Islamic Banking User Manual-IJARA

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TEMENOS User Guide - Ijara
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TEMENOS Confidential Page 2 of 59

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Item Detail
PRODUCT NAME IJARA
DOCUMENT TYPE User Guide
CONTACT BACK TO gpack@temenos.com
SPECIAL COMMENTS (1) If 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)
(Development / Support) Specific

SPECIAL COMMENTS (3)
(Client Specific)

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Serial No Last Doc Version Author Comments

Updated
1.0 22.05.2006 Version 1 Liril Thomas New
1.1 14.11.2007 Version 2 Jayadeva Updates with Browser
Vijay Kumar Release.

Table of Contents
Overview of this guide........................................................................................................................ 7
Assumptions ................................................................................................................................... 7
Document Support ......................................................................................................................... 7
Scope of this guide ......................................................................................................................... 7
Introduction ........................................................................................................................................ 8
Document Purpose......................................................................................................................... 9
TEMENOS T24 TM Modules Supported.......................................................................................... 9
Multi Threading Supported ............................................................................................................. 9
Abbreviations used in this Guide.................................................................................................... 9
Ijara Work Flow ................................................................................................................................ 10
Process Flow ................................................................................................................................... 12
IJARA PROCESSING .................................................................................................................. 12
Asset/Goods Definitions................................................................................................................... 12
Vehicle .......................................................................................................................................... 12
Real Estate ................................................................................................................................... 12
Equipment .................................................................................................................................... 12
Movable Equipment...................................................................................................................... 12
Miscellaneous Assets ................................................................................................................... 12
Asset Acquisition.............................................................................................................................. 16
Asset Purchase Pre-Approval ...................................................................................................... 17
Asset Purchase ............................................................................................................................ 18
Reverse Asset Purchase .............................................................................................................. 20
Miscellaneous Charge .................................................................................................................. 21
Forward Lease Payments ................................................................................................................ 22
FWL Lease - Input Contract ......................................................................................................... 23
Additional payment to contractor .................................................................................................. 25
Payment to Third party ................................................................................................................. 26
Customer Payment....................................................................................................................... 27
Amendment of Contract ............................................................................................................... 28
Early Maturity ............................................................................................................................... 29
Financial Ijara ................................................................................................................................... 30
Input New Contract....................................................................................................................... 30
Modify the Contract ...................................................................................................................... 32

Early Mature Ijara Contract .......................................................................................................... 33

Repossess Operations:.................................................................................................................... 34
Bank settle PD Payments ............................................................................................................ 34
Re-Possess Lease Contract ........................................................................................................ 35
Sell Re-Possessed asset ............................................................................................................. 36
Re-Purchase Pre-Approval Asset ................................................................................................ 37
Past Due Operations........................................................................................................................ 38
Customer‟s PD repayments ......................................................................................................... 38
Charity Operations ........................................................................................................................... 39
Payment of Overdue charity Amount ........................................................................................... 39
ENQUIRIES ..................................................................................................................................... 40
Basic ISB Set Up Tables.................................................................................................................. 42
ISB Product Type ......................................................................................................................... 42
ISB System Parameter ................................................................................................................. 44
ISB Product Parameter ................................................................................................................ 46
ISB Cost Types ............................................................................................................................ 52
ISB Commodities.......................................................................................................................... 54
IJARA Accounting Entries ................................................................................................................ 55

Overview of this guide
The purpose of this guide is to help the user to understand the various templates and the fields in
the templates and the crucial setup of any PARAMETER Files in the IJARA Islamic Product.
Assumptions
It is assumed that the reader of this guide has knowledge of the following.
 Fair knowledge in TEMENOS T24 TM

 Basic knowledge in LD.LOANS.AND.DEPOSITS module
If any of the above assumptions are not met, then get back to the Project Manager
Onsite for HELP.
Document Support
Any queries in any part of this document can be addressed to gpack@temenos.com. Refer to the
Contact Back To address in the Document Detail pane on Page 3 of this Guide for support.
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

Introduction
Ijara is defined as a transaction in which the bank (Lessor) leases an asset owns by it, to the
customer (Lessee). This is a well-known technique of financing the use of moveable and
immovable property including heavy equipments and large & expensive means of transport such
as airplanes.
Ijara is an agreement wherein the bank leases moveable or immoveable property to a customer
against a fixed or variable rental charge. In case the bank does not possess the required
moveable or immoveable 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.
The customer may be provided the option to purchase the item at the end of the lease period at a
pre-agreed price. Customer becomes the owner only when, they exercise their option to purchase.
A lease contract is made a binding contract so that it may not be cancelled before the end of the
lease period. This may be done to save the bank from uncalled losses.
Ijara is of two types:
1. IJARA FORWARD
2. IJARA FINANCIAL
Forward Ijara
The bank will acquire the asset over a period of time. It entails placing an order with a
manufacturer to manufacture a commodity for the purchaser as per the specifications. Bank may
be responsible for the manufacturing of the asset, building it or ordering it. Based on the order and
forward lease agreement with the identified lessee, the bank will start making payments to the
manufactures. Bank may by mutual agreement receive advance lease rent during construction.
However, the actual lease to the customer starts upon completion /delivery of the asset on a future
date. The main idea that bank makes a forward lease agreement (or an agreement to lease an
asset to be available after period of time, usually after manufacturer delivers the asset).
The forward lease will contain the terms of the normal Ijara lease contract, which will be applied
after asset delivery.
Ijara Financial
In this mode of leasing, the Lessee is offered the option of ultimately purchasing and becoming the
owner of the asset including equipment / property. The full cost of the asset is depreciated over the
lease period, and the owner is given the option of purchasing the asset at the end of the lease
period at a pre-agreed price. In most cases, the bank will, upon request from the customer,
purchase the asset from third party or the customer itself.

