ISLAMIC BANKING

Bai Salam

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, for any purpose,
without the express written permission of TEMENOS HEADQUARTERS SA.
COPYRIGHT 2007 - 2008 TEMENOS HEADQUARTERS SA. All rights reserved.
 User Guide – Bai Salam

Table of Contents

Document History ...................................................................................................................... 3

Sign Off .................................................................................................................................. 4
INTRODUCTION ....................................................................................................................... 5
Disclaimers............................................................................................................................. 5
T24 Overview............................................................................................................................. 6
Functional Overview .................................................................................................................. 7
IZALIT-ALGHIBIN .................................................................................................................. 7
Bai Salam Work Flow Diagram.................................................................................................. 8
Bai Salam Contract processing Flow......................................................................................... 9
Commodity Definition Stage ...................................................................................................... 9
Menu Option for Capturing the Asset ................................................................................. 9
Asset Capture Screen ........................................................................................................ 9
Authorise the Asset definition ........................................................................................... 10
Purchase Stage.................................................................................................................... 10
Menu Option for Purchase and Delivery of Asset ............................................................ 11
Screen of Asset Purchase Input ....................................................................................... 11
Accounting Entries after Authorisation of Asset Purchase............................................... 12
Delivery Stage (Full or Partial Delivery of Goods) ............................................................... 13
Menu Option for Purchase and Delivery of Asset ............................................................ 14
Input of Asset Delivery ..................................................................................................... 15
Accounting Entries after Authorisation of Asset Delivery ................................................. 15
Bai Salam Sale Contract ...................................................................................................... 16
Features of Bai Salam Finance contract .......................................................................... 16
Finance Contract Input ..................................................................................................... 16
T24 Setup ................................................................................................................................ 18
T24 Bai Salam Menu ............................................................................................................... 19
Accounting Entries ................................................................................................................... 20

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Document History

Author Version Date

Jude Roy Jaideep 1.0 25/06/2008

Comments:

New

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Sign Off

The following business representatives shall sign off on the functional requirements document
proposed as below.

Sign off Date Signature

Note: Any changes subsequent to the signoff of this document will be subject to the standard
change control procedures.

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 User Guide – Bai Salam

INTRODUCTION

This document covers the business requirements for the Bai Salam product to be customised
into T24.

Bai Salam means a contract in which advance payment is made for goods to be delivered
later on. The seller undertakes to supply some specific goods to the buyer at a future date in
exchange of an advance price fully paid at the time of contract. It is necessary that the quality
of the commodity intended to be purchased is fully specified leaving no ambiguity leading to
dispute. The objects of this sale are goods and cannot be gold, silver, or currencies. Barring
this, Bai Salam covers almost everything that is capable of being definitely described as to
quantity, quality, and workmanship. This contract is regularly used for financing agricultural
production.

Disclaimers
This document will form the basis of build phase of TEMENOS T24. Any functionality missing
or changed in the final version of this document will be subject to standard change control
procedures.

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T24 Overview

The function for managing commercial and retail financing is within the T24 “Loans and
deposits”. These modules allow the user to generate, maintain and track a wide range of
finance, with different repayment characteristics and a large number of regular repayments.
There are also facilities for special payments and early repayment.

For Islamic financing products, T24’s “Loans and Deposits”, “PD.PAYMENT.DUE” & “LIMIT”
modules will be used in conjunction with other applications developed specifically to cater to
the requirements of Islamic mode of financing.

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Functional Overview

T24 Bai Salam involves the advance purchase of specified goods with full pre-payment,
where the price is paid in advance by the bank and the goods are delivered at a later date by
the customer. Bank can sell these goods delivered by the customer to another customer
either partially or fully, at the original cost plus agreed profit.

 Client will apply to get Bai Salam Finance from the bank against selling and delivering
the pre agreed commodity & quantity in differed date i.e.
- Customer receive money at Deal Date
- Customer will deliver the harvest (commodity) at a delivery date (differed
date). Option available for the customer to deliver these goods either fully or
partially.
 Bank, after receiving the commodity (partially/fully), can resale the received
commodity to another client(s) for a differed payment with different price (original
price + agreed profit). The customer can repay in one bullet payment or instalments.

IZALIT-ALGHIBIN
This is applying the justice Rule for BAI SALAM product
The farmer and the bank have to agree on a prefixed value, quality & quantity for the harvest
that will be taken lately by the bank. But Islamic Shari’a obliged the bank that if a big
fluctuation happens in the value of the harvest, then for the benefit of the bank, the latter has
to share the farmer in the profits made, by a percentage accepted by the bank.

