Swift to launch Islamic Finance Rulebook

September 4, 2014 2:39 pm

Swift, in collaboration with The Association of Islamic Banking Institutions Malaysia (AIBIM) and the Malaysian Islamic financial community, announces that it will launch a new rulebook for the usage of Swift MT messages Isfor lamic finance.

Islamic finance is broadly defined as the financial services designed to comply with the principles of Islamic law. 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. It will provide an efficient platform for exchanging Islamic finance messages and further promote the usage of message standards.

“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,” he added.

Sido Bestani, 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.”

Since 2013, Swift Asia Pacific Standards team has been working in close cooperation with the Malaysian Islamic financial community to develop STP-enabled financial messaging specific to the requirements of Islamic financial institutions. This builds on earlier efforts in 2010, when Swift published the Murabaha Message Usage Guidelines describing the usage of MT messages for Treasury Murabaha, which includes a money transfer and a commodity trade, typically involving two banks and two brokers.

“This initiative marks a significant development in furthering the level of efficiency for Islamic finance transactions particularly, in ensuring compliance to Shariah requirements,” said Yusry Yusoff, Executive Director of The Association of Islamic Banking Institutions Malaysia.

The Swift Islamic Finance Rulebook will be available to the Message User Group (MUG) by the end of 2014. The MUG is a group of users that have registered to use specific messages within a controlled user community. The MUG is open to all markets, globally, that wish to utilise financial messaging compliant with practices in the Islamic finance industry. It is available for Islamic Finance practice covering all FIN MT messages. The MUG also acts as a good registration mechanism for adherence to this Islamic Finance Rulebook and enforces processing of messages in accordance with the Islamic Finance practice.

Swift has been operating in Asia Pacific for more than 30 years and has a growing presence in the Middle East, with a regional office in Dubai. Rapid growth in Swift’s business led to the launch in early 2012 of Swift’s Middle East Consulting Hub, a multi-language team of Swift experts who provide business and technical analysis, integration and implementation services, as well as training and support services. Swift’s growth in the Middle East is spread across Swift’s traditional financial message-based business (including payments, securities, treasury and trade) and in the rapidly expanding non-network-based businesses such as consulting and services, business intelligence, and connectivity solutions.