Number of schedules, Repayment frequency, Down payment if any is

defined in the Asset purchase.
Asset • Profit amount and repayment schedules are calculated for Automatic schedules.
Purchase
• Down payment captured in the Asset purchase is collected from the customer.
Down
Payment
• Payment is made to the vendor/ supplier for the purchased asset.

• Payment is made to the Cost counter party if additional costs are defined in Asset
Payment to purchase.
Vendor
• Purchased asset is sold to the customer for purchase price + profit amount. The
repayment schedules are defined for deferred payment.
Asset Sale
• Rescheduling
• Partial Payment
• Postponement
Amend - • Early Maturity
Asset sale • Amend settlement account
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T24 – Retail Service Ijara menu structure is shown below. It is possible to input/
capture the asset request details for the assets/ commodities shown in the menu
structure.
Asset request
This is the first stage in the workflow which is used to define the customer and his
requested asset details. The customer approaches bank with the request for
purchasing goods. The basic details like customer number, required number of
assets, and unit price of each asset and vendor ID/supplier details are captured. User
can input either the Vendor ID or Supplier ID or Supplier name.
Workflows related to the handling of vendor payments are provided in the Vendor
payment user guide.
The asset details may vary based upon nomenclature of the asset as detailed,
Vehicle
Asset short title

This is used to input the short title of the Asset
Year of Manufacture
This is used to input the Year of manufacturing
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Vehicle condition (New/ used)

This is used to input the Vehicle condition as whether it is New or Used.
Engine Number
This is used to input the Engine number of the vehicle.
Chassis Number
This is used to input the Chassis number.
Capacity (in CC)
This is used to input the capacity of the vehicle in CC.
Capacity (in Seating)
This is used to input the capacity of the seats.
Make
This is used to input the Vehicle make.
Model
This is used to input the Vehicle model
Accessories
This is used to input the accessories requested for the vehicle. Multiple values can be
inputted by the user.
Country of Origin
This is used to input the country of origin of the vehicle.
Car Color
This is used to input the car color.
Use
This is used to input the use of the car.
Dealer Name
This is used to input the dealer name.
Dealer Code
This is used to input the dealer code.
Registration Number
This is used to input the registration number.
Registered in
This is used to input the vehicle registered country.
Plate color
This is used to input the plate color.
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Type Plate (Private/ Public/ Taxi)

This is used to input whether the plate of the vehicle is for Private/ Public/ Taxi.
Invoice Number
This is used to input the Invoice Number.
Registration card expiry date
This is used to input the expiry date.
Real Estate
Asset short title

This is used to input the short title of the asset.
Property type (New/ Old)
This is used to input the Property type as whether it is New or old.
Ownership type
This is used to input the Ownership type.
Year of construction
This is used to input the Year of construction of the building.
Address
The address of the property can be captured in multiple lines.
Overall area in square feet
The overall area of the property in terms of square feet can be inputted in this field.
Number of rooms
This is used to input the Number of rooms.
Nearest land mark
This is used to input the nearest land mark for the property.
Use
This is used to input the use of the property.
Builder Name
This is used to input the Builder name.
Builder Code
This is used to input the Builder code
Registered/ Survey number
This is used to input the registered survey number of the property.
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Municipality name
This is used to input the Municipality name of the property.
Title deed date
This is used to input the Title deed date.
Title deed number
This is used to input the Title deed number.
Title deed from date
This is used to input the Title deed from date.
Title deed to date
This is used to input the Title deed to date.
Place of issue
This is used to input the place of issue.
Miscellaneous asset/ Goods Murabaha/ Shares Murabaha
Asset short title

