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Wednesday, 31 July 2013

Put trust in the cloud says Islamic Bank of Britain COO

Banks should not be afraid to go further and faster in their adoption of cloud computing, says Mohamed Gamil, chief operating officer at Islamic Bank of Britain.
Founded in  2004, Islamic Bank of Britain markets itself as the UK’s only wholly Sharia complaint retail bank. It offers mortgage alternatives, current accounts and savings accounts as well as wealth management services, and also handles corporate business through products such as commercial property finance.
“When I came to the country six years ago, the challenge was not just that Islamic finance is a niche market, but that we are a small fish in a big ocean,” Gamil told Banking Technology. “The big players such as Lloyds and HSBC spend hundreds of millions of pounds on IT every year, while our budget is smaller. But our customers don’t expect any less customer service or less competitive rates. That’s a challenge for a small bank – and that’s why the cloud idea is just brilliant to fit that purpose.”
IBB currently has a deal with US cloud computing company, best known for its customer relationship management products – products that Islamic Bank of Britain found attractive when it began exploring cloud solutions in 2009. According to Gamil, the adoption of the cloud means that he is free to experiment with new ideas without spending millions of pounds up front. It also means the small Islamic bank is able to get more ‘bang’ for its buck.
“There’s no direct relationship between the number of applications I’ve implemented using and the extra cost I’ve incurred,” he said. “We haven’t changed the annual subscription since 2011 – I still pay the same – yet I have almost trebled the applications I’m using on this platform.”
Islamic Bank of Britain originally turned to cloud computing for customer relationship management, encompassing tasks such as claims management. As the bank grew into the project, it began to realise that the same concept could be applied to sales management, including such tasks as opportunity and lead management. It then decided to move customer on-boarding for current accounts and savings into the cloud – a project that began in October 2011 and was completed in January 2012. Finally in July 2013, Islamic mortgage alternatives were added to the cloud (Islamic finance does not charge interest).  However, Gamil says he now wishes the bank had gone further and faster in moving products and services to the cloud.
“If I think back to 2004, if we had known about the potential of the cloud, I wouldn’t build servers and a data centre,” he said. “These are the parts of the business where we still suffer today. No, I’d be far more aggressive in moving things to the cloud. Right now, I’m thinking of reforming the telephony system we use – and I will likely choose a cloud solution, because it’s more reliable and it helps us to stay light on the ground.”
Cloud computing has existed in various forms for many years. But financial institutions and especially banks have historically been reluctant to embrace the cloud, in part due to fears over security. That has changed significantly within the last few years, as a combination of cost pressures and greater familiarisation with the technology has allowed cloud services to grow. Gamil notes that software as a service, platform as a service and infrastructure all have a role to play in making the bank’s operations more profitable.
“Last year, we doubled the book of our business liabilities and assets,” he said. “I don’t know how much of that is purely and how much is products, but in four years we haven’t achieved that. In one year, we did it and in six months we doubled what we doubled. A good element of that is the platform.”
Another example of the value of the cloud to the bank is the creation of ‘super users’ with access to different parts of the business. The bank has four or five of these individuals, who use the technology to improve aspects of day to day operations. The bank’s weekly customer survey, for example, was moved from spreadsheets onto the cloud platform. Internally, the platform also serves as the main collaboration tool between different departments in the bank.
Islamic Bank of Britain offers products that are designed to match Islamic Sharia principles. These principles forbid the charging of interest, as well as dealing in products related to vices such as alcohol, gambling, weapons sales and tobacco. In addition, trading activity should be based on a real underlying asset to avoid speculation and communal initiatives such as profit sharing are encouraged.
To meet these needs, the bank uses Misys core banking tools, which at the time of purchase didn’t have an Islamic module – although one was later added. As a result, the bank built its own Sharia products, effectively developing its own Islamic module. According to Gamil, the record keeping, systems and accounting needed by an Islamic bank are much the same as a conventional one. The difference lies more in the presence of Sharia as a guiding principle, which has an important bearing on the way the bank’s services are arranged. For example, the bank may be charging a client for a particular service at a rate that is in line with the industry in the UK, but the Sharia experts might point out that there is no direct correlation between the amount of admin work the bank has to do and the rate being charged – and therefore recommend the rate be reduced.
“Islamic banking’s main selling point may be serving the Muslim community, but don’t forget there’s an aspect of ethical banking as well,” said Gamil. “The advantage of Islamic banking is its purity – it’s very transparent, like a glass of water, and that has attracted a good number of customers that are not Muslims. You can see exactly how we are dealing with your money, and we want to be fair.

(Business Cloud News / 30 July 2013)

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Afghanistan: World Council Announces First Islamic Finance Manual for Credit Unions

MADISON, Wis. - World Council of Credit Unions has published the Islamic Finance Manual: Operating Policies and Procedures for Credit Unions, the first known guide to establishing Shariah-compliant credit unions in the developing world. The Customer Owned Banking Association, World Council's member organization in Australia, developed the manual based on World Council's experience establishing Islamic investment and finance cooperatives in Afghanistan (2004-2012).

The comprehensive guide details operating policies and procedures based on international standards for financial cooperatives and adapted to comply with Islamic Law. The 305-page document addresses membership, shares and savings mobilization, Shariah-compliant financing and collection, provisions and allowances for bad debts, asset and liability management, capitalization and capital adequacy, accounting, cash operations, internal controls, human resources, procurement and information technology and security. Each chapter includes a comprehensive review of procedural requirements and who should be involved, including template forms and contracts.

"The Islamic Finance Manual produced with the initiative of the Customer Owned Banking Association of Australia is a product of years of dedication and cooperation among World Council staff and local Afghan leaders to adapt World Council's traditional credit union building model to an Islamic banking environment," said Brian Branch, World Council president and CEO. "The manual now provides a cornerstone for local credit union development in countries as diverse as Libya and Pakistan to Australia and the United States."

World Council's nine-year program in Afghanistan, through which the manual was developed, focused on establishing sustainable financial cooperatives as well as a national apex trade association. World Council consulted Islamic scholars and local religious leaders to modify its traditional credit union development methodology and establish the country's first fully Shariah-compliant financial institutions. Today, more than 30 IIFCs and points of service in 14 provinces across the country offer share savings and loan products that heed the Islamic prohibition on paying or receiving interest. Afghanistan's national financial cooperative association, the Islamic Investment and Finance Cooperative (IIFC) Group, was established in 2009 and became a World Council member in 2012. Afghan IIFCs comprise the world's youngest credit union movement and is the only one to claim full compliance with Islamic Law.

Islamic finance is a form of ethical financing, defined by the fair distribution of wealth, concern for the welfare of communities and economic stability. Islamic finance principles promote the protection of consumer rights and prevent investment in businesses that are considered "harmful," including gambling, armaments, alcohol and pornography. The creation of economies based on physical assets is at the heart of Islamic finance - a key reason why the Islamic financial sector was largely unaffected by the recent global financial crisis. Islamic financial markets operate in 37 Muslim countries, and many non-Muslim countries in Europe offer Islamic finance options.

(Zalora / 30 July 2013)

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