TEMENOS T24

Islamic Banking
User Guide

Wakala Musawama

Information in this document is subject to change without notice.

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electronic or mechanical, for any purpose, without the express written permission of TEMENOS Headquarters SA.
Wakala Musawama

Table of Contents
Preface ........................................................................................................................3
Overview .....................................................................................................................3
Prerequisites ...............................................................................................................3
Getting Started ............................................................................................................3
Wakala - Musawama ...................................................................................................3
Work flow diagram .................................................................................................3
Asset request .........................................................................................................6
Asset Purchase....................................................................................................12
Payment Activities ...............................................................................................16
Asset Sale – Automatic Schedule ........................................................................16
Asset Sale – Manual schedule.............................................................................20
Enquires ....................................................................................................................22
Limits .........................................................................................................................26
Delivery .....................................................................................................................26
Services .....................................................................................................................26
Accounting Process ...................................................................................................27
No Accounting entries. ..............................................................................................27
Troubleshooting .........................................................................................................30
Glossary ....................................................................................................................30
Index..........................................................................................................................30

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Preface
The scope of the user guide is to explain the functionalities/ workflow for Corporate
Wakala-Musawama. The reader needs to have the basic understanding in Islamic
banking, T24 – LD.LOANS.AND.DEPOSITS and T24 – Past due applications.

Overview

Wakala Musawama is a structured finance product. The Wakala contract is linked to

the Musawama contract with Wakala reference ID in the Musawama contract. The
Wakala contract will have no Profit Rate specified and hence there will be no
accruals during the Wakala period. The Musawama contract is manually opened in
the same client name. The profit calculation at the Musawama stage is from the
Value date specified or manually specified date till the Maturity date of the
Musawama. The Musawama value date cannot be prior to the Value date of the
Wakala contract. The total profit including the Wakala period Profit till the Musawama
maturity date is added to Musawama Principal and repayment scheduled.
.

Prerequisites
Install Islamic banking pack as per the details provided in the installation guide.
Basic parameter set up to be completed .

Getting Started

Wakala - Musawama
Work flow diagram

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•Input Wakala Asset with Zero percent profit rate

Wakala •The credit will be to the Client Account
Asset

Liquidate •Wakala Asset contract is liquidated from Wakala settlement Internal account.
Wakala
Asset

•Open Musawama Asset Request which will capture the asset details and the Wakala
Musawama
Contract reference ID.
Asset
Request

Musawama • Musawama Purchase Pre Approval which will raise contra entries
Asset Pre
Approval

Musawama •Musawama Asset Purchase will raise Purchase entries and reverse the contra entries.
Asset
Purchase

•Musawama Asset sale can be done with both the flat and Reduced types of Profit
calculation. Wakala Reference to be defaulted from Asset request . Profit calculation from
Musawama
Asset sale
the Value date till musawama aturity date will be calculated and accounted .

The work flow for Wakala Musawama starts with opening a Wakala finance contract
which is handled under LD module.

The menu structure for Wakala Finance consists of Input, Amendment and
Authorisation screens. Provision for handling PD part is provided.

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The Customer ID , Currency, Finance Amount, start and End date, Profit Basis, and
Settlement accounts are to be input. The Liquidation mode by default is Semi
Automatic and can be modified by the user. The Profit rate for the contract is default
as zero percent and is no change field. The contract is committed and authorized.
Upon authorization the system generated the following accounting entries

Dr Wakala Asset
Cr Customer Account.

The next stage is to open the Asset Request for the Musawama contract. The
Wakala ID is referenced in the Musawama contract in the field Wakala reference.

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Asset request

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Customer ID, Currency, Supplier Name is input and the Wakala Reference is
selected from the drop down Enquiry. Based on the Wakala reference, the system
auto defaults the Purchase price and the total goods cost.

The asset details are updated. Separate screens are provided for different Asset
types like Vehicle, Real Estate, Equipment, Movable Equipment and Miscellaneous
Asset. The asset details fields for updating are based on the asset type. The screen
below displays the Asset details for Vehicle.
Appraiser details are updated at this stage.

