COMMERCIAL BANK OF ETHIOPIA

IFB SERVICE
TRAINING
 Session Content
1. Session Objective
2. IFB Window Service
Guidelines/Documents
3. The Principle of Permissibility &
Segregation of Funds
4. IFB Deposit Modalities
5. IFB Customer Maintenance on Temenos
System
6. Cash & Vault Management on IFB
Window
7. Branch Operation’s role in IFB window
service
8. SELAM VISA Card
 Session Objective
General Objective: Participants will have
basic understandings on IFB Service &
Operation.

Specific Objective:- Participants will be

able to understand:
 The documents we refer as a guideline to
give IFB window service;
 How to identify impermissible funds and
how to segregate them from IFB funds;
 Basic features & account maintenance
of IFB Deposit products;
 How to manage Cash and Cash Vault of
IFB Window Service
Guidelines

 Which documents do we use as a

guideline/reference to give IFB
window service?
 IFB Guidelines . . . .
 Branch Banking Procedure:
 Eligibilities & document requirements for
opening IFB deposit accounts;
 Parties & their roles, who involve in customer
acquisition
 Parties & their roles, who involve in selling of
conventional and alternative banking channels of
IFB products & services;
 Cash & non cash collection & payments on IFB
window.
 IFB Service Procedure:
 The authority & responsibility of different
organs of the bank with regard to IFB service;
 Types and features of IFB deposit products;
 The operation of Mudarabah deposit accounts.
 Various documents: IFB has also different important
memos, awareness creation documents and broacher.
 Permissibility & Segregation of
Fund

1. What do we mean by permissible business activities? And

what kind of source of funds are permissible for IFB
service?
2. How do we know the source of Customer’s fund is from
permissible business activities?
3. What actions do we take if the source of customer’s fund
is from impermissible busniess activities?
4. Why do we need a segregation of funds? And how do we
segregate IFB Funds from conventional banking funds?
5. Do we segregate the physical cash which we are collect
 Permissibility of Fund
 Permissible fund refers to a fund that
its source is from Sharia compliant
business activities.
 According to the Sharia engaging with
the following business activities is not
permissible: Usury/interest, alcohol,
pork, gambling, pornography, trading
dead animal’s meat.
 IFB also has the responsibility to
ascertain that the source of funds for
all IFB transaction are from permissible
business activities;
investments/financings should also only
on permissible businesses.
 Permissibility . . . . cont’d
Who ascertain the source?
 The KYC principle will apply
during opening of new IFB
account ;
 Customers take the burden of
proof for the source of their fund;
 If the source of the fund is from
impermissible business activities,
the following action will be
taken:
 Close the account, and
Transferring the balance to the
conventional bank (upon
 Segregation of Fund
Principle
 Funds collected from permissible sources
must be segregated from funds from
impermissible;
 The NBE directive No. SBB/51/2011 enforce
the segregation of IFB fund and separate and
proper maintenance of records for all IFB
transactions;
 Accordingly, IFB has the obligation to keep the
purity of all IFB transactions; and separate its
activity from the conventional Bank;
 IFB is considered as a separate entity which
has different capital funds, accounts, and
reporting systems for each type of daily
activities.
 Segregation . . . . cont’d
Practice
 The installed Interest Free Core
banking module (IFB TEMENOS’s )
guaranteed the segregation of both
banking services
 The system is convenient to achieve
the segregation of financial
transactions;
 IFB has its own:
A window within a conventional banking
service giving branch which exclusively
offer IFB services;
Different income and Expense category;
Separate records for all asset & liability
accounts, deposit accounts;
Separate Cash Vault for LCY and FCY.
 IFB Deposit Modalities

 What are the IFB deposit

modalities? And the deposit
products under these
modalities?
FB Deposit Modalities
 IFB Deposit Accounts
1. Wadiah Modality
i. Wadiah Saving - Normal
ii. Wadiah Saving- Women
iii. Wadiah Saving – Youth
vi. Wadiah Saving - Youth teen
v. Wadiah Saving – Education
2. Qard /Demand Deposit/ Account
 IFB Deposit . . . .

