8 Haziran 2018 Cuma

Sample Personal Finance Concept Analysis




Product Design Form



_______________________________________________________

                       



Product / Brand Name:

XYZ Personal Finance

Date:

10.02.20##

Version :

2

 

Nature of the Request:

 

1 New Product Program

þRevision of Existing Product Program (Permanent Changes)

    (Please provide brief summary of proposed changes)

1 Special Campaign (Temporary Changes)

    (Please provide brief summary of proposed changes)

 

Purpose, Conceptual Design and Structure:

 

XYZ Personal Finance product has been revised to cater for consumer personal financing needs and also for making the public to be aware of our activities in this business. This product will be re-launched through a XYZ Personal Finance Advertisement Campaign.

 

Effective Date / Launching Date:

 

·       From 24th of February 20## to 01st of May 20##.

·       Special pricing will be valid until 01st of May 20##. After the campaign, existing pricing which is shown in Appendix-1 will be automatically applied.

·       This Product Program shall be reviewed on annual basis by Retail Banking Department and Risk Management.

 

Financing Modes:

 

Commodity Morabaha and Morabaha.

 

Target Market:

 

The following customer segments will be targeted:

·       Salaried individuals both Bahrainis and Non-Bahrainis

·       Self employed individuals[1].

·       Small Business owners.

·       Retired People.

 

Eligibility Criteria:

 

Applicant under this Product Program provided must meet the following minimum criteria:

 

1)     Is of a legal age as defined by the Laws of the Kingdom of Bahrain provided the Applicant’s age plus the repayment period does not exceed his/her retirement age.  Retirement age is defined as follows:

           



Sector

Male

Female

Government Ministries

60

55

Public Sector

60

55

Private Sector

60

55

Self Employed/ CR Owners

60

60

 

2)     Applicant age will be minimum 21 years and maximum 60 years provided that the repayment period will not be incompatible with the above table. The repayment period for the retired people will not exceed the age of 65.

 

3)     Is working and residing in the Kingdom of Bahrain.

           

4)     Employment:

·       Salaried Individuals should be employed by an approved employer in accordance with the “Approved Employers” guidelines / matrix.

·       Self Employed and Small Business owners should be true owners of their business not less than 3 years with business track record.

 

5)     Employment period:

·       Salaried individuals: Has been in the employment of the present employer for a period of not less than 3 months (provided the Applicant has completed the required probation period).

·       Self employed: Must be active in their business not less than 3 years with business track record.

·       Small Business owners: Must be active in their business not less than 3 years with business track record.

 

6)     Minimum income which is defined in Appendix-2 for different types of customers will be as follows.

·       Salaried individuals: Receives a minimum income not less than BD 200 per month. DSR will not exceed the percentages depicted in Appendix-2.

·       Self employed people: Receives a monthly average net credit turnover of at least BD 800 in the past 6 months and the monthly installment per average net credit turnover of the last 6 months will not exceed the percentages depicted in Apendix-2.

·       Small Business owners: Receives a monthly average net credit turnover of at least BD 1,000 in the past 6 months and the monthly installment per average net credit turnover of the last 6 months will not exceed the percentages depicted in Apendix-2.

·       Retired individuals: Receives a minimum income of BD 350. DSR will not exceed the percentages depicted in Appendix-2.

 

7)     Is not adversely mentioned on Central Bank of Bahrain’s “Credit Risk Unit System” or any other referral lists (internally or externally).

 

8)     Has the legal capacity to enter into contracts and execute documents / agreements.

 

Applicants who do not meet the above minimum Eligibility Criteria may apply for the facilities against full tangible security which is a real estate property or cash collateral. These collaterals have to be pledged to our bank until the end of the finance. The type of security and the coverage (Value of security / principal) ratios are depicted in the following table.

 



Type of security

Coverage ratio

Real estate

120%

Cash Collateral

110%

  

Financing Amounts:

 

1)     The Facilities will be granted only in local currency of the Kingdom of Bahrain, Bahraini Dinars.

 

2)     Applicants may ask finance for amounts:

·       Salaried Bahrainis: Between BD 1,000 and BD 100,000.

·       Salaried Expatriates: Between BD 1,000 and BD 25,000 (or 80% of their indemnity)

·       Self employed individuals: Between BD 1,000 and BD 25,000.