Vehicle
Asset short title
This is used to input the short title of the Asset
Year of Manufacture
This is used to input the Year of manufacturing

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Vehicle condition (New/ used)

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

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Type Plate (Private/ Public/ Taxi)

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

Real Estate

Asset short title

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

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Municipality name
This is used to input the Municipality name of the property.
Title deed date
This is used to input the Title deed date.
Title deed number
This is used to input the Title deed number.
Title deed from date
This is used to input the Title deed from date.
Title deed to date
This is used to input the Title deed to date.
Place of issue
This is used to input the place of issue.

Equipment

Asset short title

This is used to input the short title of the equipment.
Vintage
This is used to input whether the equipment is old or new.
Year of manufacture
This is used to input the year of manufacturing of the equipment.
Equipment name
This is used to input name of the equipment.
Country of origin
This is used to input the country of origin.
Make
This is used to input the equipment make.
Model
This is used to input the model name of the equipment.
Dealer Name
This is used to input the dealer name.
Dealer Code
This is used to input the dealer code.

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Equipment installed at
This can be used to input the installation location of the equipment in multiple lines.
Invoice Number
This is used to input the Invoice number.

Movable equipment

Asset short title

This is used to input the short title of the equipment.
Equipment name
This is used to input name of the equipment.
Make
This is used to input the equipment make.
Model
This is used to input the model name of the equipment.
Year of manufacture
This is used to input the year of manufacturing of the equipment.
Vintage
This is used to input whether the equipment is old or new.
Country of origin
This is used to input the country of origin.
Registration number
This is used to input the registration number of the equipment.
Emirate
This is used to input the name of the emirates.
Plate color
This is used to input the plate color
Invoice number
This is used to input the invoice number.
Registration card expiry date
This is used to input the registration card expiry date.
Asset short title
This is used to input the short title of the Asset.

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No accounting entries are generated upon authorization of Musawama Asset request.

Asset Purchase
Asset Pre Approval and Asset Purchase are handled in Asset Purchase from the
menus given.

Upon Asset Pre Approval authorization, system generates contra accounting entries
which gets auto reversed when the Purchase is authorised.

DR Goods in Transit Account (Purchase price)

CR Purchase order Account (Purchase price)

The Appraiser details updated in the Asset Request stage is defaulted in this stage .
The user can capture the check list details.

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The second step is Musawama purchase where the Pre Approval Contra entries are
reversed and Purchase entries are generated.

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Additional costs for procuring the goods can be defined in the purchase stage which
can be added to the Musawama purchase price if required. These additional costs
are defined in IS.H.COST.TYPES file. The insurance details, Collateral details for the
asset can be captured.

During authorization the Pre Approval accounting entries are reversed and Asset
purchase entries are generated.
DR Purchase order Account (Purchase price)
CR Goods in Transit Account (Purchase price)
DR Purchase Account
CR Multi supplier Account

If Additional costs are defined,

DR Expenses category
CR Cost counterparty Account

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Accounting entries :

Payment Activities
The payment activities like payment to the vendor, down payment, payment to cost
counterparty are handled in the other services menu.

Musawama Sale:

It is possible to define Auto schedule or Manual schedule for Musawama.

The Wakala Finance ID is shown in Musawama contract.

Asset Sale – Automatic Schedule

The schedules are auto generated based on the repayment details input.

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User has to input the Customer number and Asset purchase reference number.
User has to commit and authorize the sale transaction.

In sale stage, the customer and Purchase ID is input and details like repayment type,
grace period type, profit start date profit basis, profit rate type, profit rate, repayment
frequency, Tenor is given. The No of instalments, profit amount and repayment
amount are calculated and displayed.