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Bai Salam Work Flow Diagram

Client Apply for BAI-SALAM Finance

Asset Definition
Bank captures Commodity / Customer provides commodity /
Asset details Asset details

Bank gives an offer for BAI

SALAM customer to buy Asset Purchase
Bank to pay the commodity
customer commodity by its value to customer Account.
current value

Bank receives the Asset Delivery Customer will deliver the

commodity from the Seller Commodity to the bank.
(Bai Salam Customer)
Commodity can be received
fully / partially.

Bank can sell the received

commodity to another
Client(s) with profit or Loss. Asset Sale
Finance Contract with the
Commodity can be sold fully Buyer.
/ partially to one or more
customers.

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Bai Salam Contract processing Flow

Commodity Definition Stage

Bank will capture the commodity details provided by the Bai Salam customer.

This stage will be handled in ISB.ASSET.REGISTER application.

 Customer will apply for Bai Salam Finance with the bank. Customer will be the
Supplier.
 Following details will be captured:
- Commodity Code
- Commodity Details
- Bai Salam Customer (Supplier) ID
- Purchase Quantity
- Unit Price
- Purchase Date
 Customer (supplier) A/c will be defaulted to Customer a/c or Bai Salam internal
A/c depending upon set up in the IS.H.PARAMETER table. (VENDOR.PAY as
Internal or External”)

Menu Option for Capturing the Asset

Asset Capture Screen

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Authorise the Asset definition

Purchase Stage
This stage will be handled in IS.H.CONTRACTS application.
 When the bank agrees to buy the commodity from the BAI SALAM customer, new
IS.H.CONTRACT will be opened.
 Input the Bai Salam customer.
 Select the Bai Salam Asset defined in the Purchase Stage. It will list the Bai Salam
Assets linked to the above Bai Salam Customer.

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Menu Option for Purchase and Delivery of Asset

Screen of Asset Purchase Input

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On clicking the dropdown of “Bai Salam Asset” system will list the Purchases pending for this
customer.

Accounting Entries after Authorisation of Asset Purchase

Liability entries are raised for the value of the Asset to be purchased. These liability entries
are reversed on each delivery.

CR – Supplier Account (Customer Account or internal Account)

DR – Bai Salam Purchase Account

CR – Customer Liability Internal Account

DR – Bai Salam Goods in Transit Account

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Delivery Stage (Full or Partial Delivery of Goods)

This stage will be used to capture either partial or full delivery of Goods by the Bai Salam
Customer.
This stage will also be handled in IS.H.CONTRACTS application.
 Using an enquiry provided, input the Bai Salam customer number or Bai Salam
purchase reference number or both.
 Enquiry displays the list of record(s) of Bai Salam purchases. Select the record and
update with the delivery quantity and date in the field DELIV.QTY & DELIV.DATE
respectively.
 The quantity can be delivered fully or partially.

New fields will be added for stock control & monitoring as follows:
 DELIV.QTY – Quantity being delivered currently
 DELIV.DATE – Date of delivery
 DELIV.QTY.HIS – history of quantities delivered
 DELIV.DATE.HIS- History of the delivery dates
 TOL.DELIV.QTY – Total Quantity delivered
 SOLD.QTY – Quantity sold by the bank, through finance contract with another
customer
 SOLD.LD.ID – Finance contract reference
 TOT.SOLD.QTY – Total quantity Sold

Fields DELIV.QTY & DELIV.DATE should be inputted when the goods are delivered and it
contains the delivered quantity & date respectively.
DELIV.QTY will accepts +/- value, to handle any reversal of delivery. If the bank has to reduce
the quantity of goods delivered then this field will inputted with a "-" value. E.g.: -200.
Fields DELIV.QTY.HIS & DELIV.DATE.HIS will be updated when the record is authorised and
it contains the delivered quantity & date respectively. This forms a Multi-value NOINPUT set
of field, so in case of partial delivery or reversal of delivery, it contains the history of deliveries
made.
Field TOL.DELIV.QTY will be updated when the goods are delivered and will contain the total
quantity delivered (minus any reversal of delivery).
Fields SOLD.QTY & SOLD.LD.ID will be updated when the delivered/received commodity will
be sold in market and it contains the Sold quantity and the finance reference number.
Field TOT.SOLD.QTY will be updated up on authorisation of each Sale contract.
For Accounting Entries, please refer Accounting Entries section.