3. Mudaraba Saving Deposit Account

i. Mudarabah Saving - Normal
ii. Mudarabah Saving - Women
iii. Mudarabah Saving – Youth
vi. Mudarabah Saving - Youth teen
v. Mudarabah Saving – Education
4. Mudaraba Term/ Fixed Time
Deposit
i. 3 Months iii. 12 Months
ii. 6 Months iv. 24 & above
Months
 Wadiah /Safekeeping/
Saving Deposit Account

1. What are the basic principles of Wadiah?

2. What are the basic principles of Qard?
3. Which conventional deposit product has a
similar feature with Wadiah? What are the
similarities?
4. What are the basic differences between
Special Demand Deposit (SDD) and Wadiah
Saving Deposit?
 Wadiah Saving Deposit . . . .
Principle
 Literally Wadiah means deposit;
 It is the deposit of fund or asset;
 The term Wadiah relates to the concept of
Amana (safe) where one person hands over
his/her funds or assets to another person
for the purpose of safekeeping;
 In modern banking application Wadiah is an
arrangement that the depositor deposits
his/her funds with the bank for safekeeping
purpose;
 The bank guarantees full return of these
deposits on demand;
 Wadiah Saving . . . Principle
 The usage of the deposit is subject to
permission of the depositor;
 The bank may use these funds on
permissible business at its own risk;
 The financed amount is considered as
the equity of the Bank;
 Since all risk is borne by the bank,
the depositors are not entitled to any
share in profits earned by the bank;
 Depositors have the right to deposit
or withdraw their funds at any time;
Wadiah Saving . . . . Cont’d
Account Maintenance &
Operation
o The account open as per the Branch
Banking procedure;
o The minimum initial balance to
open this Account is Birr 25.00;
o Operate using passbook;
exclusively prepared for IFB
Service;
o The account also operate using E-
payment services (Mobile Banking,
internet banking, Selam Visa card);
 Wadiah Saving . . . . Cont’d
oUse the IFB account opening
format;
oNo additional contract is
required;
oIFB formats shall be used for
cash and none cash
transaction services;
oCustomers shall fully or
partially withdraw from their
credit balance without any
 Wadiah Purpose Oriented
Deposit Products
1. Wadiah Women Saving Deposit
Account
2. Wadiah Youth Saving Deposit
Account
3. Wadiah Youth Teen Saving
Deposit Account
4. Wadiah Education Deposit
Account
 Qard /Demand Deposit/
Account
 Qard . . . . Cont’d
Feature
 Customers keep their money in the bank
to facilitate fast cash transaction;
 Has similar feature with the conventional
current account;
The Bank pays on demand any
outstanding amount in full or partially;
 Service provided with cheque books;
 Automatic access to the customer’s
account is also available through mobile,
internet banking and Selam Visa card;
 Deposits may be made by cheque, cash, or
by any of the account transfer methods;
 Qard . . . . Cont’d
Account Maintenance & Operation
 The account is opened as per the
conventional Branch Banking procedure
 Minimum balance is required to open this
account
 The IFB account opening format is used
 No additional contract is required
governing the management of the fund,
 Customers of this account shall use the
formats prepared for the IFB services.
 Account opening steps are the same as Wadiah.
However, we should use the proper product
code, 1050, which is given to Qard account.
 Mudaraba Deposit
Accounts