Document Purpose
This document provides information to the user to understand the different parameter files and
their setup. This document provides detailed information about every Field of all the Files used in
the IJARA Islamic Product
TEMENOS T24 TM Modules Supported
The following Files in the Following Modules are Supported and Used by this Ijara Islamic
Product.
 LD.LOANS.AND.DEPOSITS
 FUNDS.TRANSFER
 PD.PAYMENT.DUE
 LIMIT
 LMM.CHARGE.CONDITIONS
 FT.TXN.TYPE.CONDITION
 PD.PARAMETER
Multi Threading Supported

Multi threading supported. The following routines are multithreaded in Ijara.
 IS.DB.FWL.CUS.PAY
 IS.DB.CALCULATE.MUR.PENALTY
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

Ijara Work Flow
1. Corporate / Retail customers will apply to the bank for leasing of asset for their business or
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 the supplier details,
and quotation.
2. Bank will evaluate the market price of the asset via bank Consultant (especially for real
estate)
3. Bank will approve the customer's request and give an acceptance to initiate the
transactions to customer.
4. Customer will sign the promise agreement for the lease. At this stage, bank may take a
certain amount as Hamish Jiddiyah to ascertain customer's seriousness about the
agreement. It will be re-funded if customer sign Lease Contract) and Bank can collect the
following from the customer
 Administration fees (as bank product policy)
 Down-payment (based on customer scenario)
5. Bank will purchase the equipment from local market and if required from international
market or manufacture or build the asset. In case of Financial Ijara, 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 in case of Forward Ijara, Bank will start release payments based on
bills delivered from manufacturer during manufacturing or building period and also bank
will start calculate additional advanced rent paid by the customer for amounts paid during
manufacturing period. As per the ijara contract, Bank can't start leasing contract until
manufacturer or supplier deliver the asset to the bank and all payments to supplier should
not exceed the asset declared value which is agreed earlier between the bank and the
customer.
6. 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 forward lease agreement
7. The lease amount (could be inclusive of the rental, advance rent, and Ijara security) will be
fixed for the asset by a monthly or quarterly or half-yearly or annual basis. Customer will
provide the letter of authorization to the bank to debit his account or will provide the PDCs
equivalent to the agreed rental amount.
8. All external costs of lease agreement like evaluation fees; legal fees etc will be recovered
from the lessee either fully or on pre-agreed ratio. The banks ratio of these expenses,
initial expenses if any, would be booked in Ijara Expense.
9. Lease agreement cannot be amended / cancelled without mutual agreement of two parties.
10. Customer shall maintain an account either with the bank or will make payment through
PDC.In case of default in repayment; the system will calculate penalty charges after the
given grace period. However, these charges will not be debited to customer account but
be available for information.

11. If the default extends to more than a specified number of days, the profit
accruals/amortisation and asset depreciation will be stopped and the only option after this
stage will be to repossess the asset from the customer. Based on the book value and the
market value of the asset at the time of repossession, the bank might incur a loss. Such
loss if any will be recovered by the bank from the security deposit (if any) taken at the time
of signing of lease agreement. If there was no security deposit taken at the time of signing
the lease agreement or if the loss amount exceeds the security deposit amount, then
further recovery can be done from customer if the lease agreement specifically stipulates
customer's obligation to pay for any such losses.
12. Once the asset has been repossessed by the bank in case of defaulting of payments by
Ijara Customer, the bank will have the option to do an outright sale of such a repossessed
asset in the market to any other counter party.

Process Flow
IJARA PROCESSING
Note: The customer has the option to go for Financial Ijara Contract without entering into a
Forward Ijara. This depends on the value in FWL.FLAG during the Pre-Approval of the asset to be
purchased
Asset/Goods Definitions
The first stage in ijara Processing is to define an asset and the supplier from whom the bank is
buying it. Use the Asset/Goods Definitions from the menu. On pressing ' New Deal Button',
an automatic ID is generated for the contract (hereafter called the IAR or Asset Definition Contract).
The ID has the format IAR- Julian Date - Unique serial number.
The options available in Asset Definitions are:
Vehicle
Real Estate
Equipment
Movable Equipment
Miscellaneous Assets
Note: A single customer can have more than one asset defined in ISB.ASSET.REGISTER
table

During the Asset/Goods Definitions stage the following actions required from users:

Applied Customer ID: The party to whom the goods are going to be leased under the Ijara
contract. Enter the customer id in this field.
Supplier ID: The party from whom the goods are being purchased. This field will be inputted, if the
supplier is a customer of the Bank. Should be a valid entry in the CUSTOMER file
Supplier Name: The name of the Supplier. This field will be inputted, if the supplier is not a
customer of the Bank.
Supplier's Acc: The account of the purchase counter party with the bank. If no account exists, or
if the supplier is not a bank‟s customer or need to disburse the amount at the later stage, an
internal account can be input.
Purchase.Price: The price per unit of the goods being purchased
Purchase Qty: Input the Quantity to purchase.
Total Goods Cost: The product of the PURCHASE.PRICE multiplied by the PURCHASE.QTY
Currency: The currency in which the contract is undertaken. This will have to be the same as the
currency to be used for purchase. This is a no input field.