This is used to input short title of the Asset.
Sample Vehicle asset request screen is shown below.
No accounting entries are created during authorization of Asset request.
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Asset Purchase
This is segregated into two steps.
1). Asset Pre – approval
2). Asset Purchase
For service Ijara the skip pre-approval is set as YES in the IS.H.PRODUCT.TYPES,
ISB parameter table, hence the pre-approval stage is not mandatory.
Bank purchases the asset from vendor and receives the title of ownership from
vendor. The pre-approval details are linked to the purchase record.
Additional costs for procuring the goods can be defined in the purchase stage which
can be added to the Ijara purchase price if required. These additional costs are
defined in IS.H.COST.TYPES, ISB file. The insurance details for the asset can be
captured. User can also capture the down payment in purchase stage. If down
payment is captured in this stage, then sale would be allowed only after the down
payment is completed.The details inputted in the Asset request screen are populated
automatically to the relevant fields.
If the contract is booked for Top up purpose then Top up flag can be set as Yes. By
default it will be defaulted as No.
Down payment related information can be captured in the “Down payment details”
tab. Down payment is inputted as Percentage or Amount. Also t he customer
contribution to the contract as “Cash” or “Asset” can be selected for information
purpose.
If down payment is inputted as Percentage then down payment amount can be
calculated as,
Down payment = Purchase price * Down payment percentage / 100
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The customer and bank contribution percentage is calculated by using the below
formula,
Customer contribution = Down payment percentage
Bank contribution = 100 – Customer contribution
After authorization following entries are generated,

DR Ijara Purchase/ Inventory Account
CR Ijara Multi-Supplier Account
If Additional costs are defined,

DR Expenses category
CR Cost counterparty Account
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Payment Activities
The payment activities like payment to the vendor, down payment and Payment to
cost counterparty are handled in the other services menu.
Ijara down payment
Down payment for the Ijara contract can be collected by using this screen. User has
to input the customer number and asset purchase reference number. The debit
account number, credit account number are populated in the relevant fields. User can
input the down payment amount.
During authorization the below accounting entries are generated.
DR Customer Account
CR Purchase account
Miscellaneous charges
The ad-hoc charges that have to be collected from the customer can be performed by
using this screen. The charges collected are debited from the debit account and
credited to the category defined in the charge code.
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Payment to Vendor (Internal/ External)
The purchase amount is transferred to the vendor account using this screen. There
may be chance that the vendor may or may not have account with the bank. If the
vendor is having an account with the bank then this payment can be transferred
using “Vendor payment – Internal” screen. If the vendor is not having account with
the bank then this payment can be transferred to the other bank by using SWIFT
message from the “Vendor payment – External” screen.
User has to input the customer number and asset purchase reference number. The
debit account number, credit account number and payment amount are populated in
the relevant fields. User can make changes to the payment amount defaulted from
the purchase contract. It can be decreased and may be paid in more than one
transaction. However it cannot be increased more than what defined in the purchase
contract.
During authorization below accounting entries are generated.
DR Multi supplier Account
CR Vendor/ Supplier account
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Payment to Cost counterparty (Internal/ External)
The additional costs inputted in the purchase contract can be paid to the cost
counterparty by using this screen. There may be chance that the counterparty may or
may not have account with the bank. If the counterparty is having an account with the
bank then this payment can be transferred using “Payment to Cost counterparty –
Internal” screen. If the counterparty is not having account with the bank then this
payment can be transferred to the other bank by using SWIFT message from the
“Payment to Cost counterparty – External” screen.
User has to input the customer number and asset purchase reference number. The
values to the relevant fields are auto populated.
CR Vendor/ Supplier account
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Asset Sale
The purchased asset is sold to the customer by using this screen. After signing the
Retail Service Ijara agreement with the customer the asset is handed over to him.
User has to input the Customer number and Asset purchase reference number.The
Top up finance details and Down Payment details will be defaulted from asset
purchase record. If Top Up flag is marked as ‘Yes’ at asset purchase level, then user
has to input the Top up details in asset sale level.
The Top up finance details can be inputted in the Top up details Tab. By default it will
be set as “Fresh finance”. If required it can be set as “Buy out”. If the financing type is
set as “Refinance/ Top up” then Old finance reference number needs to be inputted.
User has to input the finance details like value date, profit basis, repayment
frequency, term, grace period type, repayment type, profit type, flat rate/ reduced
rate/ profit amount.
 Repayment type – This field is used to choose the instalment repayment type
available in the drop down.
o Constant (Annuity): Equated instalment amount is calculated for the
purchase price based upon the term, repayment frequency and profit
rate inputted.
o Scheduled disbursement and Constant repayment: Automatic
disbursement of purchase price based upon the disbursement dates
and disbursement amount inputted in the “Payment schedule” tab.
Equated instalment amount is calculated for the purchase price
considering the disbursements based upon the term, repayment
frequency, and profit rate inputted.
o Constant and Balloon payment: Equated instalment amount with
balloon payment in between. Balloon payment dates and amount can
be captured in the “Payment schedule” tab. Equated instalment amount
is calculated for the purchase price based upon the term, repayment
frequency, balloon payment amount and date, profit rate inputted.
o Linear Repayments: Principal repayment for number of instalments can
be captured in the “Payment schedule” tab. Profit payment is
automatically calculated by considering the term, repayment frequency
and profit rate inputted.
o Percentage based Repayments: Repayment of Instalment amount/
principal can be defined in terms of percentage. Number of instalment
and percentage of payment can be inputted in the “Payment schedule”
tab. Percentage instalments/ principal amount is calculated considering
the repayment frequency, percentage of payment, repayment type,
profit rate and tenor.
o Step up/ Step down payments: Repayment of instalment amount/
principal can be defined in Increasing/ decreasing percentage. The
repayment percentage and number of instalments can be captured in
the “Payment schedule” tab. Percentage instalments/ principal amount
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is calculated considering the repayment frequency, percentage of

