Transcript Conventional banking profit Function Non-Usury Financial Activities Criteria • Loaner must share in profit/loss of the economic activity of loanee. • The rate.

Conventional banking profit Function
Non-Usury Financial Activities Criteria
• Loaner must share in profit/loss of the
economic activity of loanee.
• The rate of interest must not be determined
and conditioned before.
• Interest in consumption loans is usury.
• Foreign currency exchange (without interest)
is not usury.
Conceptual Architecture model
Bank profit
distribution
Resource allocation
Other banking
operations
Investment profit
distribution
Investors
Depositors
Other banking
operations
Non-Usury Bank Corporation
NUBankCo
Resource
Mobilization
Information System Architecture
External Interface
Debit or Credit Cards
Branches TEL ATM POS Kiosk WEB MWEB Mobile
Foundations Product, services, Customers
Branches
Central Bank
BPR, ERP,
Customers:
CRM, SCM, People,Government,Enterprise
Government
MEX, HRM, Re.M:
S.W.I.F.T
PLS Contraction
WFM
Investment P
In.
And transaction
Standardizati DEP.
Insurance Co
on, K-M,
Stock Ex Ag
Analytics/BI, Ghar.
ACH,RTGS
RM, Fraud
Data warehouse
M., PI,
Other Switch
Services: EFT, bill payment,
Auditing, NC,
safety Dep. BOX, Bonds &
AC, Doc.
Data warehouse
Securities, Other
OR,PD,IA,PT
International Organization for banking and
financial Standards
Basel
Committee
Asset quality
Capital adequacy
management
of investment
accounts
AAOIFI
liquidity and
corporate
governance
Islamic Financial
Services Board
(IFSB)
macroeconomic
policy and data
transparency
Financial Stability
Forum (FSF)
institutional
and market
infrastructure
investment accounts
earnings quality
financial
regulation and
supervision
BPR is operational, supervisory and
management process’s reconsideration for
producing new products or services. BPR in
IT-based business causes structural upheaval
in process
Modifying, Removing,
Reengineering
Practices
Process
Rules
A comprehensive and
integrated system which
covering all of data
information
CR
M
Gate
way
BP
R
SC
M
HR
M
DSS
Outer-Network
RTGS
WF
M
ECS
MES
TPS
OAS
Gate
way
CRM: Contains the slightest
customers’ information for redressing
of digital delivery channels’ bottleneck
CRM
People
Enterprise
Investment Partner
Government
People
Insurance Co.
SCM: Managing relationship and
transactions among suppliers, business
partners, customers and banks.
Supplier
Business partners
Customers
Stock Exchange Agencies
Other Exchange Agencies
MES: This system interacts between
executive layer of producer enterprises
or investment partner and bank.
Supplier
Business partners
Customers
Stock Exchange Agencies
Other Exchange Agencies
HRM: Contain interactive and online
capabilities of economic ,training ,
educational, cultural, favorites and
hobby/entertainment needs of
employees
Knowledge Mapping
Knowledge Management
Employee
Welfare
Health
Favorites
Educational needs
Economic needs
Hobby/entertainment
Cultural
WFM: Determines the principles of
process and tracing management of
message, information
Auditing and accounting
Liquidity risk management
Credit risk management
Market risk management
Operational risk management
Morality risk management
RTGS
Fraud Management
Domain Integrity, Entity Integrity, Referential Integrity
ERP
DSS
BPR
MES
SCM
HR
M
OAS
CR
M
WF
M
RTG
S
Central
bank
SWIFT
TPS
Investor
External
Interface
Database Server
Stock
EX. Ag.
Business
partner
Relationship between non-usury bank
and depositors
Gharz-al-hasaneh deposits
There is no distinguished difference between conventional
and new non-usuric banking
Zakat
Tax
Marriage
Therap
y
Buildin
g
Educationa
People
Ban
k
Social
Government
securit
y
affairs
Fundamental
Relationship between non-usury bank and
depositors
Investment deposit
New non-usuric bank’s
investment company
Stock exchange
agency
company
Other exchange
markets
Direct
investment
Moshrekeh & Mudarebeh
contractionms (PLS)
Depositor
s
portfolio
New non-usury
bank
Civil
partnership
Legal
partnership
Modurebeh
Forward
transactions
Jo’aaleh
Mozara’eh
Mosaqat
Lease
IMPELMENTING A VPN
Transit
inter network
and outer
network
The users are not charged
based on the distance
between the offices
because only local
physical links are being
used
Logical Equivalent
1.
2.
Possibility to initiate a
systemic connectivity
and transparent
relationship between
depositors and
investors.
Possibility to establish
customers' shares
portfolio based on
their deposit amount.
Conventional nonusuric banking
1.
2.
Impossibility to
initiate a systemic
connectivity and
transparent
relationship between
depositors and
investors.
Impossibility to
establish customers'
shares portfolio on the
basis of their deposit
amount.
Transparency in PLS mechanism establishmen
New non-usuric
banking (IT based)
3.
4.
5.
There are not
different rates of
investment return on
basis of different time
deposits.
All Stakeholders,
bank, business
partners and all other
of partners use the
bank's productivity.
Applicability of every
contracts according to
PLS mechanism
confirming
3.
4.
5.
Determining different
rates of returns (interest
rates) for different time
deposits.