Apart from vehicle, real estate & equipments, any new assets can also be included in the Ijara
contract. To do this action, click the 'Miscellaneous Assets' item on the menu. On pressing '
New Deal Button', an automatic ID is generated for the contract as shown below: Give the details
of the miscellaneous asset in the „Details‟ tab

Asset Acquisition
The second stage in Ijara Processing is the Asset Purchase. Choose the option Asset
Acquisition. The actions carried out in Asset Acquisition are:
 Asset Purchase Pre-Approval

 Asset Purchase
 Reverse Asset Purchase
 Miscellaneous Charge
 Down Payment

Asset Purchase Pre-Approval

The first stage is to approve the purchase of the asset. To do the pre-approval, click on the 'Asset
Purchase Pre-Approval' item on the menu. On pressing ' New Deal Button', an automatic ID
is generated for the contract (hereafter called the IS or Purchase contract). The ID has the format
IS- Julian Date - Unique serial number.
The first tab in this screen "Ijara Request" has the following fields:
PRODUCT.CODE: The product that is being purchased for this particular Ijara contract. This is a
no-input field, which will be defaulted by the system and has to be a valid record in the
IS.H.PRODUCTS file. Value in the PRODUCT.CODE field will determine which parameter record
the system has to access for further processing.
FWL.FLAG: This is a mandatory field, which will have two values "YES", or "NO". If the flag value
is "YES", then we are doing the forward ijara contract first otherwise we are directly entering into
the financial ijara contract
Customer ID: The party to whom the goods are going to be leased under the Ijara contract. Enter
the customer id in this field
Multiple Asset/Supplier: This field defines whether there are multiple assets/suppliers
Asset ID: Asset definition ID. It should be a valid record in ISB.ASSET.REGISTER application.
Choose the appropriate asset id from the drop-down menu.
Currency: The currency in which the contract is undertaken. This will have to be the same as the
currency to be used for purchase of the goods at a later stage. Should be a valid record in the
CURRENCY file.

Asset Purchase
After the Pre-Approval of the contract, the bank will purchase the required goods from the market.
The 'Asset Purchase' option has to be chosen from the menu. The same contract ID that was
used when doing the Pre-Approval will have to be input in the ID line.
The 'Basic Details' tab & Purchase Details tab will default information that have been captured at
the time of doing the Pre-Approval. The last field AVAILABLE.QTY shows the number of units of
the commodity purchased that are still available with the bank. When these units are leased as
part of the Ijara contract or are sold in the open market, this field will be updated by the system
with the new figure.
Choose the option Asset purchase under Asset Acquisition from the menu.

The actual information regarding purchase is captured under the tab 'Purchase Details',
containing the following fields:
COST.TYPE: This is a valid record in IS.H.COST.TYPES. It should have been defined earlier by
using the 'ISB Cost Types' option under 'Basic ISB Set up Tables' in the Menu
Cost Amt: The amount of the cost incurred for the cost type mentioned in the previous field.
Cost Date: The date on which the costs were incurred
Cost. Cparty.Acc: The account of the counter party to whom the costs are being paid. If such
account does not exist, an internal account can be input here.
Add.To.Total: The allowed inputs for this field are YES or NO. If YES is chosen, then the cost in
COST.AMT is added to the basic cost of the goods, as it appears in the TOTAL.GOODS.COST.
If the input in this field is NO, then the amount in COST.AMT is not added to the basic cost of the
goods.
Net Cost: This field shows the net amount (Total.Goods.Cost + Cost.Amt depends on the
ADD.TO.TOTAL field)

Reverse Asset Purchase

After the conclusion of purchase transaction, if the customer backs out from his promise to
purchase the asset from bank, the purchase transaction will be cancelled by using the 'Reverse
Function on the same screen'
Upon authorisation of such Reversal, contra entries will be generated for the entries generated at
the time of authorisation of input of the corresponding purchase transaction.
In case of such a cancellation of contract with the customer, if any 'Deal Cancellation' Fee is to be
charged to the customer, then the same will be posted manually using a FUNDS.TRANSFER
screen.

Miscellaneous Charge
Any extra charges that are incurred during the contract can be mentioned here. To do this action,
click the 'Miscellaneous Charge' item on the menu. On pressing ' New Deal Button', an
automatic ID is generated for the contract
Pur Contract Id: The id of the pre-approved contract.

Account to Debit: Enter the account number to debit
Charge Code: Choose the corresponding the charge code from the drop down menu
Charge Amount: Enter the charge amount in this field
Status: The current value of the charge request. Choose the correct option from the drop down
menu:
UNPAID - A request has been made but no further action has been taken
TAKEN - Account entries for the charge have been raised via another application.
PAID - The charge has been paid, and accounting entries raised.
WOF - The charge has been written off.

Forward Lease Payments

In Case FWD.IJARA flag in the purchase contract EQ "Y"
T24 will provide new LD version to cover payments to contractors during Asset building or
manufacture and also to support any repayments from customer to cover construction /
manufacture period. The forward lease option mainly handles the payments to the contractor. After
the asset acquisition, the bank will enter into forward lease with the contractor. Choose the option
Forward Lease under ijara from the menu.
The actions carried out in Forward Ijara are:
 FWL Lease – Input Contract
 Additional Payment to Contractor
 Payment to Third Party
 Customer Payment
 Amendment of Contract
 Forward Early Mature Contract

FWL Lease - Input Contract

During this process, the bank will start the payment process to the contractor. Choose the option
Forward Lease Input Contract under Forward Lease from the menu. The user has to enter the
amount in the Payment Amount field and the maturity date in the completion Date field screen
as shown below. Pressing ' New Deal Button' will automatically generate a LD ID for the
contract.
In the field Purchase Contract Id, the relevant IS contract will have to be input.

Customer ID: The party to whom the goods are going to be leased under the Ijara contract. This
is a mandatory field. Enter the customer id in this field
Pur Contract Id: The id of the pre-approved contract. Choose the corresponding contract id from
the drop down menu
Payment Amount: The amount paid to the supplier when input a new forward lease contract.
Completion Date: The final date of delivery of the asset. This is a mandatory field
Profit Liq Account: If bank decides to collect variable rent from the customer, then customer‟s
account should be inputted in this field.
NOTE: If variable rent has to be collected from the customer, input the customer‟s account in profit
liquidation account and then define the “I” schedules accordingly in the schedule screen, else
schedule will default to collect the rent at the completion date.