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Menu Option for Purchase and Delivery of Asset

On clicking the “Delivery of Asset” option system will open the following enquiry screen. User
can list the pending deliveries based on the Customer Number or the Purchase reference.

Following screens shows the display of the enquiry output and the option available for
inputting the delivery of the assets.

Continuation of Previous Screen shot...

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Input of Asset Delivery

The user has to input the Delivery Quantity and the date of the delivery.

Accounting Entries after Authorisation of Asset Delivery

Entries within the marked area are raised on authorisation of the asset delivery. The Liability
entries raised during the purchase stage is reversed by the amount of delivered quantity.

DR – Customer Liability Internal Account

CR – Bai Salam Goods in Transit Account

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Bai Salam Sale Contract

The commodities delivered can be sold to another client with standard T24 Finance model.

Features of Bai Salam Finance contract

- Can execute the sale even though the commodity is not fully delivered by the Bai
Salam Customer.
- Any amount of the delivered quantity can be bought, either fully / partially.
- Any customer can buy the commodity
- Payment can be scheduled or bullet payment.

Finance Contract Input

 Open a new finance contract
 Input customer number of the buyer.
 Select the commodity to buy from the list of delivered commodity/asset. System will
list/allow only those commodities which are delivered and not yet sold.
 System will display the available quantities that can be sold. Enter the quantity of
commodity to sell.
 System will default the principal & profit repayment account to the customer’s current
account of the contract. User can modify this any time during the life of the contract.
 Drawdown account will default to Bai Salam purchase account and it is no input field.
 Can define payment schedule or can be bullet payment.

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After authorisation, fields SOLD.QTY and SOLD.LD.ID in IS.H.CONTRACTS file will be

updated with sold quantity and finance reference id. This is a set of multivalue field, which will
be updated for every sale. In case of multiple partial sales this contains the quantity and
finance reference number, which was sold earlier. Total of the Sold quantity will be updated in
the TOT.SOLD.QTY field in IS.H.CONTRACTS.

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T24 Setup
The operations of the BAI SALAM will be managed through the following activities :

 Input new BAI SALAM contract

- Definition of Asset(Commodity)
- Purchase of Commodity
- Delivery of Commodity
- Sale of Commodity

 For O/S Sale contracts following Actions are available:

- Change Profit Percentage

- Reschedule Contract
- Amendment of repayment a/c
- Early Maturity

 Enquiries and reports

- Basic Accounting Entries

- Finance Contract Schedules
- O/S Salam Finance contracts log sheet
- List of Un-authorized Accounting Entries
- List of Authorized Accounting Entries
- List of Forward Accounting Entries
- List of Bai Salam Purchases/Delivery made
- Customer position

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T24 Bai Salam Menu

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Accounting Entries

Action Accounting Entries Entry Type

With Commodity Purchase Amount ONLINE

On Purchase Date
DR Bai Salam Purchase A/c
(Purchase Stage)
CR Bai Salam Customer(Seller) A/c or Bai Salam Internal
A/c (depending upon vendor pay Internal / External in
Parameter table setup)

DR Bai Salam Transit A/c (Internal A/c)

CR Bai Salam Customer liability A/c (Internal A/c)

On Delivery Date With Amount of Commodity Delivered (Either full or ONLINE

Partial)
(Delivery Stage)
DR Bai Salam Customer liability A/c (Internal A/c)
CR Bai Salam Transit A/c (Internal A/c)

On Reversal of Goods With Amount of Commodity Reversed ONLINE

Delivered.
DR Bai Salam Transit A/c (Internal A/c)
CR Bai Salam Customer liability A/c (Internal A/c)

On Value Date With Amount of Commodity Sold ONLINE

(Sale Stage) CR Bai Salam Purchase A/c
DR LD Receivable (LIVEDB)

COB
Daily Profit Amortization DR LD Accrual
(During life of contract) CR PL Profit Category

In case Instalments not Amount Not Paid Entry COB

paid (PD entries) DR PD.ACCT
CR LD Receivable (LIVEDB)
Or LD Accrual Or Pl Charges and Fees

PD Collection (Online or at COB)

DB CUSTOMER.LIQ.ACCT
CR PD.ACCT

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On Maturity Date /
Payment Schedule Date With Financed / payment schedule Amount COB
(Maturity / Schedule CR LIVEDB
Stage)
DR Customer(Buyer) A/c

On Maturity Date / With Profit Amount COB

Payment Schedule Date CR LD Accruals
(Maturity / Schedule DR Customer(Buyer) A/c
Stage)

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