payment, repayment type, profit rate and tenor.
o Profit only plus constant: Repayment of profit amount for certain period
of the contract and then pay the equated instalment amount to settle
the outstanding amount. The payment of Profit, Number of instalments,
Payment of constant amount and Number of instalments can be
captured in the “Payment schedule” tab. Equated instalment amount is
calculated by considering the term, purchase price and profit rate
inputted.
o Profit only plus bullet payment: Repayment of profit for the certain
period of the contract and then pay the outstanding amount as Bullet
payment. The payment of profit, Number of instalments can be captured
in the “Payment schedule” tab.
o Manual schedule: This is used to input the Principal and profit
repayment amount for each instalment date by user. The repayment
date and amount can be captured in the Asset sale stage. The
amortization rate is calculated based upon the Principal and profit
amount inputted.
 Profit basis – This field is used to choose the list of available profit basis
applied in profit calculation and amortization.
 Profit Method – This field is used to choose the profit calculation method.
 Profit value – This field is used to input the profit rate/ profit amount based
upon the value selected in the Profit method field.
 Value date – This field is used to input the value date of the sale contract.
 Repayment frequency – The repayment frequency of the instalment payment
can be inputted in this field.
 Profit start date – This field is used to input the profit calculation start date. By
default the value inputted in “value date” is populated. It can be amended if
required. It should be greater than or equal to value date.
 Term – This field is used to input the tenor of the sale contract from the value
date. The number of instalments is calculated by considering the Repayment
frequency and term.
 Grace period type – This field is used to choose whether the profit amount
calculated during grace period needs to be collected immediately [Settle] or it
needs to be apportioned [Apportion] in the subsequent repayment dates.
Options available for user input are “Apportion” and “Settle”.
 Disbursement amount and Disbursement date – These fields are used to input
the disbursement date and amount for schedule disbursement contracts.
 Balloon payment amount and Balloon payment frequency – These fields are
used to input the balloon payment frequency and amount which will be
considered for “Constant and balloon payment” schedules.
 Linear amount and No of instalments – These fields are used to input the
principal repayment amount and No of instalments for “Linear repayment”
schedules. It can be multi valued to define multiple principal amounts.
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 Profit/ constant type and No of instalments – These fields are used to input the
type of payment and the number of instalments. It can be multi valued to
define multiple type of payments.
 Repayment percentage, No of instalments, percentage calc type – These
fields are used to input the percentage of repayment and the number of
instalments. The percentage calculation type decides whether percentage
needs to be applied on instalments amount or principal amount.
User has to commit and authorize the sale transaction.
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During authorization of asset sale below accounting entries are generated.

DR Ijara receivable (Purchase amount)
CR Purchase Account (Purchase amount)
DR Ijara profit receivable (Profit)
CR Profit Capitalization (Profit)
Amend – Asset Sale

It is possible to do below amendments to the authorized Asset sale contract.
1). Rescheduling
2). Partial Payment
3). Postponement
4). Early Maturity
5). Amend settlement accounts
Rescheduling
This screen is used to increase/ decrease the maturity date of the contract by
changing the repayment frequency.
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User can navigate to this screen and choose the below options.
 Increase maturity date Change repayment date
 Increase maturity date Change last repayment date
 Increase maturity date Installment amount reduction
 Decrease maturity date Increase last installment amount
 Decrease maturity date Increase repayment amount
The installment amount is recalculated based upon the outstanding amount.

