What is your professional background?
I am a Saudi national. I joined HSBC Amanah last May from Saudi British Bank (SABB) where I had been General Manager, Operations & Processing since 1998. Prior to that, I held various senior positions within SABB for nearly two decades in Operations, Retail, Corporate Banking and in Credit.
Briefly what is Islamic finance? How is it different from conventional banking?
Islamic finance is an ethical and equitable mode of finance that derives its principles from the Shariah (Islamic law). The most distinctive element of Islamic finance is the prohibition of interest, whether ‘nominal’ or ‘excessive’, simple or compound, fixed or floating. Other elements include the emphasis on equitable contracts, the linking of finance to productivity, the desirability of profit-sharing, and the prohibition of gambling and certain types of uncertainty. These parameters define the nature and scope of Islamic finance, as interpreted by the Shariah scholars who work with Islamic financial institutions like HSBC Amanah.
What are the main challenges of Islamic banking?
There is a pressing need for a proactive regulatory framework to pave the way for enhanced and innovative offerings by Islamic finance. In this respect, proactive dialogue between regulators and practitioners is of utmost importance with a view to codifying Shariah principles that are applicable to Islamic transactions. Standardisation remains a key challenge that needs to be addressed. Key enablers to drive the industry also include the development of human assets which remain one of the key challenges that Islamic banking has to face up to. The future of Islamic banking depends on the training and development of talented professionals. Academic input to formulate a visionary framework for the industry is also mandatory to innovation. In sum, we need to work on effecting a change in mindset from Shariah-compliant to Shariah-driven products and services. Another important factor that needs to be addressed is the level of product understanding by customers of Islamic financial solutions. There is a genuine need to fill this gap for the increased penetration of Islamic banking products.
How is a conventional (i.e. interest-based) bank like yours able to offer an Islamic financial service?
Islamic law does not require that the seller of a product be Muslim, or that its other services also be Islamic. This is the considered opinion of our Shariah Supervisory Committee. HSBC is also a customer-driven institution. We are the ‘world’s local bank’, which simply means that we can fulfill specific needs of our customers’ across geographies. At HSBC Amanah, we provide Islamic financial solutions to serve the need for Shariah-compliant financial products of our Muslim customers. However, our Islamic financial solutions are available for Muslims and non-Muslims alike.
What is the advantage of HSBC Amanah over products offered by other Islamic banks?
At HSBC, we constantly strive to provide financial solutions that meet the requirements of our customers around the world. HSBC Amanah offers Islamic banking solutions which combine our financial expertise with our enduring values. At HSBC Amanah, customers can experience the global coverage and convenience of banking with HSBC without compromising the principles of the Shariah. The HSBC Amanah brand speaks of the commitment of HSBC to the Muslim societies in which it operates. Since the launch of HSBC Amanah in 1998, it has undertaken a number of initiatives which have become industry standards and one of these initiatives was the introduction of the first ever sovereign Sukuk. I think innovation is our key differentiator in the market. We are always working towards improving the quality of our product propositions, which include enhancing customer experience through the increased level of education of our sales force and by setting up an efficient technology platform that can facilitate Shariah-based financial solutions. Needless-to-say, our constant drive for innovation never compromises on the Shariah-compliance of our propositions.
What is your ongoing strategy for developing new Shariah-compliant products and services? What are the key areas?
We will continue to invest significantly in all of our businesses; be it investment banking, corporate banking or retail business. We will also focus on HNWI customers by leveraging the private banking arm of the HSBC Group. The main geographic region of growth within the Islamic finance industry is the Middle East and we will continue to focus heavily in this region. In Saudi Arabia, we have obtained a Takaful licence and have started offering Takaful solutions to our customers. Malaysia is another country where we continue to do very well, so this market will remain on our radar. Other than these markets, we will be considering opportunities in Pakistan, Egypt, Turkey and Indonesia. These are the markets that will be of interest to us in the near future.
What are your projections for the Sukuk market and where does HSBC Amanah stand?
It is expected that there will be continued strong growth in the Sukuk market. HSBC Amanah lead-managed the first Sukuk transaction in the Middle East for the State of Qatar in 2003. Since then, we have lead-managed many more groundbreaking and highly successful deals in the Middle East. These included Sukuk transactions for the Dubai government, Emirates Airlines, Islamic Development Bank, Tabreed, Abu Dhabi Islamic Bank and Sharjah Islamic Bank. We have also been very successful outside the Middle East due to our global presence. We also lead-managed world’s first sovereign Sukuk transaction in 2002 for the Federation of Malaysia. More recently, we lead-managed the first exchangeable Sukuk transaction for Khazanah and also the first bank capital subordinated Sukuk for Maybank in Malaysia. Our track record speaks for itself. We are able to offer our clients the benefit of our experience not only in terms of quality structuring capabilities but also an efficient global distribution network.
What is the state of Islamic banking here in the Middle East and globally?
Within this region, Islamic finance industry is evolving from a niche segment to a mainstream one. Its total estimated size now is around $750bn and is growing at 15-20 percent per annum. The proportion of Islamic assets in GCC countries’ total banking assets has reached 30 percent and continues to register growth trend, whereas in Malaysia the proportion of Islamic assets compared to total banking assets is currently around 12 percent and the Malaysian government is targeting to achieve 20 percent penetration by 2010. It is our informed opinion that within 8-10 years, the industry is estimated to capture half of the savings of the world’s 1.6 billion Muslims.
We have seen a recent growth in Islamic insurance products, more commonly know as Takaful; along with growth in investment vehicles such as real estate funds, Sukuks and a number of more sophisticated Islamic debt investments that have made it to the market.
Do you look at Europe as a potential promising market for Islamic banking?
HSBC Amanah serves customers in the UK. At this stage, we don’t have plans to expand into other European markets. However, if a commercially viable Islamic financial proposition is available in a given European market, we can leverage HSBC’s network to offer HSBC Amanah’s Islamic financial solutions. We are already offering some of our investments solution through our New York office in view of the opportunity and infrastructure available in that market.