Maximization of bank's
profit function via
widening banking spread
(difference if loan and
deposit interest rates).
Applying unrestricted
Mudarabeh or Kefaleh
contracts and
determining minimum
investment return rate.
6.
7.
Increasing competition
for investment in real
economy because there
is WFM system for
accounting, auditing
and tracing.
Agreement on
execution and
operational processes
of transactions.
6.
7.
Unlawful and
immoral competition
among banks for
determining rate of
return to increase
shareholders' profit.
Disagreement on
execution and
operational
processes of
transactions.
1.
2.
3.
Stability in financial
markets because of
stable money markets
and prevailing FSF
standards.
Standardization in
operational, supervising
and management
process and unique
practices.
Lower markup prices of
banking products and
services.
Conventional nonusuric banking
1. Fluctuations in
financial markets
resulting from money
markets fluctuations.
2. Varieties of methods
and non-unique
practices and
standards.
3. Higher markup prices
of banking products
Economical , Financial, social effectivene
New non-usuric
banking (IT based)
4.
5.
Access to
international
markets because of
compatibility and
integrity
capabilities.
Satisfaction and
tranquility of
customers will be
result of products
and services quality.
4.
5.
Less ability to
possessing global
market share and
working with restricted
market and customers.
Dissatisfaction of
customers because of
paperwork and
bureaucratic procedures
concerning supply of
products and services
6.
7.
Deletion of unofficial
financial markets and
usury in the society.
Decrease of
investment cost and
increase of
productions in the
society because of
lowering cost of
capital rent in resource
mobilization.
6.
7.
Expansion of
unofficial financial
markets and usury in
the society.
Increase of
investment cost and
decline of productions
in the society because
of growing cost of
capital rent in resource
mobilization.
8.
9.
10.
Dampening money
laundering activities
because of effective
supervisory on processes
and tracing of
transactions.
Depositors will derive
actual investment returns
of economic activities.
Expansion and
development of social
justice in the society
through better allocation
of resources.
8.
9.
10.
Expansion of money
laundering activities
because of ineffective
supervisory on processes
and tracing of
transactions.
Depositors will be
deprived from actual
investment returns of
economic activities.
Expanding of unfair
allocation of resources
and wealth in the society.
New non-usuric banking (IT based)
1.
2.
1.
2.
3.
Higher
operational risk.
Incapability of
continual
accounting and
auditing process.
Less confident
forecasts of the
financial market
variables
because of
varieties of
Risk Management
3.
Less operational risk.
Continual accounting and
auditing process capabilities on
Moshrekat or Mudarabah
contraction by use of WFM
system.
More confident forecasts of the
financial market variables
because of standardized and
unique practices especifically
through WFM system on
operational, supervising and
Conventional nonusuric banking
4.
5.
Supervising
capability on
business partners
and their manner
of management.
Ability to present
reliable
documents and
monitoring
projects
conditions and
convincing
customers in case
4.
5.
Incapability to supervise on
business partners and Mozareb
(investment operator) and lack
of ability to survey their
managerial capabilities and
qualities before project
maturity.
Inability to present acceptable
documents and reasons for
legal claiming in the court
based upon to be partner of
depositors in loss conditions
for confirmation of Moshrekat
or Mudarabah contracts.
6.
7.
8.
Lower liquidity risk.
Higher ability to assess,
forecast, and
scheduling bank's
liquidity requirement
because of accuracy
and accessibility
information.
Full use of resources
and ineffectiveness of
hearsays to withdraw
deposits and
bankruptcy because of
liquidity risk.
6.
7.
8.
Higher liquidity risk.
Less ability to assess,
forecast, and
scheduling bank's
liquidity requirement.
Useless of partial
amount of resources
for risk management
and decline of
investment returns
hedging.
9.
10.
Transparency of financial
sound situation of bank
and accessible actual
capital adequacy ratio for
embracing liabilities and
ability for international
non-usuric inter-banks
financing.
Attraction of customers
and expansion of market
because of sound
financial stability
resulting from enjoyment
of customers from real
9.
10.
Unavailable modern
monetary, inter-banks,
stock exchange,
derivative markets and
inaccessible precise
banking information
for international
financing.
Missing customers
because of higher loss
probability in
Moshrekeht or
Mudarabeh contracts.
12.
13.
14.
Stability of price of
goods in futures.
Stability of inflation rate
and preservation of
customer financial
position.
Less morality risk:
symmetric information in
Moshrekeh or
Mudarabeh contracts and
monitor capability for
tracing investment and
fulfillment of PLS
12.
13.
14.
Fluctuations in goods
prices in the futures in
Salam or Forward
(Albeyea Salaf)
contracts.
Higher inflation rate
arising from financial
markets' fluctuations.
Morality risk:
Asymmetric
information in
unrestricted
Mudarabeh[1] may
cause expansion of
Conclusions and policy recommendations:





One of the important proposals to fulfill non-usuric
banking is "NUBankCo".
But fulfillment of PLS mechanism and establishment
of NUBankCo will be more realistic and more
effective by applying IT based systems.
This capability requires external interfacing, gateway
and RTGS with security characteristics of integrated
information.
Standardization in all processes and practices of
operational, supervising and managerial aspects
should be done by an independent organization to
fulfill this type of banking.