Additional payment to contractor

Additional amount can be given to the supplier during the ijara contract using the option
Additional payment to contractor under Forward Lease Payments from the menu as shown
below: The user has to enter the additional amount in the Payment Amount field and date in the
Pay Value Date field. Input the same LD id which is used for the new contract.
Payment Amount: The additional amount paid to the supplier when input a new forward lease
contract. This is a mandatory field.
Pay value Date: The date on which the additional amount paid to the supplier. This is a mandatory
field.
Payment account: Can specify the account to receive the supplier‟s payment amount. By default
it credits to Ijara multi supplier account, so later it can be disbursed to supplier.

Payment to Third party

During the forward Ijara Contract, amount can be given to a third party (a consultant for example)
using the option Payment to thirdparty under Forward Lease Payments from the menu as
shown below: The user has to enter the amount in the Payment Amount field and date in the Pay
Value Date field. The user has to enter the account number for the third party in the Payment
Account field. The amount paid to the thirdparty will be deducted from the total outstanding
amount.

Customer Payment
If the customer is making a down payment during the forward ijara lease period, the user can
choose the customer payment option from Forward Lease Payments option. User can enter
the amount in the Payment amount field with negative amount, the value date in Pay Value Date
field and the account to pay from(debit account) in Payment Account field.
Supplier Paid Amt: This field shows the amount paid to the contractor.
Customer Paid Amt: This field shows the amount paid by the customer to the bank
Outstanding amount: This field shows the outstanding amount to be paid
Payment Amount: This field contains the amount that the customer wishes to pay during the
forward ijara contract as down payment. This is a mandatory field.
REPAYMENT ACCT: The ijara customer account that will be used to make the payment. Should
be an account belonging to ijara customer. Must be in the same currency as ijara/IS contract
currency.
Pay value Date: The date on which the customer is doing the down payment. This is a mandatory
field
Payment Account: Account to pay from (account to debit the down payment amount). There
should be sufficient balance in the account.

Amendment of Contract
The customer has an option to amend the contract during the forward Ijara Contract by extending
the final date of the contract. The new completion date has to be given in the Completion Date
field.

Early Maturity
This action will be used in case of early settlement of a forward ijara contract by the bank. The
user can enter the date on which the bank is doing the early maturity in Completion Date field as
shown below. Early maturity can be done only after the bank paid the full amount to the supplier.
Completion Date: The date on which the bank is maturing the contract. This is a mandatory field

Financial Ijara
The actions carried out in Financial Ijara are:
 Input New Contract
 Modify Contract
 Early Mature Ijara Contract
Input New Contract

After the forward ijara Contract, the next stage is the lease of these goods to the customer through
the actual Ijara contract. The customer has an option to do a direct financial ijara also without
entering into the forward lease contract. In the menu, the 'Input New Contract' option has to be
chosen. Pressing „ New Deal Button', will automatically generate a LD ID for the contract.
In the field Purchase Contract Id, the relevant IS contract will have to be input. On doing so, the
system will default the field Details, Currency, Product Type, Supplier Paid Amt(if forward lease),
customer paid amt(if forward lease), Total Cost Amt from the linked IS contract and these values
cannot be changed.

Explanation of the other fields is given below:

Customer ID: This is a mandatory field. Enter the ijara customer id in this field
Pur Contract Id: The id of the pre-approved contract. Choose the corresponding contract id from
the drop down menu. This is a mandatory field
Contract Date: The start date of financial ijara contract. NOINPUT field.
Final Pay Date: The date on which the Lease contract matures.
Profit Rate type: Indicates the type of profit rate to be used for the contract. User can choose 2
/3/4 from the drop down menu.
Profit Key: This is used to define Profit key from T24 table in order to re-value Profit percentage
Profit Rate: Indicates the annual profit fee rate applicable on the contract.
Security Flag: This field will be used to define the following for MIS purposes: - This is a
mandatory field
 Secured
 Partially Secured
 Unsecured
Fwl Profit Applicable: The possible values are “Add to ijara Amt” or “Customer will Pay” or “Write
Off”. If we choose the first option, then the forward profit amount will get added to the ijara amount.
For the second option, the customer account will get debited immediately with the profit amount.
The third option will debit the P/L account.
Charge Code: This should be an ID in the LMM.CHARGE.CONDITIONS record.
Charge Amt: This field could either be manually input by the user or it will be defaulted by the
system according to the settings in LMM.CHARGE.CONDITIONS, when the contract is committed.
Security Flag: This field will be used to define the following for MIS purposes: - This is a
mandatory field
 Secured
 Partially Secured
 Unsecured

Modify the Contract
Note: After the financial ijara input, the customer can have the option to modify the contract by
paying a down payment so that the schedules will also get redefined. The screen shot is given
below:

Early Mature Ijara Contract

This action will be used in case of early settlement of financial ijara contract. This action can be
carried out if the end date of ijara contract has not passed and also the closure can be done only
with effect the bank date. On retrieving the desired contract, the date in FINAL.PAY.DATE will
have to be set to current date. On committing the contract, any pre-defined schedules that may
exist will be removed by the system.

Repossess Operations:
The actions carried out in Repossess of Ijara Contract are
 Bank Settle PD Payments

 Re-Possess Lease Contract
 Sell Re-Possessed Asset
 Re-Purchase Pre-Approval
Bank settle PD Payments

If the customer is defaulted for some months, the bank will take the decision of repossessing the
asset by settling the PD amounts. Choose the option “Bank Settle PD payments” under “RE-
Possess OPS”. To choose the appropriate record, prefix the LD contract with 'PD' and commit the
record.