 Repayment type – This field is used to choose the instalment repayment type
available in the drop down.
o Constant (Annuity): Equated instalment amount is calculated for the
purchase price based upon the term, repayment frequency and profit
rate inputted.
o Scheduled disbursement and Constant repayment: Automatic
disbursement of purchase price based upon the disbursement dates
and disbursement amount inputted in the “Payment schedule” tab.
Equated instalment amount is calculated for the purchase price
considering the disbursements based upon the term, repayment
frequency, and profit rate inputted.
o Constant and Balloon payment: Equated instalment amount with
balloon payment in between. Balloon payment dates and amount can
be captured in the “Payment schedule” tab. Equated instalment amount
is calculated for the purchase price based upon the term, repayment
frequency, balloon payment amount and date, profit rate inputted.
o Linear Repayments: Principal repayment for number of instalments can
be captured in the “Payment schedule” tab. Profit payment is
automatically calculated by considering the term, repayment frequency
and profit rate inputted.
o Percentage based Repayments: Repayment of Instalment amount/
principal can be defined in terms of percentage. Number of instalment
and percentage of payment can be inputted in the “Payment schedule”
tab. Percentage instalments/ principal amount is calculated considering
the repayment frequency, percentage of payment, repayment type,
profit rate and tenor.
o Step up/ Step down payments: Repayment of instalment amount/
principal can be defined in Increasing/ decreasing percentage. The
repayment percentage and number of instalments can be captured in
the “Payment schedule” tab. Percentage instalments/ principal amount
is calculated considering the repayment frequency, percentage of
payment, repayment type, profit rate and tenor.
o Profit only plus constant: Repayment of profit amount for certain period
of the contract and then pay the equated instalment amount to settle
the outstanding amount. The payment of Profit, Number of instalments,
Payment of constant amount and Number of instalments can be

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captured in the “Payment schedule” tab. Equated instalment amount is

calculated by considering the term, purchase price and profit rate
inputted.
o Profit only plus bullet payment: Repayment of profit for the certain
period of the contract and then pay the outstanding amount as Bullet
payment. The payment of profit, Number of instalments can be captured
in the “Payment schedule” tab.
o Manual schedule: This is used to input the Principal and profit
repayment amount for each instalment date by user. The repayment
date and amount can be captured in the Asset sale stage. The
amortization rate is calculated based upon the Principal and profit
amount inputted.
 Update limit for Profit – This field is used to choose whether limit needs to be
updated for Profit amount or not. It is defaulted from IS.H.PARAMETER and it
can be changed if required.
 Profit basis – This field is used to choose the list of available profit basis
applied in profit calculation and amortization.
 Profit Method – This field is used to choose the profit calculation method.
 Profit value – This field is used to input the profit rate/ profit amount based
upon the value selected in the Profit method field.
 Value date – This field is used to input the value date of the sale contract.
 Repayment frequency – The repayment frequency of the instalment payment
can be inputted in this field.
 Profit start date – This field is used to input the profit calculation start date. By
default the value inputted in “value date” is populated. It can be amended if
required. It should be greater than or equal to value date.
 Term – This field is used to input the tenor of the sale contract from the value
date. The number of instalments is calculated by considering the Repayment
frequency and term.
 Grace period type – This field is used to choose whether the profit amount
calculated during grace period needs to be collected immediately [Settle] or it
needs to be apportioned [Apportion] in the subsequent repayment dates.
Options available for user input are “Apportion” and “Settle”.
 Disbursement amount and Disbursement date – These fields are used to input
the disbursement date and amount for schedule disbursement contracts.
 Balloon payment amount and Balloon payment frequency – These fields are
used to input the balloon payment frequency and amount which will be
considered for “Constant and balloon payment” schedules.
 Linear amount and No of instalments – These fields are used to input the
principal repayment amount and No of instalments for “Linear repayment”
schedules. It can be multi valued to define multiple principal amounts.
 Profit/ constant type and No of instalments – These fields are used to input the
type of payment and the number of instalments. It can be multi valued to
define multiple type of payments.

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 Repayment percentage, No of instalments, percentage calc type – These

fields are used to input the percentage of repayment and the number of
instalments. The percentage calculation type decides whether percentage
needs to be applied on instalments amount or principal amount.