·       Small business owners: Between BD 1,000 and BD 10,000

·       Retired People: Between BD 1,000 and BD 10,000.

 

 

3)     Where an Applicant enjoys other credit facilities with the Bank, the maximum amount per individual personal finance facility plus all other credit facilities (such as Cards, other consumer finance facilities, or any other commercial financing) should not exceed maximum limits permissible by the Central Bank or the Bank’s internal Single Obligor policies (whichever is lower).

 



Pricing:

 

Normal Profit Rate     :           As per the matrix

 



Customer Type

Salaried Bahraini

Salaried Expat

Self Employed

CR Owner

Retiree

Maximum Tenor

84

84

60

60

60

Minimum Finance - BD

1,000

1,000

1,000

1,000

1,000

Maximum Finance – BD

100,000

25,000 or 80% of the indemnity[2]

25,000

10,000

10,000

Minimum Salary - BD

200

200

800

1,000

350

Salary Transfer

Mandatory

Mandatory

N/A

N/A

Mandatory

Life Insurance

Mandatory

Mandatory

Mandatory

Mandatory

Mandatory

Life Takaful Arrangement Fee

BD 1

BD 1

BD 1

BD 1

BD 1

Checks

Security checks

Security checks

Post dated

Post dated

Security checks

Administration Fee

BD 100

BD 120

BD 150

BD 150

BD 120

Installment Fee

BD 1

BD 1

BD 1

BD 1

BD 1

Grace Period

(tenor > 24 months)

Max 3 months

Max 3 months

Max 3 months

Max 3 months

Max 3 months

Pricing*

0-12 months

3.99%

4.09%

4.09%

4.09%

4.09%

13-48 months

4.19%

4.29%

4.29%

4.29%

4.29%

49-60 months

4.49%

4.59%

4.59%

4.59%

4.59%

61-84 months

4.49%

4.59%

-

-

-

Grace Period (3 months)

4.69%

4.79%

4.79%

4.79%

4.79%

 

* General Manager of Commercial Banking will have the right to increase the pricing of the product at any time after the campaign.

 


 

Financing Tenor:

 

Grace Period            :              Maximum of 3 months (Optional for the customer subject to the credit assessment)

Repayment Period      :           Maximum repayment period of 84 months inclusive of Grace Period subject to the pricing matrix.

Payment Holidays      :           Not allowed.

 

 

Administration Fees   :           Administration fees (as shown in the above matrix) will be deducted from the customer account upfront and will not be financed. There will be installment fees of BD 1 that will be collected on the due date of the installments.

 

Penal Rate                   :           If any of the monthly payment(s) under the Facility is (are) not paid on the due date(s), a maximum penal rate of 0.5% flat per day to be charged on defaulted installment (each individually) from the due date(s) until the date(s) of payment. 

 

                                                All penalties collected must be credited to charity accounts after deducting costs and expenses associated with collecting the defaults (Sharia to decide on percentage that Bank may retain).

 

Prepayment Fees        :           To remain compliant with the rulings of our Sharia Board, prepayments under this product shall not be subject to any specific “Prepayment Fees”.  HORB, however, may deduct reasonable amounts from profits refundable to the Applicants in case of full prepayment (Non-accrued amounts – this deduction may also include the life insurance).

 

Life Takaful Fee                     : We charge BD 1 for Life Takaful Insurance Arrangement to the customer due to the service given for arranging Life Takaful through Solidarity.

 

 

Life-Takaful (Insurance) Premium:

 

Life Takaful which is mandatory in all transactions will be made through Solidarity with a rate of 0.2375 per mille and the customer will be charged 0.350 per mille. If Solidarity applies different pricing scheme for the individuals out of the scope the same profit margin will be kept.

 

Security / Support:

 

The securities in this financing scheme are listed in the following:

  • In all cases salary transfer will be mandatory
  • In all cases the life insurance will be mandatory
  • In all cases the security checks will be mandatory from salaried individuals and retirees.
  • Post dated checks (from CR owners and SE people)
  • Personal guarantee from CR owners and SE people is mandatory.
  • If the customer obtains finance against his/her time deposit, there is no need for salary transfer and life insurance. Nevertheless, if the customer obtains finance against his/her real estate there is a need for life insurance, fire insurance and salary transfer.

