At first, we had one central development environment for the our developers which every developer connected to from their own SoftwareAG Designer. However, due to the central development, it was hard to keep track of changes and there was a chance of developers overwriting code of each other. Luckily for use, the Local Service Development feature exists, which gets rid of all those issues: Everyone has his own local IS with their packages, and nobody can get a change into a next release without explicitly commiting it to TFS themselves.

Now: Can we use a similar approach for BPM development? I started to give each developer a local MWS installation, however, I noticed that for the ProcessEngine and ProcessAudit database, the embedded database can’t be used, as no script has been provided to create the tables. So how do others tackle this issue? No isolated BPM development? Or one database per developer on a remote RDBMS? Or maybe a completely different approach?

you could create and check the process model to Version Control .
You would only be able to test it in the environment that you build and deploy from the version control in,

To Test Process Model locally you would have to need to hook it up to a process engine database (Preferably locally )

See some observations here

and more expansive conversation here