The Wakala Reference is captured in Musawama Contract.

Accounting Entries raised is shown:

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Asset Sale – Manual schedule

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

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The Repossess and Past Due operations are as per standard pack functionality.

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Enquires
Enquiry 1: Accounting entries summary

Enquiry 2: Customer Musawama contract summary

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Enquiry 3: View schedule balances full details

Enquiry 4: View schedule

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Enquiry 5: Musawama accruals enquiry

Enquiry 6: Musawama outstanding contracts summary

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Enquiry 7: Musawama deal report

Enquiry 8: Finance position of a Customer

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Limits
Limits are not applicable for retail Musawama contracts. If required bank can do the
set up in the Limit reference and Limit parameter applications. The Limit is updated
for the sale amount after authorization of Asset sale.

Refer to LIMITS user guide for more information about setting up Limits.

Delivery
Refer to DELIVERY user guide for more information about delivery setup.

Services
BNK/ OFS.MESSAGE.SERVICE have to be setup in “Auto” mode for generating the
accounting entries after Asset pre-approval/ Asset purchase.

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BNK/IS.B.SB.SCH.DISB have to be attached in COB for automatic disbursement of

scheduled disbursements.

Accounting Process

Wakala :

Dr Wakala Asset
Cr Customer Account

Asset Request

No Accounting entries.

Asset Pre – approval

DR Goods in Transit Account (Purchase price)

CR Purchase order Account (Purchase price)

Asset Purchase

DR Purchase order Account (Purchase price)

CR Goods in Transit Account (Purchase price)
DR Purchase Account
CR Multi supplier Account

If Additional costs are defined,

DR Expenses category
CR Cost counterparty Account

Down payment

DR Customer Account
CR Purchase Account

Asset sale – Automatic/ Manual Schedule

DR Musawama receivable (Purchase amount)

CR Purchase Account (Purchase amount)

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DR Musawama profit receivable (Profit amount)

CR Profit Capitalization (Profit amount)
Daily Accrual – Automatic Schedule
DR Profit Capitalization
CR Profit and Loss Account
Schedule repayment
DR Customer Account (Repayment Principal Amount)
CR Musawama Receivable (Repayment Principal Amount)
DR Customer Account (Repayment Profit Amount)
CR Musawama profit receivable (Repayment Profit Amount)
Unpaid schedule repayment
DR Past due account
CR Musawama Receivable (Principal)
CR Musawama profit receivable (Profit)
Partial Payment
DR Customer Account (Principal)
CR Musawama receivable (Principal)
DR Customer Account (Profit)
CR Musawama profit receivable (Profit)

Contract Early Maturity

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

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

DR Profit and Loss Account (Bonus Amount)

CR Customer Account (Bonus Amount)

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

DR Customer Account (Outstanding Amount)

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CR Musawama Receivable (Outstanding Amount)

DR Customer Account (Adjusted profit)
CR Musawama Profit Receivable (Adjusted Profit)
DR Profit Capitalization (Un-Accrued Profit – Adjusted Profit)
CR Musawama profit receivable (Un-Accrued Profit – Adjusted Profit)

Past due settlement

DR Customer Account
CR Past due Account (Principal)
DR Customer Account
CR Past due Account (Profit)

Bank settle PD

DR Repossess Account (Past due outstanding)

CR Past due Account (Past due outstanding)

Repossess the Asset

DR Repossess Account (Sale outstanding)

CR Musawama receivable (Sale outstanding)

Resale the Asset for Profit

DR Third party customer account (Sold Amount)

CR Repossess account (Outstanding settlement)
CR Profit and Loss account (Sold amount – Outstanding settlement)

Resale the Asset for Loss

DR Third party customer account (Sold Amount)

DR Profit and Loss account (Outstanding settlement – Sold amount)
CR Repossess account (Outstanding settlement)

Repurchase the Asset

DR Purchase Order Account

CR Goods in Transit Account

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Troubleshooting

Glossary
………..

Index
...............

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