Repayment schedules are built automatically based upon the new repayment date/
repayment amount. No accounting entries are generated after authorization.
Partial Payment - Respite
This screen is used to do partial payment based upon the number of schedules
outstanding. User can navigate to this screen and input the number of schedules
requested to be paid by the customer. The installment amount is unchanged and next
upcoming schedules are removed based upon the number of schedules paid. This is
applicable only for Constant (Annuity) type and Scheduled disbursement with
constant type of repayment schedules.
DR Customer Account (Principal)
CR Ijara receivable
DR Customer Account (Profit)
CR Ijara profit receivable
Partial Payment – Compression
Customer can pay the “N” number of installment in advance but can continue to
make repayment for the remaining installment from next month till the contract
maturity. It will adjust the number of installments “N” paid in advance as per
repayment schedule and reduce the loan tenor with paid installments. The maturity
date of the finance contract will be preponed based upon the number of installments.
This screen is used to do the partial payment based upon the number of schedules
outstanding. User can navigate to this screen and input the number of schedules
requested to be paid by the customer. At the time of committing the Transaction the
repayment schedules will be built automatically based upon the number of schedules
paid by the customer.
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This is applicable only for Constant (Annuity) type and Scheduled disbursement with
constant type of repayment schedules.
CR Ijara receivable
Partial Payment - Online

This screen is used to do the partial payment for the outstanding principal and profit
amount. User can navigate to this screen for inputting the Principal and profit amount
paid by the Customer. Repayment schedules will be generated after recalculation of
installment amount for the remaining tenor. If required the contract term can be
amended before recalculation of instalment.
CR Ijara receivable
Postponement
This screen is used to do the postponement of installments in terms of number of

payments. User can navigate to this screen and input the number of schedules to be
postponed. Below options are available to choose the redefinition of repayment
schedules.
 Add to Next installment – The installment amount scheduled during the
postponement period will be added to the subsequent installment that comes
after the postponement period.
 Add to Last installment – The installment amount scheduled during the
postponement period will be added to the Last installment (Maturity date).
 Extend maturity date – The maturity date of the contract will be extended
based upon the number of schedules postponed.
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The installment amount is unchanged and the next upcoming schedules are
postponed based upon the repayment frequency. No accounting entries are
generated after authorization. Repayment schedules cannot be postponed if the
contract is having outstanding grace period instalments.
Early Maturity
This screen is used to mature the asset sale contract before the maturity date. User
can navigate to this screen and the maturity date is defaulted as Today’s date. There
is an option available to provide certain percentage of the outstanding profit portion
as bonus amount. If required the unearned profit amount can be reversed.
If Top up flag is set as “Yes” then user will have to choose the principal and profit
liquidation account for settling the old finance contract.
The repayment schedules are removed and contract maturity accounting entries are
generated after authorization.
If early maturity type is set as “Return profit” then,

DR Customer Account (Outstanding Amount)
CR Ijara Receivable (Outstanding Amount)
DR Customer Account (Profit Amount)
CR Ijara Profit Receivable (Profit Amount)
DR Profit Capitalization (Outstanding Profit)
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CR Profit and Loss Account (Outstanding Profit)
DR Profit and Loss Account (Bonus Amount)

CR Customer Account (Bonus Amount)
If early maturity type is set as “Reverse un-accrued profit” then,

DR Customer Account (Adjusted profit)
CR Ijara Profit Receivable (Adjusted Profit)
DR Profit Capitalization (Un-Accrued Profit – Adjusted Profit)
CR Ijara profit receivable (Un-Accrued Profit – Adjusted Profit)
Amend settlement account
This screen is used to do the amendment of settlement accounts. User can navigate
to this screen and modify the Principal, profit liquidation accounts.
Asset Sale – Manual schedule

