HSBC plans $300m 'syariah' loan

The Jakarta Post, Jakarta

The Hongkong and Shanghai Banking Corporation Limited (HSBC) plans to arrange a US$300 million financing facility for a local company through the syariah arrangement in a bid to develop the syariah investment in the country.

Chief executive officer of HSBC Indonesia Richard McHowat said the bank had just received a mandate from one of the country's largest state company to arrange the lending facility for export using money collected from Middle East investors.

"We have brought fresh money from a fresh source to Indonesia. But we still cannot disclose the name of the company until we sign the deal, which is expected in two weeks time," said McHowat to reporters in a gathering on Wednesday.

McHowat said the six-month facility would help the export activities of the company to Middle Eastern countries.

A "syariah investment" is an investment that is carried out in accordance with Islamic law, which bans the receipt of interest from loans, and instead rely on a revenue sharing scheme.

McHowat said there was a need for Indonesia to widen access to financial resources based on syariah, since such investment was still unsophisticated and had small market share with insufficient investment products for the customers.

At present, it is estimated that $200 billion in mobile funds from the Middle East are available for investment in syariah products. Most of the capital had not entered Indonesia due to the lack of reliable syariah investment infrastructure.

Since last year, the London-based HSBC has already open its syariah banking business in Indonesia.