Re-Possess Lease Contract

In case of non-recovery of ijara instalments from ijara customer, an Ijara contract will be
suspended after the number of day‟s set-up on SUSP.OD.DAYS field on ijara contract. After
suspension of ijara contract, bank will have to resort to repossession of the asset from ijara
customer. At the time of repossession, based on the difference between book value of the asset
and the market value of the asset the bank may make a profit or a loss.
User should input the market value of the asset at the time of repossession in MARKET.VALUE
field.
Note: After the Re-possession of the asset the bank can make a decision to either sell the asset
in the market or can enter into a new ijara contract. Choose the option “Re-Purchase Pre-
Approval Asset” or “Sell Re-Possessed asset “ under “RE-Possess OPS”.

Sell Re-Possessed asset

This action will be used in cases where ijara contract asset has been repossessed by the bank
due to non-recovery of rental instalments from the original ijara customer. Should input the resale
counter party & counter party account in Resale Cparty & Resale Cparty Acc fields respectively
under the Resale Details tab. Also input the Date in the Resale Date field.
Clicking the Sell Repossessed Asset option will lead to a Selection Criteria box being displayed.
The ID of the IS Purchase contract has to be input as a selection criterion, as shown in the
following screen shot

Re-Purchase Pre-Approval Asset
The bank to enter into a new ijara contract by the pre-approval of the Purchase contract id will use
this action
Choose the option “Re-Purchase Pre-Approval Asset” under “RE-Possess OPS”.
Re-Possessed Purchase ID: Enter the IS contract id in this field.

Customer Sale Cparty: Enter the new ijara customer id. This is a mandatory field
Asset ID: Choose the appropriate asset id from the drop-down menu

Past Due Operations

Customer’s PD repayments
During the ijara Contract, the customer can settle the PD amounts if any. Choose the option
“Customer’s PD repayments” under “Past Due OPS”. To choose the appropriate record, prefix
the LD contract with 'PD‟
The field VALUE.DATE is used to input the date on which the repayment is being made and the
amount to be repaid can be input in the REPAYMENT.AMOUNT field. The ACCOUNT.TO.DEBIT
field should contain the customer's account.

Charity Operations
Payment of Overdue charity Amount
The calculations of penalty charges for the over dues will happen only after the PEN.GRACE in
the Ijara contract have been crossed. To see the amount of penalty charges outstanding or to
make repayment of the same, choose 'Payment of Overdue Charity Amount' on the Menu. The
screenshot below shows that a penalty amount of 5.48 is outstanding. If the entire penalty is to be
waived, an amount of 0.00 can be input in the PENALTY.CHARGE.PAID field and the whole
penalty amount can be input in PENALTY.CHARGE.WAIVED. The user can even repay a part of
the penalty amount and the rest can be waived.
The 'Charge Default Details' tab shows the date-wise penalty amounts that have fallen due.
The 'Repayment Details' tab shows the amounts that have been paid online

ENQUIRIES
To display a summary of transactions under a particular IS contract, click 'Ijara Entries Summary‟
on the Menu. This will lead to a Selection Criteria box being displayed. The ID of the IS Purchase
contract has to be input as a selection criteria, as shown in the following screen shot
This enquiry shows all the movements during the life of Ijara contract
Also, the summary of transactions for a particular customer can be displayed by clicking
'Customer’s Ijara contracts Summary ' on the Menu and specifying the customer number or
mnemonic.

To display the details of a particular forward ijara contract, click 'FWL Payments Contracts
Summary ' on the Menu. Enter the contract number and click “Display”.

Basic ISB Set Up Tables

The tables mentioned below are one time set-up that is used in Ijara implementation. Choose the
option „Basic ISB Set Up Tables’ from the menu to view these tables.
ISB Product Type
File Type: H
About This File…
Each Islamic Product should have a valid id in this table. Record id „IJA‟ is used to define Ijara
product type.
IS.H.PRODUCTS - Field Description and Population Rules…
Field Name Length M/S Description
GB DESCRIPTION 35 AMS Description of the product type
Figure 1 - IS.H.PRODUCTS.TYPES

ISB Products
File Type: H
About This File…
Each Islamic Product should have a valid id in this table. Record id „6‟ is used to define Ijara
product.
IS.H.PRODUCTS - Field Description and Population Rules…
PRODUCT.CODE 5 S The id of the file. The product id for the
particular Islamic product
GB DESCRIPTION 35 AMS Description of the product
SHORT.DESC 35 AMC Short description of the product
PROFIT.BASIS 3 S Valid id in INTEREST.BASIS table
TWQ.FLAG 1 S Contain the value “YES” or “NO”
CDT.FLAG 1 S Contains the value “YES” or “NO”
FWL.FLAG 1 S Contains the value “YES” or “NO”
PRODUCT.TYPE 3 S Valid record in
IS.H.PRODUCTS.TYPES table
LOCAL.REF 35 M Local Ref field
Figure 2 - IS.H.PRODUCTS

ISB System Parameter
File Type: H
About This File…
This is a System parameter file used in Ijara. The id of this file is “SYSTEM”. This is a common
parameter file, which is used across all Islamic products.
IS.H.SYSTEM.PARAMETER - Field Description and Population Rules…

@ID 6 S The id should be “SYSTEM”
IS.CON.OFS.SOURCE 20 S A valid record in OFS.SOURCE
IS.CON.FT.VER 54 S A valid FT version for OFS processing
IJ.ACC.VER 54 S A valid AC version for OFS processing
OVERRIDE.CLASS 4 M As OFS.GLOBUS.MANAGER is being
used to process some of the
transactions through FT, these FT's
could go in INAO status due to
OVERRIDE.CLASS. In order to avoid
this, all OVERRIDE.CLASS IDs being
used onsite should be set-up in
OVERRIDE.CLASS field
LOCAL.REF 35 M Local ref fields

CHARITY.ACCR.TXN 3 S The transaction code used for Charity
Accrual in Ijara
LD.AUTH.USER 16 S Contains a valid user id

