HSBC to get into sharia banking

The Jakarta Post, Jakarta

HSBC Indonesia is set to accommodate increasing Indonesian demand for sharia financial services, after providing similar services globally for more than a decade.

"Indonesia is the largest Muslim country in the world. We see a growing number of Islamic customers who want to have sharia financial services, and we think we should provide that," HSBC Group chairman Stephen K. Green said Monday.

"It's also good momentum as the macroeconomic environment is quite attractive. This young market is about to develop."

The bank, which initially introduced Islamic financial services in Malaysia in 1994, sees potential market growth as fast as that projected by Bank Indonesia (BI), the nation's central bank.

"At the moment, only 1.5 percent of the overall banking market is Islamic. BI has said by the end of 2008... that (figure) would move up to 5 percent," said HSBC's Indonesia CEO Richard McHowat.

The bank has targeted attracting 200,000 new sharia customers over the next three years, raising about US$300 million in liabilities.

According to HSBC's survey, about 40 percent of conventional banking customers here are interested in sharia financial services.

In 2003, HSBC also established a sharia unit providing sharia-based corporate financial services.

Meanwhile, Din Syamsuddin, the chairman of Indonesia's second-largest Muslim organization, Muhammadiyah, said the government should provide more assistance to encourage sharia banking in the country.

"The government should provide regulations to guarantee the flourishing of sharia banking because such mechanisms can be a solution to economic problems," he said.

In addition, he said, sharia financial practices did not necessarily correspond with the implementation of Islamic bylaws. "(Sharia banking) merely provides alternative products in the banking industry."

Indonesia will be the eighth country -- after Malaysia, the United Arab Emirates, Saudi Arabia, the United States, Britain, Brunei and Singapore -- where HSBC provides sharia retail products.

Similar sharia products are currently provided in Indonesia by various banks, including sharia banking pioneer Bank Muamalat Indonesia, Bank Syariah Mandiri, Bank Mega Syariah, Bank Negara Indonesia and Bank Rakyat Indonesia.