1. What are the basic principles of Mudarabah?

2. What are the peculiar features of Mudarabah accounts?
3. What is the use of IFB pool? And how do we maintain it
in IFB T24?
4. What are the practical & operational problems we have
faced in relation to Mudarabah accounts?
5. What are the eligibility requirements to share profit?
 Mudaraba Deposit
Accounts
Principle
 According to AAOIFI “Mudaraba is a partnership in
profit whereby one party (rab ul-mal) provides
capital/fund and the other party (mudarib) provides
labour/expertise”;
 The mechanism of profit sharing must be based on
prior agreement and it must basis on agreed
percentage of the profit; not on lump sum or
percentage of the capital;
 Financial loss, if any, solely incurred by the owner of
the capital/fund (Rab-ul-mal);
 The mudarib is not liable for losses except in case of
misconduct, negligence or breach of the contract;
 Mudarabah contract is a trust based contract which
signed between both parties to facilitate the
management of the fund.
Mudaraba Account . . . . principle
 Mudaraba Deposit Accounts
Feature
 Mobilized from depositors with prior
agreement that benefit (Profit) is
paid based on the Bank’s
performance on pre-agreed rate
 It is a consent to combine the
interest of the two parties; the
customer /Provider of the fund/ and
the Bank /Manager of the fund/;
 The Bank & Depositor share profit
based on the pre-determined profit
sharing ratio.
 Mudaraba Deposit . . . Feature
 The Accounts only available in ETB;
 The Bank give no prior guarantee for
return of principal or benefit
 Loss or significant reduction on
investible fund is compensated with
Profit Equalization Reserve (PER) and
Investment Risk Reserve (IRR);
 If the reserve couldn’t cover the loss, it
will entirely be borne by the
depositor/investor (unless there is
evidence of negligence or any other
cause on the part of the Bank);
Mudaraba Saving Deposit
Account
Account Maintenance & Operation
 We refer Branch Banking & IFB Service
Procedures to open this account;
 We use IFB account opening format;
 The Bank & the customer will get in to
contractual agreement with regard to
the management of the fund;
 Two copies of Mudaraba contracts are
required, one for the customer the
other will be filed in the bank after
signed by both parties;
 Mudaraba Saving . . . . Acct
Maintenance
 operated by using passbook and
‘Selam’ VISA Card, exclusively
prepared for IFB service;
 Minimum initial balance of Birr 500
is required to open this account;
 A minimum monthly average daily
balance of birr 1000 shall be
maintained in the account in order
to be qualified for profit sharing;
 Mudaraba Saving . . . . Acct
Maintenance
 Withdrawal restriction can be set;
 The services deliver by using IFB
formats;
 Automatic access to the
customer’s account is also
available through mobile, internet
banking, and ATM
 Deposits may be made by cash, or
by any of the account transfer
methods,
 Mudaraba Saving Purpose
Oriented Deposit Accounts

1. Mudaraba Women Saving Account

2. Mudaraba Youth Saving Account
3. Mudaraba Youth Teen Saving
Account
4. Mudaraba Education Saving
Account
 Mudaraba Saving New . . . .
Basic features of all Purpose Oriented
Mudaraba Deposit Accounts:-
Accounts
 Operational Procedure for all accounts we use:
- Branch Banking Procedure
- IFB Service Procedure
 All deposit accounts open with initial deposit
balance of Birr 500.00;
 The minimum monthly average daily balance
for profit calculation is Birr 1000.00;
 There is no restriction on withdrawal;
 Mudarabah Women & Education saving
account holders are enjoy the benefits
attached with the respective accounts.
Mudaraba Saving Deposit . . .Cont’d
The following PSR has applied on
Mudaraba Saving Deposit Accounts
 Mudaraba Term/Fixed Time
Deposit Account
Account Maintenance & Operation
 We uses Branch Banking Procedure
and IFB Service Procedure;
 Customer enters a contractual
agreement with the bank;
 Issue a Certificate;
 Open with minimum initial deposit
of Birr 10,000;
 The account open for a limited
period or on term bases;
 Mudaraba Fixed . . . . Account
Maintenance
 The investment period may be for
3, 6, 12, 24 or more months, but
the Bank may change the duration
by considering the deposit and
financing policy;
 Partial withdrawal of deposit is
not allowed;
 The depositor eligible for profit
sharing if the fund kept at least
for a month;
 Profit sharing margin is variable
among customers based on terms;
 Mudaraba Fixed . . . . Feature
Mudaraba Fixed Time Deposit Accounts: -
Product Profit Sharing
Investment Code Ratio
Period Bank Customer

1 3 Months 21026 30 70
2 6 Months 21027 28 72
3 12 Months 21028 25 75
4 24 & above 21029 23 77
Months
 IFB Pool Management

 What is the consequence of

opening Mudaraba Accounts
without attaching the pool?
IFB Pool Management
Summary of Pool
.
 IFB Customer Maintenance
on Temenos System

How do we maintain IFB

customer accounts on the
T24?
 IFB Customer
Maintenance . . . .
 IFB Access at least for two IFB
front Makers;
 The window shall always be active.
New IFB Customer Creation:-
 Use Retail Operation & IFB menu to
create new customer for IFB
customers;
 Follow the same steps to create new
customer/s, as conventional Bank;
 Use different register book for
recording and delivery of the
passbook or cheque book.
 Customer Maintenance . . . .
Cont’d
Account Opening:-
Retail Operation menu
Wadiah Saving deposit
Accounts
Qard /Demand deposit/
Account,
Interest Free Banking menu
Mudaraba Saving deposit,
Mudaraba FIXED Time deposit
 Wadiah Deposit Account
opening steps on Temenos
User Menu  Retail Operations  Account  Open Saving Account – Local
 Enter Customer Number
Wadiah Deposit Account
opening . . .