LD.OFS.VER 54 S A valid LD version for OFS processing
LD.OFS.SOURCE 20 S A valid record in OFS.SOURCE

Figure 3 - IS.H.SYSTEM.PARAMETER

ISB Product Parameter
File Type: H
About This File…
This is a system parameter file, governs the processing and accounting of Ijara. The ID of this file
has to be defined first in IS.H.PRODUCTS file. Record is „6‟ is used to define the Ijara product in
this table.
IS.H.PARAMETER - Field Description and Population Rules…

@ID 5 S The product id created for Ijara in
IS.H.PRODUCTS table
PUR.CATEG 5 S This is an internal account category.
When the bank purchases an asset for
the purpose of leasing it out in financial
Ijara, a sundry debtors account opened
under this category, in the currency of
purchase, is debited.
SEC.DEP.CATEG 54 S Customer account category. The
Hamish Jiddiyya, which is received from
the customer, is debited to the Ijara
client's account under this category.
This account is opened automatically by
the system when a Hamish Jiddiyya is
taken.
RESALE.PL.CATEG 54 S If after the purchase of commodity for
the purpose of leasing, the Ijara
customer backs out of his promise to
lease the same, the bank may have to
do an outright resale of the commodity
in open market. If the bank makes a
profit on account of selling the goods in
the open market, such profit is credited
to this P/L category
LOSS.REC.CATEG 4 M When the bank makes a loss on
account of selling the goods in the open
market, such loss is debited to the
internal account in this category. The
bank may thereafter try to recover the
loss from the original customer of the
Ijara, or write it off to Profit and Loss
Account.
POST.RESTR.CODE 35 M For customer accounts that are opened
by the system under the categories
mentioned in SEC.DEP.CATEG,

PROFIT.RECD.ADV and SUSP.CATEG

fields, there should be no manual
interference from users at a later stage,
as these accounts have been opened
for specific purposes. Input in the
POST.RESTR.CODE here will be
defaulted by the system into the
POSTING.RESTRICT field of the
account record, which it opens
automatically. If any manual changes
are done in this account and the record
is committed, the system will raise an
override. The value that is input in the
POST.RESTR.CODE field should be a
valid record ID in the
POSTING.RESTRICT file
TRANSIT.CATEG 3 S Not used for Ijara

CHARITY.CATEG 16 S The internal account category to which
penalty charges received from
defaulting customers is credited. These
funds are meant to be used for
charitable purposes.
RESERVED.11 35 S No input
PUR.TXN.TYPE 4 S Contains the ID to a record in the
FT.TXN.TYPE.CONDITION file, which
in turn contains the transaction codes
that are to be used by the system when
purchase of goods is done.
SEC.DEP.TXN.TYPE 4 S Contains the ID to a record in the
Hamish Jiddiyya is taken from the
customer.
SALE.MAIN.TXN.TYPE 4 S Contains the ID to a record in the

that are to be used by the system for the
sale proceeds when a market resale is
done.
SALE.SDA.TXN.TYPE 4 S Contains the ID to a record in the
a loss is incurred on a market resale
and the available Hamish Jiddiyya
amount is used to offset such loss.

SALE.PRF.TXN.TYPE 4 S Contains the ID to a record in the

a profit is made on a market resale and
such profit is credited to the appropriate
P/L category.
SALE.LRL.TXN.TYPE 4 S Contains the ID to a record in the
and such loss or a portion thereof is to
be recovered from the original Ijara
customer.
SALE.LRD.TXN.TYPE 4 S Contains the ID to a record in the
and such loss or a portion thereof has
been recovered from the original
Financial Ijara customer
COST.TXN.TYPE 4 S Contains the ID to a record in the
additional costs are incurred along with
the purchase.
SALE.CPTY.TXN.TYPE 4 S Not used for Ijara

PENALTY.TXN.TYPE 4 S Contains the ID to a record in the
penalty charges are collected from the
Financial Ijara customer on default in
payment.
PROFIT.CENTRE.DEPT 4 S The Profit Centre under which deals are
booked. This should be a valid entry in
the DEPT.ACCT.OFFICER file.
PROFIT.RECD.ADV 5 S The profit that is built into a Ijara
contract will be credited to a customer
account under the category given in this
field. This account is opened by the
system.
ACCR.DR.CODE 3 S The transaction code that is used when
daily amortisation of profit is done by
debit to the Profit Recd Adv customer
account. Should be a valid entry in the

TRANSACTION file
ACCR.CR.CODE 3 S Accrual Credit Txn Code
SUSP.CATEG 5 S When the Ijara customer defaults in
making repayments and the profit
amortisation is to be suspended, the
suspended profit is credited to a
customer account under this category,
instead of to the Profit and Loss
category. This account is opened by the
system.
SUSP.DR.CODE 3 S When profit amortisation is to be
suspended, the transaction code in this
field will be used for the debit to Profit
Recd Adv account. Should be a valid
entry in the TRANSACTION file.
SUSP.CR.CODE 3 S When profit amortisation is to be
suspended, the transaction code in this
field will be used for credit to the to
SUSP.CATEG account. Should be a
valid entry in the TRANSACTION file.
SUSP.OD.DAYS 3 S The number of days after a payment
becomes overdue (and is still overdue)
that the amortisation of profit received in
advance is suspended. If the number of
days is not mentioned at the contract
level or the customer level, the number
of days specified in this field will be
defaulted to the Ijara contract
PEN.DR.CODE 3 The transaction code that is used when
the customer's account is debited for the
penalty charge. Should be a valid entry
in the TRANSACTION file.
PEN.CR.CODE 3 S The transaction code that is used when

the charity account mentioned in
CHARITY.CATEG is credited with the
penalty charge recovered from the
defaulting customer.
PEN.FEE 19 S The penalty charge (flat amount) that is

to be levied if the customer defaults.
Either a penalty fee or a penalty rate
(next field) can be used.
PEN.RATE 11 S The penalty rate that is to be levied if
the customer defaults. This amount is
levied on the amount of the overdue, for
the period that it is overdue. Either a
penalty rate or a penalty fee (previous

field) can be used.

