HSBC launches sharia service

The Jakarta Post, Jakarta

The Hongkong and Shanghai Banking Corporation Limited (HSBC) launched a new sharia banking service on Monday, making it the first foreign bank in the country to provide the service.

Chief executive officer of HSBC Indonesia Richard McHowatt said that Indonesia, the world's most populous Muslim country, was seeing an increased demand for sharia banking products and services.

"This, coupled with the recent initiative by Bank Indonesia to promote sharia banking in the country, has created an opportunity for us to launch HSBC sharia in Indonesia," said McHowatt in a press statement.

He explained that given a total population of more than a billion Muslims worldwide and an estimated industry size of US$200 billion, Islamic finance was one of HSBC's most important initiatives in community banking.

He said that HSBC globally managed $1 billion in collective fund with a total Islamic customer base of 115,000 and a total volume of crossborder transactions of $5 billion.

The bank first established a sharia banking division in Malaysia in 1994 and has since extended the franchise to the Middle East, the United States, the United Kingdom and Indonesia.

As regards Indonesia, HSBC said that its sharia business would initially focus on the corporate and institutional sectors, providing structured financial capabilities and debt capital markets advisory services.

In the medium term, HSBC would provide a broad range of wealth management and investment products and services.

The Islamic banking system works in line with the principles of Islamic sharia law. While conventional banks get interest from borrowers, Islamic banks take a part of the profits made by borrowers under the profit sharing arrangement.