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DDCAP’s Sharia’a Compliant Automated Trade and Post Trade Services Platform, ETHOSTerminal™, Gains Market Traction as Fintech and Digitalisation Solutions Bring Transactional Flexibility and Additional Integration Functionality to IF Clients

Global trade has been more resilient during the COVID-19 pandemic than during the 2008-09 global financial crisis. According to the World Trade Organisation (WTO) in its latest World Trade Report 2022, global trade reached US$4.8 trillion during the financial crisis, compared with US$6.2 trillion during the pandemic, despite the economic, health and social impacts, especially the major disruptions to supply chains.

A key driver of this growth is digitalisation and automation of trade and post-trade services, which has proliferated in recent decades alongside the huge advances in Fintech, of which London is a premier hub with a conducive infrastructure implemented with the proactive support of the UK government. The global Islamic industry, projected to have assets under management of US$4.3 trillion by 2025, is no exception.

Murabaha, Commodity Murabaha and Instalment Sale are core Islamic liquidity management and trade finance instruments which have gone “mainstream” in recent decades with the London market leading in many respects.

One institution that is a pioneer market intermediary, asset facilitation and financial technology solutions provider connecting the global Islamic financial marketplace responsibly, is the London-based DDCAP Group™ (‘DDCAP’), headed by Stella Cox CBE, who has over four decades of experience working with the industry.

Earlier this year for instance, DDCAP launched ETHOSTerminal™, the latest evolution of its multiple award-winning Sharia’a compliant automated trade and post trade services platform, ETHOS AFP™, in cooperation with its valued client Emirates NBD.

ETHOSTerminal™ brings additional integration functionality to DDCAP clients via an open market environment that will enable users’ full discretion in choosing trade counterparts. These developments have enabled Islamic financial institutions to seek transactional flexibility that enables them to select, and alternate, the market counterparties that they contract with for their individual trade requirements.

In March 2022, Boubyan Bank became the first bank in Kuwait to utilise the Straight Through Processing (“STP”) capabilities of DDCAP’s ETHOS AFP™, thus benefitting from first mover advantage and expanding the Bank’s digital footprint through the extended functionality of the Platform, including processing Sharia’a compliant corporate credit transactions.

The digitalisation of Murabaha, according to Boubyan Bank, “would expedite obtaining financing and facilitate procedures in order to meet the requirements of customers wishing to obtain Islamic financing quickly and comfortably.”

Outside of the GCC, DDCAP has witnessed significant interest in the STP functionality of ETHOS AFP™ from its Malaysian clients, with each institution seeking to benefit from the multitude of operational efficiencies STP can provide.

Digitalisation is the way forward for all financial institutions. In the Murabaha space, it is not only traditional Islamic banks but also the surfeit of digital banks that are being licensed across the marketplace that are ideally placed to effect the upscaling of Fintech-based trade and credit volumes and business.

On the back of digitally aligned automation is the proliferation of digital banks also offering Islamic trade finance and credit services. In Malaysia, Bank Negara Malaysia is in the process of issuing its first five digital bank licences following a year-long RFP and market consultation which attracted 29 applications.  

Similarly, the Saudi Central Bank (SAMA) in February approved its third digital bank licence. Al Rajhi Bank Malaysia (ARBM), a subsidiary of Al Rajhi Bank of Saudi Arabia, last year embarked on a multi-year digital transformation which includes the launching of a digital bank in 2022 with a range of sophisticated retail and commercial financial services. Other digital banks emerging include DIB Rabbit in the UAE, Boubyan Bank’s BLME Nomo in Kuwait/UK and Jago Syariah in Indonesia.

The Fintech revolution is gaining steady momentum in the Islamic finance marketplace, especially in asset facilitation and intermediation, trade services and payment solutions, thus opening up exciting opportunities both for financial institutions, intermediaries and trade facilitation technology solution providers.

This is crucial in promoting the continued orderly development of the digital revolution and pre-empting a digital divide in the global Islamic finance industry.

Given the specificities of Islamic finance, Sharia’a compliance – not only of the transaction structures and documentation but crucially importantly also of the digitally automated processes, platforms and connectivity – is vital and non-negotiable.

In fact, the upgraded functionality of DDCAP’s ETHOSTerminal™ was precisely developed in response to user demand and Sharia’a preferences. All DDCAP’s services strictly adhere to Sharia’a standards set by its world-renowned 5-member Shariah Advisory Board and reference, where appropriate, the standards adopted and stipulated by the relevant authorities and regulators at national and industry infrastructure levels.

Not surprisingly, system enhancement through integration of platform functionality has been a principal focus for DDCAP in recent years. This latest development is one of a series of planned, system upgrades that will further improve the seamless trade and post trade automated experience for our clients within an expanded and open market environment.  

Clients and counterparties of DDCAP also have access to the fully integrated service solutions of DDCAP’s diverse and market leading technology partners including Refinitiv Eikon Open Platform (Islamic Deal Connect) and Murex MX.3 for Islamic Finance (for trading, risk management and processing solutions for capital markets), whilst development work continues with Instimatch (for the institutional money market). 

As an institution which strongly promotes responsible investment and finance as part of the global ESG and SDG agendas, ETHOS AFP™ and ETHOSTerminal™ and their functionality are also integrated within the DDCAP Group’s corporate policies, including its Sustainable and Responsible Actions programme through which ESG considerations are addressed.

DDCAP in this respect has made the public commitment to develop a more sustainable, equitable, and prosperous world and supports the view that those in business must adopt strategies to deliver not only financial results but also social and environmental outcomes.

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