Banking, the ethical way

Islamic banking has been widely established as an ethical alternative to the conventional banking system. Software firm ITS hopes to help to drive its adoption worldwide.

With the western banking model looking pretty rough after a year of collapses and crises, even Pope Benedict XVI recently urged financiers to look at the Islamic system, where bankers are automatically more risk averse because they share the risks with the customer. This shows that Islamic banking is now ready for to be re-branded as ethical banking, a system that could find new customers in the western world and elsewhere, as well as its traditional home in the Islamic world.

The new focus on Islamic banking in the west comes just as ITS prepares for a global roll-out of its latest suite of banking solutions, called  Ethix.

Going global
Today ITS supplies more than 85 banks in the Middle East. In the past couple of years it has grown into Africa, and into the Far East from Malaysia to the Philippines. Its  core expertise is in Islamic banking, but it also supplies into the conventional banking industry as well. ITS has a lot of the Tier One banks as customers; it supplies conventional banks in Africa, in Nigeria and South Africa.

“Conventional western banks are looking to open up Islamic ‘windows’, especially with the global banking crisis,” says Haitham Abdou, Group Director of Marketing at ITS. “Islamic banking saw a boom starting a couple of years ago and we feel it’s been growing at about 15 to 20 percent here and globally. We don’t see that slowing down. We’ve seen some of the Tier One banks such as HSBC, Citibank, ABN Amro, all established Islamic windows in their operations.” The ITS development centre is in Cairo. We have about 1400 software engineers there. We’re the only CMM level five software organisation in this part of the world. What we’ve done is put several products together whether they’re ours or third-party, and re-packaged them as one solution, which we call Ethix Financial Solutions. The focus is on ethical banking, which is the new term, really that is starting to be used for Islamic banking. This way it can cross the borders of the Western community.

Unique Sharia compliance
The nature of Islamic banking means that every bank interprets what rules there ought to be. The problem that causes is that it makes building a rigid IT platform to administer all the different versions very difficult. However, ITS welcomes diversity: “We don’t believe there will ever be a standard, and I believe that if there was one it would defy the whole point of an Islamic bank. I don’t think you could come up with a standard, for example, of how Murabaha [a type of sale compliant with Sharia, involving a declaration of the seller’s fixed costs, to be added to the price] is defined,” says Abdou.

What ITS has done, is create an Islamic platform which represents the underlying principles of Sharia. This then allows the client bank to define its own products from the ground up, from an accounting point of view, a product point of view, a line of business point of view, how the particular bank’s Sharia board wants to see it done, and define the workflow completely from scratch.

ITS is preparing to market the product globally, and has now had its name registered around the world as a trademark. “Even conventional banks need to be more ethical,” says Abdou. “There are many components that fall under the Ethix brand, such as Ethix – finance, Ethix – Branch, Ethix – invest, Ethix – Ledger: overall there might be 25 different products under that banner. The good thing is, you don’t have to purchase all of that, they’re all components in the suite.”

Haitham Abdou is Group Director of Marketing at ITS. He has over 15 years of IT experience in the banking and finance industry and expertise in IT strategies for financial institutions based on the latest service orientated architectures. His areas of expertise include: bank automation projects; branch delivery; core replacements; Islamic financing; AML; electronic banking; payment systems.