|
Written by Rodney Diola
|
|
Monday, 23 March 2009 14:53 |
 If there is one player that has the potential to shake the way Islamic finance is done in Malaysia, it could be HSBC. The bank’s Islamic finance operation gained a boost when it opened a separate Islamic subsidiary named HSBC Amanah Malaysia Berhad. The new bank, a wholly-owned subsidiary of HSBC Bank Malaysia Berhad, was incorporated in February 2008 and began operating on August 24.
HSBC Amanah Malaysia opened two standalone branches in November. With the opening of these additional touchpoints, customers of both HSBC Amanah Malaysia Berhad and HSBC Bank Malaysia can conduct their banking transactions at these new branches in addition to HSBC’s existing 40 branches nationwide and can enjoy use of the Internet banking and call centre.
HSBC has been operating conventional banking in the country for years and since 1994 has offered Islamic financial services as well. In late 2007, HSBC Bank became the first locally-incorporated foreign bank in Malaysia to be awarded a licence by Bank Negara Malaysia to set up an Islamic banking subsidiary.
Musa Abdul Malek, CEO HSBC Amanah Malaysia Berhad, says that the new license will turn the bank into an even more active player providing a full range of Islamic banking business activities.
One of HSBC’s strong suits is trade finance. Vivek Gupta, HSBC head of trade and supply chain for Malaysia, says that while it may have taken this long, a large regional pool of buyers, anxious to run their entire business on shariah-principles, has now emerged and has prompted major institutions to ratchet up Islamic finance capabilities.
This is evident on the trade finance side. HSBC has been offering conventional trade products in Malaysia for years but those products simply won’t do any more. Which is why, Gupta explains, the bank has over the years been substituting shariah-compliant products for conventional products. This has meant, for instance, offering an Islamic version of conventional letters of credits and that required reconfiguring how systems and processes work. “There are clear differentiations between a conventional letter of credit and an Islamic letter of credit and the difference is not just a matter of nomenclature, but also of systems and processing.”
Gupta says their push for Islamic trade finance business means positioning themselves not just as an entity that processes transactions but one that aggressively provides working capital solutions to customers, which is probably one reason why the bank’s most successful Islamic trade products in the country so far has been Islamic banker’s acceptances that are tapped by Malaysian corporates to finance working capital.
Gupta says banker’s acceptances now account for a significant portion of the assets held in the bank’s balance sheets. “I would say that roughly 50% of the banker’s acceptances assets we are holding are Islamic.” Musa says HSBC’s aim has always been about becoming a full-service bank and that means providing a full suite of Islamic propositions that can be an alternative to conventional products. “To achieve that, a considerable amount of work is required such as making sure that in the products we introduce to the market are not only shariah compliant, but also have features that are equal if not better than conventional.”
But doesn’t this complicate matters and in the end make Islamic transactions more inefficient and costly than conventional products? Musa agrees, but says the challenge in recent years for major Islamic jurisdictions such as Malaysia was how to make Islamic transactions as competitive as conventional banking. In many ways, he explains, the government played a big role in making things happen by addressing tax issues: taxes were nullified if they were considered to have made Islamic transactions more difficult to undertake.
The HSBC Amanah brand was established in 1998 with the aim of making HSBC the leading provider of shariah-compliant banking services worldwide. It has more than 300 professionals serving the Middle East, Asia-Pacific, Europe and the Americas. |