If the user wants to manually define the repayment schedule then “Sale – Manual
schedule” screen has to be used for booking the Asset sale contract. User can
navigate to this screen for inputting the Customer ID and Asset purchase reference
number.
1). Instalment Frequency Based – This option can be used if the instalment date and
Instalment amount is available with Proper frequency. The reduced rate is calculated
automatically based upon the schedules defined.
2). Instalment Non Frequency Based – This option can be used if the instalment date
and Instalment amount is available in ad-hoc dates. The reduced rate is calculated
automatically based upon the schedules defined.
3). Manual – This option can be used if the Principal and profit amount for eac h
instalment date is available. Reduced rate is not calculated and the amortization will
happen automatically by using linear amortization method. The principal and profit
repayment amount for each repayment date should be inputted manually in the
schedule screen.
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During authorization of asset sale below accounting entries are generated.

DR Ijara receivable (Principal)
CR Purchase Account (Principal)
DR Ijara profit receivable (Profit)
CR Profit capitalization (Profit)
Amend – Asset sale – Manual schedule

Amend – Manual – Frequency Based schedule
It is possible to do below amendments to the authorized Asset sale contract.

1). Rescheduling – Only increasing/ decreasing the maturity date is allowed.
2). Partial Payment
3). Early Maturity
4). Amend settlement accounts
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Amend – Manual – Non Frequency Based schedule
It is possible to do the below amendments to the authorized Asset sale contract. After
amendment will have to manually redefine the installment date and Installment
amount for each repayment.
1). Partial Payment
2). Maturity date change
3). Amend settlement account
4). Early Maturity
Amend – Manual – Manual schedule
It is possible to do the below amendments to the authorized Asset sale contract. After
amendment the repayment schedule along with principal and profit payment for each
repayment date to be defined manually.
1). Partial Payment
2). Maturity date change
3). Amend settlement account
4). Early Maturity
Past due Ops

If the repayment amount is not available on the due date in customer account then
the payment is moved to past due for settlement. After customer credits the funds to
his account the past due can be settled in online / COB. This can be settled in online
by using “Customer – PD repayments” screen.
Provisioning for the unsettled past due portion can be handled by using “Manual PD
provisioning” screen.
Refer to the Past due user guide for more information about settling the past due.
Page 32 of 57
Repossess Ops
The assets sold to the customer can be repossessed on or before the maturity date if
he cannot repay his installments due to various reasons. The repossessed asset can
be sold to a different customer using outright sale or it can be sold to a different
customer on deferred payments. The bank can sell it for profit or loss.
The workflow for repossessing the asset is shown below.
Page 33 of 57
•Ba nk has to s ettle the

Bank settle PD Pa s t due outstanding
us i ng the Internal
payments a ccount
•Outs ta nding a mount i n the

Re-Possess As s et sale contract is settled
us i ng the Internal account. The
RSI contract ma rket price of the asset is
ca ptured in this s creen
•Repossessed asset
ca n be s old to a third
pa rty for outri ght
s a le or a new a sset
purcha se is booked
Resale Asset/ for s elling it i n
Repurchase RSI deferred
repa yments.
Asset •The di fference
between the Ma rket
pri ce a nd the s old
pri ce is a ccounted as
Profi t or l oss for the
ba nk.
Enquires
Enquiry 1: Accounting entries summary
Page 34 of 57
Enquiry 2: Customer Ijara contract summary
Enquiry 3: View schedule balances full details
Page 35 of 57
Enquiry 4: View schedule
Enquiry 5: Ijara accruals enquiry
Page 36 of 57
Enquiry 6: Ijara outstanding contracts summary
Enquiry 7: Ijara deal report
Page 37 of 57
Enquiry 8: Finance position of a Customer
Enquiry 9: Finance position of a Guarantor
Enquiry 10: View Ijara Purchase Transactions
Limits
Bank can do the set up in the Limit reference and Limit parameter applications. The
Limit is updated for the sale amount after authorization of Asset sale.
Refer to LIMITS user guide for more information about setting up Limits.
Delivery
Refer to DELIVERY user guide for more information about delivery setup.
Page 38 of 57
Services
BNK/ OFS.MESSAGE.SERVICE have to be setup in “Auto” mode for generating the
accounting entries after Asset pre-approval/ Asset purchase.
BNK/IS.B.SB.SCH.DISB have to be attached in COB for automatic disbursement of
scheduled disbursements.
Accounting Process
Asset Request
No Accounting entries.
Asset Purchase
DR Purchase Account
CR Multi supplier Account
If Additional costs are defined,
DR Expenses category
CR Cost counterparty Account
Down payment
DR Customer Account
CR Purchase Account
Payment to vendor
CR Vendor/ Supplier Account
Payment to Cost counterparty
CR Vendor/ Supplier Account

