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New ‘message usage’ guidelines have been introduced to enable straight-through processing for Islamic finance in the GCC and around the world.
Islamic finance is broadly defined as the financial services designed to comply with the principles of Islamic law and the aim is to provide an efficient platform for exchanging Islamic finance messages and further promote the usage of message standards.
Society for Worldwide Interbank Financial Telecommunication (SWIFT), a member-owned co-operative that provides the communications platform, products and services to connect more than 10,500 banking organisations, securities institutions and corporate customers in 215 countries and territories, has been a lead player in the project. This rulebook will provide greater clarity around SWIFT MT message usage based on Islamic principles in order to enable straight-through processing (STP), thereby improving efficiency as well as reducing risk and cost.
“Globally, the growing interest in Islamic finance as a viable alternative to conventional finance has heightened awareness of the need to adopt international standards to automate paper-based Islamic finance operations,” said Kiyono Hasaka, standards specialist, Asia Pacific at SWIFT.
“With SWIFT’s growing presence in Southeast Asia and the Middle East, we are well positioned to act as an enabler to bring the financial communities together, define market practice and automate Islamic finance processes using international messaging standards.”
SWIFT launched the rulebook in collaboration with The Association of Islamic Banking Institutions Malaysia (AIBIM) and the Malaysian Islamic financial community.
Sido Bestani, pictured left, head of Middle East, North Africa and Turkey at SWIFT, said: “Islamic banking is flourishing, not just in South Asia, the Arab region and other countries of the Middle East, but also globally.
“Bahrain has traditionally been a centre for Islamic banking and finance in the Gulf region; the UAE unveiled plans this year for Dubai to become the global capital of the Islamic economy and the governments of the UK and Germany have recently issued Sukuk, or Shariah-compliant bonds. “This is clearly a growing sector within the banking and finance industry and our customers are looking at SWIFT to assist them in standardising and automating processes in Islamic financial institutions.
“SWIFT has been working with some large Islamic banks in the Gulf for the past five years to adapt SWIFT standard messages to Islamic finance transactions such as Murabaha, in order to use SWIFT network/messages for such instruments.”
The SWIFT Islamic Finance Rulebook will be available to the Message User Group (MUG) by the end of 2014.
