The Society for World Interbank Payments (Swift) launched a new pilot in Dec,2009 for Islamic finance. Although a relatively small beginning for the Society, it is seen as a potentially interesting area for diversification.

The initial focus is on treasury murabaha messages, with a London-centric pilot. This is a highly manual area at present, says Swift’s managing director, UK, Ireland and Nordics, Arun Aggarwal (left), so the aim is to replace the paper flows with ISO 15022 message standards. ‘We have done the messaging, there were only very small tweaks needed, and it is really now about getting the community together.’ There will quickly be a push to gain acceptance in major Islamic centres such as Dubai and Malaysia, he says. The fact that most of the Islamic banks will already have Swift connectivity should help the uptake. The instrument coverage will also be extended; he points out that the pilot is focused on one of the largest.

Aggarwal declines to name the banks involved until the pilot has gone live. However, it seems clear that they include users of Path Solutions’ core banking system, iMAL, as this supplier and Swift have announced a partnership to support the new messaging standards. Path’s customers in the UK are Bank of London and The Middle East, Europe Arab Bank, European Finance House and Gatehouse Bank. Partners will be important to facilitate the uptake, says Aggarwal. ‘The first live trades should be in December,’ he says. Patrik Neutjens, head of partner management, Swift, says: ‘Swift is pleased to welcome Path Solutions into our Partner Programme. Together we can work towards standardising and automating processes such as the treasury murabaha, thereby helping to reduce cost and risk associated with manual processing’.

‘We are delighted to collaborate with Swift on creating pioneering messages that will serve the special nature of the Islamic finance community’, says Naji Moukadam, president of Path Solutions. Once the pilot phase is achieved and its progress monitored, Path will be among the first to implement the new Islamic messaging system standard.