Asset sale – Automatic/ Manual Schedule
DR Ijara receivable (Purchase amount)

CR Purchase Account (Purchase amount)
DR Ijara profit receivable (Profit amount)
CR Profit Capitalization (Profit amount)
Page 39 of 57
Daily Accrual – Automatic Schedule

DR Profit Capitalization
CR Profit and Loss Account
Schedule repayment
DR Customer Account (Repayment Principal Amount)
CR Ijara Receivable (Repayment Principal Amount)
DR Customer Account (Repayment Profit Amount)
CR Ijara profit receivable (Repayment Profit Amount)
Unpaid schedule repayment
DR Past due account
CR Ijara Receivable (Principal)
CR Ijara profit receivable (Profit)
Partial Payment
CR Ijara receivable (Principal)
CR Ijara profit receivable (Profit)
Contract Early Maturity
If early maturity type is set as “Return profit” then,

DR Customer Account (Profit Amount)
CR Ijara Profit Receivable (Profit Amount)
DR Profit Capitalization (Outstanding Profit)
CR Profit and Loss Account (Outstanding Profit)
DR Profit and Loss Account (Bonus Amount)

CR Customer Account (Bonus Amount)
If early maturity type is set as “Reverse un-accrued profit” then,

DR Customer Account (Adjusted profit)
Page 40 of 57
CR Ijara Profit Receivable (Adjusted Profit)

DR Profit Capitalization (Un-Accrued Profit – Adjusted Profit)
CR Murabaha profit receivable (Un-Accrued Profit – Adjusted Profit)
Past due settlement
DR Customer Account
CR Past due Account (Principal)
DR Customer Account
CR Past due Account (Profit)
Bank settle PD
DR Repossess Account (Past due outstanding)

CR Past due Account (Past due outstanding)
Repossess the Asset
DR Repossess Account (Sale outstanding)

CR Ijara receivable (Sale outstanding)
Resale the Asset for Profit
DR Third party customer account (Sold Amount)

CR Repossess account (Outstanding settlement)
CR Profit and Loss account (Sold amount – Outstanding settlement)
Resale the Asset for Loss
DR Third party customer account (Sold Amount)

DR Profit and Loss account (Outstanding settlement – Sold amount)
CR Repossess account (Outstanding settlement)
Page 41 of 57
Troubleshooting
Example for inputting different type of repayment schedules
Finance details needs to be inputted in Asset sale for Corporate Murabaha contracts.
Constant (Annuity)
Principal Amount = 108000

Profit rate (Flat) = 5%
Term = 12M
Value date = 01-Jul-2014
Profit start date = 03-Jul-2014
Repay frequency = 20140801M0110
Page 42 of 57
Scheduled disbursement + Constant repayment

Profit rate (Reduced) = 4.54%
Term = 12M
Scheduled disbursement date, Amount = 3-Jul-2014, 20000; 10-Jul-2014, 35000;
25-Jul-2014, 53000
Page 43 of 57
Constant + Balloon payments

Profit Amount = 3500
Term = 12M
Balloon Payment = 5000 on every 3 Months once starting from 1-Sep-2014 till 1-
Mar-2015, 10000 on every 1 month once starting from 1-Mar-2015 till Maturity date.
Page 44 of 57
Linear repayments
Profit rate (Flat) = 3.5%
Term = 60M
Principal payment and No of schedules = 1000, 30 schedules; 5000, 10 schedules;
2000, 14 schedules
Page 45 of 57
Percentage based repayments - EMI

Term = 36M
Percentage calc Type = EMI
Repayment % and No of instalments = 15%, 7 Installments; 50%, 20 Installments;
35%, 8 Installments
**Total percentage defined for repayments should be equal to 100
Page 46 of 57
Percentage based repayments - Principal