After we fill the above form properly (like the mandatory fields of Customer ID,
product code, currency and other optional details like mnemonic, account name,
short name, account officer, other officer etc . . .) we have to commit/save the
record.
 Mudaraba PLS Deposit Account Opening

Steps on Temenos
Interest Free Banking Menu  IFB – Retail Operation 
Mudarabah Saving Accounts (LCY)  Open Saving Account –
Local  Enter Customer Number
Mudaraba PLS Account Opening Steps . . .
.
Mudaraba PLS Account Opening
Steps . . .
Customer Maintenance . . . Cont’d
Challenges in Mudaraba
deposit Account Maintenance
1.Opening Mudaraba account
without signing the contract form;
2.Opening Mudarabah accounts
without identifying the pool ID i.e.
due to amending any deposit
product into Mudarabah deposit
account.
Customer Maintenance . . . .
Cont’d
Effects of Mudaraba account
opening without attaching
pool ID.:-
 The deposit is not considered
as IFB pool deposit;
 Profit do not shared to these
customers;
 Highly affects IFB pool
deposit balance.
 IFB Cash and Vault
Management

How do we manage IFB

cash that collected through
IFB Window?
 IFB Cash and Vault . . . .
Cash Management
IFB window Front Maker handle
any cash related issues based
Branch Banking Procedure.
Cash collection - for deposit and
money Transfer; and
Cash Payment - to withdrawals
and money transfers
 Both transactions are handled
the same as the conventional
banking services.
 Cash and Vault Mgt . . . . Cont’d
IFB Vault Management
 IFB has its own cash vault for FCY &
LCY on the system;
 There will be one physical Vault (no
physical segregation of Cash);
 The Branch’s actual/physical cash
shall be the sum of the two vaults;
 No changes made on the cash
holding limit of Branches;
 One cash book should be used for
both conventional & IFB services;
Cash and Vault Mgt . . . . Cont’d
 The Senior Customer service officer
- cash has two menus:-
 Retail Operation and
 Interest Free Banking
 IFB Till Transfer for SCSO - Cash
Till to IFB Vault Transfer
IFB Vault to Till Transfer
 Two ‘Cash-in-Vault’ accounts (one
on IFB T-24 and one on
conventional T24) will be
maintained,
 ETB100019999DAO for Conventional,
 ETB100159997DAO for IFB
 Cash and Vault Mgt. . . Cont’d
 IFB Vault cash accounts initiated/opened
using ETB100159997DAO
Steps to activate IFB vault
Step 1 – open Retail Operation menu
Step 2 – open ‘‘Account’’
Step 3 – open ‘‘Denomination Control”
Step 4 – enter ETB100159997 the branch
DAO
Step 5 – select ‘‘STOCK CONTROL’’
Step 6 – select ‘‘DENOM’’
Finally, save the transaction.
 Cash and Vault Mgt. . .
Cont’d

What do we do if the cash

in the IFB vault is not
sufficient to pay to an IFB
 Branch Operation’s Role in
IFB window service
 The duties and responsibilities of the Branch
Operation in Branch Banking procedure shall be
applied;
 Ensure IFB window is dedicated for IFB services
and fully operational on the banks business day;
 Ensure the IFB vault on the system is kept
segregated from the conventional banking service;
 Ensure Mudarabah accounts are linked to the pool
at the time of account opening;
 Ensure all IFB services are operated using formats,
certificates and passbooks specifically designed
for the purpose;
 Ensure the respective Standard Account Opening
Applications and Contracts are filled, completed
and signed in an orderly and proper manner.
 Selam VISA Card
Two type of VISA cards are
prepared:- Selam Classic VISA Card
and Selam Women VISA Card;
Selam Classic Selam Women Card
Card

Wadiah saving, Mudaraba Wadiah Women and

Saving and Qard/Demand Mudaraba Women Saving
Deposit Accounts are eligible Accounts are eligible for
for Selam Classic Card. Selam women Classic Card.
Selam classic card 0023 will Selam women 0022 will be
be selected from the system. selected from the system.
 Discussion Questions
1. What kind of services are given on IFB
window?
2. What are the formats IFB prepared for branch
banking operation?
3. What are the priorities that branches should
fulfill before start giving IFB window service?

1. Who do you think the customer of IFB?

2. How do we pay a customer if he/she closed
his/her account before the profit pay period?