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Yemen has followed in the footsteps of other Islamic countries around the globe by opening up the market to Shari’ah-compliant banking products. The oldest commercial bank in the country, Yemen Bank of Reconstruction and Development (YBRD) aims for the same as it works towards managing its systems to get up to speed.
Yemen Bank of Reconstruction and Development (YBRD) has been a mainstay of the Yemen banking sector, founded as the country’s first bank following the revolution in the country in 1962 and operating as the central bank and regulator until the 1970s. As a majority state-owned entity, it has underpinned the establishment of several key public companies, such as The Public Corporation for Foreign Trade, Yemen Printing and Publication Company and Yemen Drug Company, among others, with financing and support.
In 2012, the Central Bank of Yemen followed a recent trend by allowing Shari’ah-compliant banking products to be offered by the country’s banks. Aref Awadh, CIO at YBRD, explains that at the time, ‘we decided that we had to seize this opportunity, to show it was possible to expand our customer base’. The demand for established Islamic banking products among the bank’s existing customers was clear, says Awadh, evidenced by the fact that the majority would simply stay away from interest-bearing products as an alternative. This arrangement caused revenue leakage and was not practical in the long-term.
From a systems perspective, the bank was in a relatively advantageous position, having gone live with a new conventional core banking system in 2009, Temenos’ Transact. Awadh explains that the bank then had a decision as to whether to venture out to market for a specialised fully-fledged Islamic core system, or to utilize Transact instead. ‘When we decided to take Islamic banking, we had a strict time limit to implement the Islamic products in the branches, so that was key for us,’ he recalls. After evaluating the options on the market, the bank concluded that ‘it was cost effective and logical to use the existing system, the infrastructure and the services’.
When we decided to take Islamic banking, we had a strict time limit to implement the Islamic products in the branches, so that was key for us.
Regional Temenos partner, NdcTech, was contracted to deliver the system, having also worked on the conventional Transact roll-out at YBRD. Awadh suggests that ‘because our business experience here at YBRD was conventional banking, we needed somebody who could help give us a good understanding of Islamic products’.
NdcTech had a number of references and the bank reached out to Meezan Bank in Pakistan for a reference call about the experience of its project to date. ‘They gave me a good reply,’ says Awadh.
The bank signed the agreements with Temenos and NdcTech in July 2013. The project started in September the same year following the management approval process with a go-live the following March. Awadh re-emphasises that given the short timeframe the bank had to launch the new business, it prioritized just six main product offerings; murabaha, mudarabah, musharaka, ijara and istisna. ‘In Transact, I was able to build the products I needed fast,’ he states. The complexity of the project revolved around how the profit distribution system would work for the end of year distributions of payments, but NdcTech was able to provide a solution for this, he adds. The system was initially deployed at YBRD’s two Islamic branches (it has over 50 for conventional banking), but the plan is to now expand the footprint to all the cities across the country.
NdcTech is continuing its partnership with the bank by working on the development of new products such as sukuk and bai salam (the distribution of payments for agricultural projects and the collection of payments based on harvests), which will continue over the next few months. Implementing this platform will allow YBRD to achieve rapid time to value for new digital products and the cost savings to fulfil its vision.
The bank is also working on revamping its channels, with Temenos’ Connect mobile application being installed. This project will be finalised next month, says Awadh. And there is a new internet banking system being developed with a local partner, with this scheduled to launch at the end of this year. ‘For any new electronic services that we introduce, we are utilising one general database, and at the same time we are running the same infrastructure and services, so when we change something it is a single effort,’ states Awadh.
With the adoption of these new technologies like mobile banking application and internet banking system the bank will be able to advantage from easy customization of the user interface, providing dynamic and personalized content with high fidelity/pixel perfect layout, creating near native user experiences. This enables banks to be very agile in responding to market opportunities and customer demands, allowing high speed to market and reducing the complexity and cost of managing and distributing multiple apps for various devices.
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