PEN.GRACE 3 S The penalty fee/rate will be applied only
if the over dues are not cleared within a
certain number of days, specified in this
field.
EARLY.RATE 11 S Not used for Ijara
EARLY.CATEG 5 S Not used for Ijara
EARLY.DR.CODE 3 S Not used for Ijara
EARLY.CR.CODE 3 S Not used for Ijara
AMORT.PRFT.Y.N 1 S Not used for Ijara
PRFT.ON.NET.Y.N 1 S Not used for Ijara
PEN.GRACE.Y.N 1 S In cases where a penalty rate on default
is specified, the system will start
charging such rate on the expiry of the
number of days given in PEN.GRACE
field. If this field is set to Y then the rate
will be applicable from the beginning of
the grace period (i.e the date of default).
If set to N, the rate will be applicable
after the grace period has expired.
PRA.PL.CATEG 5 S Not used for Ijara
PRE.APP.ENTRIES 1 S The valid values are “YES” or “NO”
GOODS.TR.CATEG 5 S A valid record in Category table
PUR.ORDER.CATEG 5 S A valid record in Category table
PRE.APP.TXN.TYPE 4 S A valid record in
FT.TXN.TYPE.CONDITION file
ACCRUAL.CHARITY 1 S
CU.CHARITY.CATEG 5 S A valid record in CATEGORY file
CHARITY.PAY.CATEG 5 S A valid record in CATEGORY file
ACCR.CHARITY.FREQ 5 S The frequency to be entered. The valid
values are “D_M_Q_Y”
FWL.CU.PURCHASE 5 S A valid record in CATEGORY file
FWL.REPOCESS.CATE 5 S A valid record in CATEGORY file
G
FWL.PAYMENTS.PFT 3 S A valid record in
LMM.CHARGE.CONDITION file
FWL.REPOSSES.PFT 3 S A valid record in
FWL.REPOSSES.LOSS 3 S A valid record in

FWL.RESELL.PFT 3 S A valid record in

FWL.RESELL.LOSS 3 S A valid record in
FWL.EM.PIN 3 S A valid record in
TXN.LIMIT.AMT 19 S The transaction limit amount
Figure 4 - IS.H.PARAMETER

ISB Cost Types
File Type: H
About This File…
This table is used to create cost types for material and immaterial costs that might be incurred
during the life of lease contract for maintenance and repair of the asset.
User can create different cost types in this table depends on the contract. A sample screen shot is
given below:
IS.H.COST.TYPES - Field Description and Population Rules…

@ID 4 S Id should be any numeric value
DESCRIPTION 35 M Description of the cost type
EXP.CATEG 5 S The Profit and Loss Category to which
the cost should be debited (field
EXP.CATEG) in case of additional costs
at the time of purchase or immaterial
costs incurred during the life of ijara
contract.
CAP.EXP.CATEG 5 S This is an internal account category

code, which should be debited initially
for material costs incurred during the life
of ijara contract. And then on a daily
basis there will be amortisation of cost
from EXP.CATEG PL to this internal
account.
PROV.CATEG 5 S As OFS.GLOBUS.MANAGER is being
used to process some of the
transactions through FT, these FT's
could go in INAO status due to
OVERRIDE.CLASS. In order to avoid
this, all OVERRIDE.CLASS IDs being
used onsite should be set-up in
OVERRIDE.CLASS field
LOCAL.REF 35 M Local ref fields

Figure 5 - IS.H.COST.TYPES

ISB Commodities
File Type: H
About This File…
The ID of this file should have a numeric value. This file is meant to give a description to various
types of commodities that are purchased and leased by the bank (e.g. land, houses, cars,
equipment etc). User can create different commodities in this table depends on the contract
A sample screen shot is given below:
IS.H.COMMODITY - Field Description and Population Rules…

COMMODITY.CODE 4 S The id used for defining the commodity
DESCRIPTION 35 M Description of the commodity
UNITS 15 S Commodity in units. It could be acres,
square feet, etc
TWQ.FLAG 5 M Contains “YES” or “NO”
LOCAL.REF 35 S Local ref field
PROD.CODE 5 M A valid id in IS.H.PRODUCTS table
Figure 6 - IS.H.COMMODITY

IJARA Accounting Entries
Action Accounting Entries Entry type

Request and DR - IJARA.TRANSIT.ACCT Online
approval
CR - IJARA.PURCHASE.ORDER
Purchase Order  Reverse Approval Entries Online
Authorization
DR - IJARA.PURCHASE.ORDER
CR - IJARA.TRANSIT.ACCT
 Asset Purchase Value
DR - CUST.PURCHASE.ACCT
CR - SUPPLIER.ACCT
 Additional Cost(s) added to Asset Value
CR - Cost counter party Acct
 Additional Cost(s) Not Added to Asset Value
DR - EXPENSE.PL.CATEG
CR - Cost counter party Account.
Entries (Asset Purchase Value) will be passed
based on the Payments to Contractors in case of
Forward Ijara Lease Contracts.
Forward Lease After Authorization for FWD lease or any new
IJARA (Payments to amounts paid to contractors
contractors
DR - LD RECV LIVEDB
CR - SUPPLIER.ACCT
 At Asset Delivery Date (NORMAL MATURTY)
CR - LD RECV LIVEDB
 Payment to Third Party
DR - LD RECV LIVEDB
CR - Consultant Account
 Customer Payment During Construction
(down payment)
Draw down Acct: CUSTOMER.LIQUIDATE.ACCT
DR - CUST.CURR ACC
CR - LD RECV LIVEDB

 Customer Payment (Automatic Schedules)

