More Banks In Asia Join Shariah Finance Trend

Lachlan Colquhoun WealthBriefingAsia Features Editor Sydney 8 December 2009

More Banks In Asia Join Shariah Finance Trend

The last few months of 2009 has seen a flurry of activity among providers offering Islamic style wealth management products not only in the Gulf States but also in South-East Asian markets, in particular Malaysia.

In the private banking and wealth management sector, London has emerged as the centre for Islamic financial products for wealthy Muslims.

But as providers look for new clients among affluent, but slightly less affluent clients, they are beginning to launch Islamic products in home markets targeting middle market high net worth individuals.

The last few months of 2009 has seen a flurry of activity among providers offering Islamic style wealth management products not only in the Gulf States but also in South-East Asian markets, in particular Malaysia.

It’s not only Middle-Eastern and Asian banks which are involved. Their dynamic is to seek new growth after their profitability has taken a hit.

Abu Dhabi Islamic Bank announced this month that it was launching Islamic wealth management products in Malaysia, Indonesia and Singapore but this came after recent announcements from the likes of Standard Chartered and Bank Sarasin, which has broken the mould to become one of the first private Swiss banks to enter the world of Islamic finance.

“It’s all about the hunt for more clients,” one veteran retail banker from Malaysia told WealthBriefingAsia recently.

“There’s a whole strata of Malaysian society who can be targeted – pious but wealthy Muslims who might enjoy a little bit of special treatment from a bank, but in the Islamic product context,” the banker says.

Bank Sarasin launched its Islamic product suite at Doha’s Museum of Islamic Art in November, with the bank offering estate and succession planning, financing and asset management with structured products. The Gulf states might be the immediate focus of the launch, but Sarasin has grown its presence in the Asia Pacific and South Asia and that presents as a logical extension of its Islamic business.

The bank cites statistics which show that while 50 per cent of the Islamic finance market is centred in the Gulf, another 25 per cent is based in South East Asia. Sarasin’s plan is a soft launch in the Gulf through its Sarasin-Alpen subsidiaries, followed by a global roll-out through a “step by step approach”.

Standard Chartered, whose historic franchise covers South Asia and the Asia Pacific, announced in November that it would introduce more Islamic wealth management products in Malaysia to meet customer demand.

Through its Islamic banking arm StanChart Saadiq, the bank plans to offer products differentiated from conventional offerings.

“Through innovative wealth management products we hope to be the right partner for customers, especially in the medium to high value segments,” chief executive officer Azrulnizam Abd Aziz told a Kuala Lumpur media briefing.

StanChart Sadiq offers 33 shariah compliant products across retail banking corporate and treasury products.

StanChart’s Islamic wealth management business might present as a natural extension of its existing franchise, but one perhaps surprising entrant has been Japan’s SBI Holdings, which plans to launch an Islamic investment fund worth $112 million and set up an online brokerage firm in India.

Speaking at a Reuters event in Tokyo in October, SBI chief Yoshitaku Kitao said the company wanted to expand its Islamic product reach to Indonesia, Malaysia and the Middle East.

“The Islamic financial industry will likely keep growing, and we would like to play a part in that,” Mr Kitao said.

On a retail level, Malaysia’s central bank Bank Negara shortlisted two foreign banks in November for new Islamic banking licences.

Malaysia’s deputy finance minister Awang Adek told a conference in November that the high number of HNW Malaysian’s was likely to be a growth driver for the country’s financial planning industry.

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