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SWIFT & Islamic Finance. John Falk 12 th AMEDA Meeting, Libya - 30 Nov 2010. Islamic Finance. What is it?. It is NOT a competing ‘ism’. “Islamic Finance is not a competing ‘ism’, but simply finance subject to another regulatory authority.” – Shaykh Yusuf DeLorenzo, Sibos 2009

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SWIFT & Islamic Finance


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    1. SWIFT& Islamic Finance John Falk 12th AMEDA Meeting, Libya - 30 Nov 2010

    2. Islamic Finance What is it? It is NOT a competing ‘ism’ “Islamic Finance is not a competing ‘ism’, but simply finance subject to another regulatory authority.” – Shaykh Yusuf DeLorenzo, Sibos 2009 “The most common forms of investment for Muslim’s are equities, mutual funds and property. Surveys show that between 3,000 and 4,000 companies listed on exchanges…are acceptable by Islam. Investments in such assets by Muslim investors are made in the same manner as by Western investors.” – A Muslim’s Guide to Investing & Personal Finance • Banking consistent with the principles of Islamic law (Sharia) • Interest, or Riba, is prohibited • Investment in companies providing goods or services contrary to Sharia principles is forbidden (e.g. banks, alcohol, casinos, etc.) • Emphasis on moral and ethical values in all dealings • Islamic banks operate in the same manner and marketplace as conventional banks “Islamic finance is here to stay. Those who are not involved should get involved.” Asif Raza, Managing Director, MENA, J.P. Morgan Sibos 2010 SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    3. Market Size and Growth Islamic finance growth is attributed to strong growth in the GCC countries, emerging markets and economies of Asia, coupled with a rapidly growing population • Muslim’s are increasingly seeking Sharia compliant banking solutions • Non-Muslim’s are turning to Islamic banking as a form of ‘ethical banking’ • Non-Islamic banks are opening Islamic Windows Source: The Banker magazine SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    4. Global Muslim Population and Growth • 2006 Population Growth Rates • Muslim population: 1.8% • Global population: 1.1% Source: October 2009 study by the Pew Research Center report of Mapping the Global Muslim Population SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    5. SWIFT’s Islamic Finance Vision & Strategy SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    6. SWIFT & Islamic Finance Today Tomorrow Re-use ISO standards to include Islamic products First is Murabaha Commodity based money market deposit 60% of all Islamic financing Cat 5 messages with Rulebook “Interest” in some messages is an issue – exploring solutions Need for Islamic derivatives message standard • 240 Islamic banks on SWIFT • 84% of Sharia assets • 44 million messages in 2009 • Use SWIFT for: • Payments • Foreign Exchange • Securities • Funds • Trade Finance • Cash Management SWIFT and Islamic Finance is not new. We are simply building on the existing relationship, to bring standardisation and automation to Islamic financial products. SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    7. Murabaha Flow Example Customer Bank Broker A Broker B Master Agreement Money Transfer (MT 202) Purchase Request (MT 502) Seller’s Offer (MT 502) Purchase Acceptance (MT 515) Notice of Sale (MT 515) Notice of Intent (MT 502) Purchase Acceptance (MT 509) Form of Offer (MT 515) Sale Acceptance (MT 509) Seller’s Request (MT 502) Purchaser Offer (MT 502) Seller’s Acceptance (MT 515) Deferred Money Transfer (MT 202) SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    8. AAOIFI Certificate – SWIFT Murabaha SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    9. Going Forward Murabaha • Rulebook available – download from www.swift.com/IslamicFinance • AAOIFI approved • Promote amongst Islamic users • Working with Partners to ensure automation (SWIFTReady Label for 2011) New Areas • Define requirements for: • FX, Money Market Deposit, Derivatives confirmations (Cat 3) • Corporate Actions, Sukuk settlement messaging (Cat 5) • Will obtain AAOIFI Sharia endorsement for each new initiative Community Engagement • One to one engagement with Islamic users • AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) • Conferences: Engage industry via attendance / speaking at Islamic Finance conferences • Establish an IMPG (Islamic Market Practice Group)? • Is there interest from AMEDA members? SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010

    10. John Falk Director, Securities Market Infrastructures SWIFTAvenue Adele 1B-1310 La HulpeBelgium +32 2 655 31 11+32 2 655 34 61+32 2 655 37 52+44 777 15 12 952john.falk@swift.comwww.swift.com T D F M E W Thank you SWIFT & Islamic Finance : 12th Ameda Meeting, Libya 30 Nov 2010