DR - CUSTOMER CURR.ACC
CR - LD RECV LIVEDB
Forward Lease Early  Early Maturity of the Contract COB

Maturity
DR - IJARA PRUCHASE ACCT
CR - LD RECV LIVE DB
Action Accounting Entries Entry Type

Authorize Finance  Asset Finance Entries Online
Lease Contract
DR - LD RECEIVABLE (LIVEDB)
CR - IJARA.PURCHASE ACCT
 Add profit to ijara
DR - ijara purchse acct
CR - Deferred profit acct
 Customer Pay
DR – Customer Curr.Acct
 Write Off
DR – Expense PL.Categ
Daily Profit DR - LD Accrual COB
Amortization
CR - PL Profit Category
(Variable Rent)
Monthly (Periodic)  Variable Rent (Profit) COB
Instalments
DR - CUSTOMER.LIQ.ACCT
CR - LD Accrual
 Monthly Depreciation (Fixed Rent)
CR - LD RECEIVABLE (LIVEDB)
 Supplementary Charges & Fees
CR - PL Charges and Fees Category
In case of  Amount Not Paid Entry COB

Instalments not 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
RE-POSSESSION  Bank to settle PD txns for IJARA overdue Online

Entries (1/2) amounts through
(PD.REPOSSESS.VERSION)
DR - IJARA.REPOSSESS.ACCT
CR - PD.ACCT & Update IJARA contract with
PD amounts Settled in Field TOTAL.PD.AMT
 IJARA.REPOSSESS VERSION
- System will check that there is no
overdue amounts for this contract in
PD
- System will check that Field
TOTAL.PD.AMT in IJARA contract not
equal zero or null
- Version will display Following fields
to User
<TOTAL.PD.AMT>: XXXX
<TOT.IJARA.OS.AMT>: XXXX
<TOT.PFT.OS.AMT>: XXXX
<TOT.REPOSSESS.COST>: XXXX
- User should input Market Value for
repossess function
<ASSET.MARKET.VALUE>: < >
- System Automatically will default
following values
<MATURITY.DATE>: Today Date
<PRINC.LIQ.ACCT>:IJARA.REPSSSESS.ACCT
<PFT.LIQ.ACCT>:IJARA.REPOSSESS.ACCT
- System will update
ASSET.MARKET.VALUE in IJARA purchase
contract
__________________________________________
 RE-POSSESS Accounting Entries

- IJARA CONTRACT CLOSE ENTRIES
RE-POSSESSION DR - IJARA.REPOSSESS.ACCT
Entries (2/2) CR - LD.RECEIVABLE (OS ASSET AMT.)
DR - IJARA.REPOSSESS.ACCT
CR - LD.ACCRUAL (OS Profit AMT.)

&
- RE-POSSES Profit & Loss Entries
CURRENT.ASSET.COST = (OS asset Amt. + OS
profit Amt. + Total PD Amt.)
REPOSSESS.DIFF = (CURRENT.ASSET.COST -
MARKET VALUE)
Case 1: Current Asset value greater than Market
Value (Loss Case)
DR: IJARA.REPOSSES.LOSS.CATEG
CR: IJARA.REPOSSESS.ACCT (Repossess Diff.)
Case 2: Current Asset value less than Market
Value (Profit Case)
DR: IJARA.REPOSSESS.ACCT (Repossess Diff.)
CR: IJARA.REPOSSESS.PFT.CATEG
Action Accounting Entries Entry Type

Asset Market Resell Sell Entries
DR: Customer third party current acct (to whom the bank
is selling)
CR: IJARA.REPOSSESS.ACCT (Asset Sell Amount)
PL Entries for Asset Resell Transaction
Sell Diff Amt.= Asset Sell Amount - Asset Market Value
Case 1: Lose Case
DR: IJARA.RESELL.LOSS.CATEG
CR: IJARA.REPOSSESS.ACCT
Case 2: Profit Case
DR: CUSTOMER THIRDPARTY CURR.ACCT
CR: IJARA.RESELL.PFT.CATEG
Charity Entries for When repayment of penalty charges is done, the system
non paid PD will raise the following accounting entry
overdue amounts
DR - Settlement Account Penalty Charge Paid (Given
under the 'Basic Details' tab)
CR - Charity Account Penalty Charge Paid
(The Charity Account is the internal account that has to
be opened by the user, with the category the same as
that mentioned in the CHARITY.CATEG field in the
parameter file).
Early Maturity (Pre- In IJARA Lease Contract the FINAL.PAY.DATE will have COB
Closure) Of Sale to be set to current date.

Contract When the contract is committed and authorised, the

following entries will take place for the unamortized profit
amount:
DR - CUSTOMER LIQ ACCT
CR - LIVE DB
DR - CUSTOMER INT LIQ ACCT
CR - P/L ACCT

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TEMENOS Confidential Page 2 of 59

PRODUCT NAME IJARA

DOCUMENT TYPE User Guide

CONTACT BACK TO gpack@temenos.com

SPECIAL COMMENTS (1) If Field Information is Crossed Out, it

(Development / Support) Specific

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Serial No Last Doc Version Author Comments

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Early Mature Ijara Contract .......................................................................................................... 33

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Overview of this guide

 Fair knowledge in TEMENOS T24 TM

Scope of this guide

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

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TEMENOS T24 TM Modules Supported

Multi Threading Supported

Abbreviations used in this Guide

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Ijara Work Flow

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 Asset Purchase Pre-Approval

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Asset Purchase Pre-Approval

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Reverse Asset Purchase

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Pur Contract Id: The id of the pre-approved contract.

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Forward Lease Payments

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FWL Lease - Input Contract

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Additional payment to contractor

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Payment to Third party

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Input New Contract

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Explanation of the other fields is given below:

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Modify the Contract

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Early Mature Ijara Contract

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