Term = 36M
Percentage calc Type = Principal
35%, 8 Installments
**Total percentage defined for principal payments should be equal to 100
Page 47 of 57
Step up - EMI
Term = 36M
150%, 8 Installments
**Total percentage defined should be equal to the Number of multi values [Assume 100% for
each multi value]. Suppose if there are three multi values defined then total needs to be
equal to 300.
Page 48 of 57
Step up - Principal
Term = 36M
50%, 16 Installments
Page 49 of 57
Step down - Principal

Term = 36M
20%, 15 Installments; 15%, 5 Installments;
Page 50 of 57
Step down - EMI

Term = 36M
25%, 12 Installments; 20%, 1 Installments;
**Total percentage defined should be equal to the Number of multi values [Assume 100% for
each multi value]. Suppose if there are three multi values defined then total needs to be
equal
Page 51 of 57
Profit only plus Constant

Term = 36M
Profit only payment for 23 Installments
Constant payment for 12 Installments
Page 52 of 57
Profit only plus Bullet

Term = 23M
Profit only payment for 22 Installments
Page 53 of 57
Manual schedule – Frequency based

Principal Amount = 23000.00
Profit Amount = 247.00
Term = 3M
Value date = 02-Nov-2014
Profit start date = 02-Nov-2014
Page 54 of 57
Manual schedule – Non Frequency based

Term = 3M
Value date = 02-Nov-2014
Profit start date = 02-Nov-2014
Page 55 of 57
Manual schedule - Manual

Term = 28M
Profit rate = 5%
Page 56 of 57
Glossary
………..
Index
...............
Page 57 of 57

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R14 - UG - Retail Service Ijara

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TEMENOS T24

Retail Service Ijara

Information in this document is subject to change w ithout notice.

Ijara is an agreement wherein the bank leases movable or immoveable property to a

Retail Service Ijara

Products - IS.H.PRODUCTS, ISB

Category code can be changed if required.

Parameter - IS.H.PARAMETER, ISB

Commodity – IS.H.COMMODITY, ISB

Sub asset types – IS.H.SUB.ASSET.TYPE

Additional Costs – IS.H.COST.TYPES, ISB

Check List – IS.H.CONTRACTS.ACTION.TEXT, ISB

What if – Negotiation (Flat rate/ reduced rate/ Profit amount)

What if – Negotiation (Manual schedule)

Retail Service Ijara

• Customer requests to the bank for purchase of Asset.

• Profit rate, Number of schedules, Repayment frequency, Down payment if any is

• Payment is made to the vendor/ supplier for the purchased asset.

Asset short title

Vehicle condition (New/ used)

Type Plate (Private/ Public/ Taxi)

Asset short title

Asset short title

No accounting entries are created during authorization of Asset request.

After authorization following entries are generated,

If Additional costs are defined,

Ijara down payment

Payment to Vendor (Internal/ External)

Payment to Cost counterparty (Internal/ External)

is calculated considering the repayment frequency, percentage of

User has to commit and authorize the sale transaction.

During authorization of asset sale below accounting entries are generated.

Amend – Asset Sale

The installment amount is recalculated based upon the outstanding amount.

Partial Payment – Compression

Partial Payment - Online

This screen is used to do the postponement of installments in terms of number of

If early maturity type is set as “Return profit” then,

CR Profit and Loss Account (Outstanding Profit)

DR Profit and Loss Account (Bonus Amount)

If early maturity type is set as “Reverse un-accrued profit” then,

Asset Sale – Manual schedule

During authorization of asset sale below accounting entries are generated.

Amend – Asset sale – Manual schedule

It is possible to do below amendments to the authorized Asset sale contract.

Amend – Manual – Non Frequency Based schedule

Past due Ops

The workflow for repossessing the asset is shown below.

•Ba nk has to s ettle the

•Outs ta nding a mount i n the

Enquiry 2: Customer Ijara contract summary

Enquiry 3: View schedule balances full details

Enquiry 4: View schedule

Enquiry 5: Ijara accruals enquiry

Enquiry 6: Ijara outstanding contracts summary

Enquiry 7: Ijara deal report

Enquiry 8: Finance position of a Customer

Enquiry 9: Finance position of a Guarantor

Enquiry 10: View Ijara Purchase Transactions

DR Multi supplier Account

CR Vendor/ Supplier Account

Payment to Cost counterparty

DR Multi supplier Account