 

Documentations and Agreements:

 

  • Salaried Bahraini

Mandate documents

    • Copy of CPR
    • Last Salary slip (If overtime is required for better DSR last three salary slips)
    • CRB consent form.

Additional Mandate Documents

    • 3 months bank statement (If there is additional fixed income, i.e. rent income)
    • Salary certificate or 3 months salary slip (If the joining date is not mentioned in the last salary slip or title of the employee is not clearly stated in CPR / salary slip)
    • If joining date is mentioned in salary slips but title is not mentioned, salary certificate is required

 

  • Salaried Expatriate

Mandate documents

    • Copy CPR and Passport for Non-Bahrainis (with Visa work permit) 
    • Last Salary slip (If overtime is required for better DSR last three salary slips)
    • CRB consent form.

Additional Mandate Documents

    • 3 months bank statement (If there is additional fixed income, i.e. rent income)
    • Salary certificate or 3 months salary slip (If the joining date is not mentioned in the last salary slip or title of the employee is not clearly stated in CPR / salary slip)
    • If joining date is mentioned in salary slips but title is not mentioned, salary certificate is required

 

  • Self Employed and Small Business

Mandate documents

    • Copy CPR for Bahrainis
    • Copy CPR and Passport for Non-Bahrainis (with Visa work permit) 
    • 6 months bank statement
    • Copy of Commercial registration document.
    • CRB consent form.

 

  • Retired people

Mandate documents

    • Copy CPR for Bahrainis
    • Salary Certificate from GOSI or pension fund
    • Salary slip if they are working officially in an organization
    • CRB consent form.

Additional Mandate Documents

    • 3 months bank statement (If there is additional fixed income, i.e. rent income)
    • Salary certificate or last 3 months salary slip for the current organization (if joining date is not mentioned in the last salary slip)

 

 

Facility Documents    :           -    Application Form

-      Morabaha Agreement

 

Security Documents   :          

-      Security checks

-      Salary Transfer Letter

-      Post dated checks (from CR owners and SE people)

 

Media Channels:

 

We are expecting an average of BD 40,000 as advertising cost. The channels will be decided after the advertisement agency recommendations.

 

Source of Funding:

All transactions will be funded by the General Modaraba.

 

Appendices:

-      Appendix 1 : Existing pricing

-      Appendix 2 : Income Assessment

-      Appendix 3 : Max tenor / min salary / max limit / grace period

-      Appendix 4 : Pricing and the fees of the banks

-      Appendix 5 : Security structure and specific finances

-      Appendix 6 : Profitability

 

 

 

 

 APPROVALS



 

 

 

Mgr – Retail Banking

 

Senior Manager – Retail Banking

 

 

 



 

 

 

 

 

Head – Risk Management

 

Sharia Compliance

 

Legal Advisor

 

 

 




 

 

General Manager Com. Bnk.

General Manager Support

 

 

 



 

CEO

 

 

 


APPENDIX – 1:

 

EXISTING PRICING

 




Facility Type

Morabaha and Commodity Morabaha

Customer Type

Bahraini

Expatriates / Self Employed

Pricing                                        New         Existing       New              Existing

0-12 months

4.55%

4.39%

4.85%

4.49%

13-48 months

4.55%

4.49%

4.85%

4.79%

49-60 months

4.75%

4.75%

4.99%

4.99%

61-84 months

4.75%

4.75%

n/a

n/a

Grace Period (max. 3 months)

4.99%

4.99%

5.29%

5.29%

 

 

 

INCOME ASSESSMENT CRITERIA FOR RETAIL BANKING CUSTOMERS

 

1.           SALARIED BAHRAINIS

"Income" is calculated according to the following formula:

+ Basic income

+ Fixed Allowances

+ Fixed percentage of his last 3 months average overtime earning (depending on the company)

If he has other income

+ 50% of his rent income

+ 25% of his other steady income

The sum of installment and other obligations will not be higher than the basic salary.

The minimum DSR values for Salaried Bahrainis




Income – BD

XYZ Personal Fin.

XYZ Car Fin.

XYZ Home Fin.

0-200

No finance

No finance

No finance

201-250

30%

30%

No finance

251-350

50%

50%

No finance

351-1,000

50%

50%

50%

1,001-3,000

50%

50%

65%

Above 3,000

65%

65%

70%

 

2.           SALARIED EXPATRIATES

"Income" is calculated according to the same formula applied to Salaried Bahrainis:

The minimum DSR values for Salaried Expatriates




Income – BD

XYZ Personal Fin.

