AAOIFI FAS 54 “Direct Costs: Determination, Attribution and Reimbursement” approved

At its 46th accounting board meeting in Bahrain in June, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) discussed standard developments including the public consultation on the exposure draft for FAS 54 “Direct Costs: Determination, Attribution and Reimbursement”. 

The standard sets out the accounting and financial reporting principles for the determination, attribution and reimbursement of direct costs incurred by Islamic financial institutions with regard to the shari’ah-compliant contracts and arrangements (and to other institution in connection with their respective Islamic finance transactions). 

The standard has been approved in principle, and is expected to be issued within this year, after completion of the due process. 

Hamad Al Oqab, Chairman of the AAOIFI Accounting Board stated: “The focus of the board has been to facilitate the Islamic financial institutions in implementation of consistent accounting practices with more transparency, in line with shari’ah principles and rules. I believe that FAS 54 will bring greater harmony in financial reporting practices and, additionally, will help improving the level of compliance with Shari’ah principles and rules across the industry”.

Hajj visa application process a complex business

Those who want to go on the hajj* pilgrimage not only have to secure a place under the country quota system, but also need to identify an approved travel operator to handle visa procedures and travel arrangements. 

The visa application is a particular hurdle as requirements may change from year to year. A report on Arab News reported on 9 July that some Egyptian agencies had been denied hajj visas because Egyptian pilgrims had overstayed their visas in the past, for example. 

Meanwhile, Arabian Business said in May 2014 that those under four and those over 60 were being denied hajj and umrah visas because fears of complications if they caught Middle East Respiratory Syndrome (MERS), though another report in Arab News the same month denies that those over 65 are being denied visas. 

The Ministry of Health in Saudi Arabia has a page on misconceptions about MERS here. At the time of writing, the number of new MERS cases in the Kingdom are slowing, and the Ministry of Health has not issued any advisories regarding hajj or umrah. The page nevertheless recommends that people over 65, pregnant women, children under 12, and those suffering immunodeficiency or chronic ailments postpone their trips. "However everyone can take precautions by following the prevention guidelines and exercising common sense," states the ministry on the website.

*Islam requires all Muslims who are able to do so to make the pilgrimage at least once in their lifetime. Those who have been on hajj in the last five years will not be issued hajj visas. 

BIBD At-Tamwil turns to FICO technology to manage loan portfolio risk

FICO, a predictive analytics and decision management software company, has announced that BIBD At-Tamwil, a subsidiary of Bank Islam Brunei Darussalam (BIBD), the largest Islamic bank in Brunei, has seen increases of 20% percent or more in auto loan bookings since it implemented a mobile decision management application developed using FICO technology.
FICO predictive analytics and the FICO Blaze Advisor decision rules system have enabled BIBD At-Tamwil to manage its loan portfolio risk, satisfy regulatory requirements and take full advantage of information from a newly formed credit bureau, which became available in late 2012. 

Source: FICO

The company’s ability to provide on-the-spot decisions for loans has been the driving factor in boosting business. Its marketing agents at car dealers now use iPads to process credit applications at the car lot, entering the customer’s financial information into the mobile app, along with photographs of important documents such as identity cards and payslips. 

This information, along with credit bureau data, is then analysed using predictive analytics and business rules within FICO Blaze Advisor decision rules system to provide a loan approval decision. This customer-centric approach has streamlined the experience, increasing buyer satisfaction and therefore sales.

“We felt customers were waiting too long for loan approvals using our old system,” said Irwan Lamit, MD of BIBD At-Tamwil, which helps more than 14,000 Brunei consumers every year to finance new and used cars or motorbikes. “With this new approach, we’ve cut the process from a potential 24 hours down to mere minutes while still effectively managing risks. This is a win-win solution that has grown our client base and sales.”

BIBD At-Tamwil made this technology investment as part of its strategy to double its revenue every five years in a highly competitive and saturated marketplace.

“Finding growth meant targeting new customers while managing our risk,” said Irwan. “We decided to include non-salary assigned customers, people whose principal bank account is not with our parent bank. To do this, while increasing loan turnaround time, meant quality risk management was an essential ingredient to the solution.

Dinesh Pereira, who manages FICO’s business in Brunei, added that the innovative solution developed for BIBD At-Tamwil is a great example of the use of customer-focused technology in the financial services industry to drive profits.

“BIBD At-Tamwil is using technology to make life easier for clients looking to buy automobiles. Their work demonstrates what is possible when the power of analytics and mobile are brought together to improve the customer experience.”