XYZ Car Fin.

XYZ Home Fin.

0-200

No finance

No finance

No finance

201-250

30%

30%

No finance

251-500

50%

50%

No finance

501-1,000

50%

50%

50%

1,001-3,000

50%

50%

65%

Above 3,000

65%

65%

70%

 

3.           SELF EMPLOYED INDIVIDUALS

Income is the net average credit turnover of the last 6 months. The monthly installment will not be higher than a percentage of the income which is depicted in the following table.

The minimum installment / income ratios for Self Employed Individuals




Income – BD

XYZ Personal Fin.

XYZ Car Fin.

XYZ Home Fin.

0-800

No finance

No finance

No finance

801-1,000

40%

40%

No finance

1,001-3,000

50%

50%

55%

Above 3,000

60%

60%

65%

 

4.           SMALL BUSINESS OWNERS

 

Income is defined as same as the self employed people.

 

The minimum installment / income ratios for Small Business Owners




Income – BD

XYZ Personal Fin.

XYZ Car Fin.

XYZ Home Fin.

0-1,000

No finance

No finance

No finance

1,001-1,500

35%

35%

No finance

1,501-3,500

40%

40%

50%

Above 3,500

50%

50%

60%

 

5.           RETIREES

 

"Income" is calculated according to the following formula:

+ Pension

If working in an organization

+ Basic income

+ Fixed Allowances

+ Fixed percentage of his last 3 months average overtime earning (depending on the company)

If he has other income

+ 50% of his rent income

+ 25% of his other steady income

The sum of installment and other obligations will not be higher than the basic salary.

The minimum DSR values for Retirees




Income – BD

XYZ Personal Fin.

XYZ Car Fin.

XYZ Home Fin.

0-350

No finance

No finance

No finance

351-600

40%

40%

No finance

601-2,000

45%

45%

55%

Above 2,000

50%

50%

60%

 

 

APPENDIX-3: MAX TENOR / MIN SALARY / MAX LIMIT / GRACE PERIOD




BANK

MAX TENOR

MIN SALARY

MAX LIMIT

GRACE PERIOD

Bank-1

Sal. Bahr 7 years

Sal. Exp 7 years

SE 6 years

SB 6 years

Retired No finance

Sal. Bahr BD 200

Sal. Exp BD 200

SE ann. inc. BD 30K

Ann.Sales 150K

SB ann. inc. BD 30K

Ann.Sales 150K

BD 150,000

No

Bank-2

Sal. Bahr 7 years

Sal. Exp 7 years

SE Upon approval

SB Upon approval

Retired 7 years

BD 200

BD 50,000

3 months

Bank-3

5 years

Sal. Bahr BD 200

Sal. Exp BD 250

SE BD 1,000

SB BD 1,000

Retired BD 300

Depends on the income.

No

Bank-4

7 years

BD 200

Depends on income

2 months

Bank-5

7 years

 

No retired finance

Sal. Bahr BD 250

Sal. Exp BD 300

SE Varies

SB Varies

Retired No finance

Depends on the income

No

Bank-6

7 years

Sal. Bahr BD 200

Sal. Exp BD 250

SE BD 2,000

SB BD 2,000

Retired BD 200

Depends on the income

No

Bank-7

7 years

Sal. Bahr BD 200

Sal. Exp BD 200

SE BD 2,000

SB BD 2,000

Retired BD 200

Depends on the income

No

Bank-8

7 years

Sal. Bahr BD 250

Sal. Exp BD 300

SE Varies

SB Varies

Retired BD 250

Depends on the income

No

Bank-9

7 years

Sal. Bahr BD 250

Sal. Exp BD 250

SE Varies

SB Varies

Retired BD 250

Depends on the income

No

Bank-10

7 years

No Info

No info

1 month

APPENDIX-4:

 

PRICING AND THE INSTALLMENTS

 




BANK

PRICING

Insurance rate

Bare Installment

Real Installment

Bank-1

Salaried people

5.02 % flat

9.00% reducing

 

SE, SB

5.33 % flat

9.50% reducing

0.45/1,000

161

 

And

 

163

165

 

And

 

167

 

Bank-2

All customers

4.80% flat

9% reducing

 

0.19/1,000

161

163

Bank-3

All customers

5.50% flat

9.80% reducing

 

Included in the admin fee

 

217

Bank-4

Bahraini, SE, SB

3.25% flat

6.18% reducing

 

Expatriates

4.50% flat

8.13% reducing

Others

0.85/1,000

 

Expatriates

0.60/1,000

 

 

146

 

And

 

157

155

 

And

 

163

Bank-5

All customers

5.02 % flat

9.00% reducing

 

0.4/1,000

 

161

165

Bank-6

4.53% flat

8.50% reducing

0.4/1,000

158

162

Bank-7

4.60% flat

8.63% reducing

0.34/1,000

157

161

Bank-8

5.33% flat

9.50% reducing

0.35/1,000

163

167

Bank-9

6.90 % flat

12.00% reducing

0.25/1,000

177

181

Bank-10

5.37% flat

10% reducing

0.60/1,000

164

170

 

 

APPENDIX-5:

 

FEE AND SECURITY STRUCTURE

 




BANK

Admin Fee

SECURITY

Bank-1

Sal. Bahr BD 55

Sal. Exp BD 55

SE BD 250

SB BD 250

Retired No finance

ST

Bank-2

Sal. Bahr BD 70

Sal. Exp BD 70

Retired BD 70

ST

Bank-3

3%

 

Bank-4

Sal. Bahr BD 550

Sal. Exp BD 300

SE BD 550

SB BD 550

Retired BD 550

ST

Bank-5

BD 50

ST

Bank-6

BD 80

ST

Bank-7

BD 60

ST

Bank-8

BD 100

ST

Bank-9

BD 200

ST

Bank-10

BD 210

Cheques, notes, direct debit from A/C

 

 




Pricing

 

Sal. Bhr.

Sal. Exp.

SE

SB

Retiree

0-12 months

3.99%

4.09%

4.09%

4.09%

4.09%

13-48 months

 

 

 

 

 

49-60 months

 

 

 

 

 

61-84 months

 

 

 

 

 

Grace Period (3 months)

 

 

 

 

 

 




APR’s*

 

Sal. Bhr.

Sal. Exp.

SE

SB

Retiree

0-12 months

9.81%

10.43%

10.43%

10.43%

10.43%

13-48 months

 

 

 

 

 

49-60 months

 

 

 

 

 

61-84 months

 

 

 

 

 

Grace Period (3 months)

 

 

 

 

 

*APR contains Admin and installment fee but life insurance is not factored

 

 

APPENDIX-6:

 





Incomes

Unit

Total

Profit from funds

8.5% reducing

BHD 24,791

Admin Fee

BHD 101

BHD 35,500

Installment fee

BHD 1

BHD 350

Insurance profit

0.1125/1,000

BHD 393

Total

 

BHD 61,034

 

 

 

Expenses

Unit

Total

Cost of the deposits

2.93%

BHD 8,545

Advertisement costs

BHD 20,000

BHD 20,000

Total

 

BHD 28,545

 

 

 

Profit (Advert. Period)

 

BHD 32,489

 

The profitability of the XYZ Personal Finance Campaign is shown in the above table. In order to create this table we have used conservative figures. The assumptions are:

  • The financing will be BD 10.000 on average.
  • The tenure will be 60 months on average.
  • The target is 350 transactions for 1 month
  • Our admin fee will be BD 100 per transaction.
  • Life takaful arrangement fee will be BD 1 per transaction.
  • The installment fees will be BD 1.
  • The insurance profit will be 0.350/1,000 – 0.2375/1,000 which is 0.1125 / 1,000
  • We expect the advertisement cost will be BD 40,000 for two months.
  • The cost of the deposits of retail banking is calculated regarding the following table.

 




In Million USD[3]

Amount

Rate

Current Accounts

337

0%

Savings Accounts

114

0.75%

Mudaraba Accounts

704

4.45%

 

The average cost of the deposits is estimated as 2.78%. After adding 5% reserve requirement we have found a figure of 2.93%.







[1] Self Employed people are the professionals such as accountants, doctors, architects, lawyers etc. The professionals such as entertainers, actors, singers, sport players etc. will not be covered with this product program


[2] Whichever is higher


[3] Taken from our financial control retail daily report.