Tuesday, March 25, 2008

A Bridge Between Malaysia & the Gulf

Part Two of The Malaysian Reserve interview with Yakub Bobat of HSBC Amanah

HSBC Amanah Malaysia Bhd, the full-fledged Islamic subsdidiary of HSBC Bank Malaysia Bhd, plans to be a bridge between Malaysia and the Gulf Cooperation Countries (GCC) countries when it comes to financing.
The newly-approved Islamic subsidiary argues that there is no Islamic bank in this market that has the kind of presence that HSBC has across the GCC. In this second part of the interview, Yakub Bobat, the managing director of HSBC Amanah, talks to Habhajan Singh about the Islamic bank's plans on moving forward and the challenges in getting the right expertise.

Q: HSBC Amanah says that Malaysia will become the group's regional hub for Islamic banking businesses. What are the building blocks towards achieving that stated goal?
A: Actually, it already is. This is already the scenario within HSBC. We are already, within the HSBC world, the regional centre of excellence across Asia Pacific. We already are. And this is very much in line with the MIFC (Malaysian International Islamic Finance Centre) initiative. The idea is to consolidate existing businesses within the Asia Pacific market and to identify possible new markets, using Malaysia as a base to transfer and export best practices from Malaysia. Even from other markets within the globe. As I'm part of the global Amanah top team, we are able to transfer best practices across the globe into any market. We are able to take advantage of that given our presence.
Fundamentally, we will also build the block to act as a bridge between Malaysia and the GCC. It's not just a one-way traffic. Basically, with presence across both markets, we are able to connect Malaysian entities, and there are many of those that are moving into the other direction, to support the significant amount of growth in various industry sectors, including the real estate sector, for example in the UAE. We also have a need to support that market once they are there. So, we are able to connect those companies at that end in the same way as we are able to connect our customers in GCC into Malaysia.

Q: Is this similar to the roles played by some of the GCC Islamic banks present in Malaysia?
A: There is no Islamic bank in this market that has the kind of presence that HSBC has across the GCC. We have a presence in every single market over there. The depth and breath of our business, and our customer franchise across the entire GCC and indeed throughout the OIC (Organisation of Islamic Conference) market, gives us an ability to connect investment opportunities at both ends.

Q: What is the role of HSBC Amanah outfit that you have here?
A: Simply put, I would say HSBC Amanah is well positioned to supporting existing businesses, for example Indonesia, to grow significantly from where it is today, using the expertise, experience and the credentials that we have built in this market over the last 13-14 years, both in the areas of domestic banking as well as in cross-border investment banking business. And, the other part of that, our role is to support HSBC businesses across parts of Asia Pacific where there is no HSBC Amanah business to identify opportunities and to support them, help them establish an Amanah presence.

Q: Which markets?
A: If you look at the top six markets in the Asia Pacific markets, affinitiy populations, i.e. the Muslim population, across the markets is around 750 million large. That shows you there are significant opportunities to build an Islamic business across these markets. This is something that we will continue to focus on. It will depend on how fast regulation is established in some of these markets. Where regulations are already established, how fast they can be conducive to global Islamic finance. Where there are those needs, we will be there to support those needs, from Malaysia.

Q: What about getting the right people with the right skill-sets?
A: This is the biggest issue that the industry is facing right now. It's not just Malaysia, but across the Islamic finance industry in the world. It's not just the people in the business, it's also the resources that support the industry. For example, our scholars, training institutes and how we gear up our talent pipeline. In that respect, Malaysia has taken some steps, very positive steps, to develop talent. First, you have INCEIF (International Centre for Education in Islamic Finance), the Islamic university is doing a splendid job. You have the Bank Negara Malaysia (BNM) talent commission programme, and many other initiatives that will help build talent.
HSBC itself has taken a number of steps of our own. HSBC Amanah graduate recruitment programme, so that we have our own talent. We very much believe in the organic approach to build up grassroots. There has been a tendency, as the market develops rapidly, for players to come to market and acquire talent at a price. It increases the cost of doing Islamic business overall, without necessarily increasing incremental value for the organisation. Talent development is a crucial issue and the industry must focus on it. As the business continues to grow, the industry will need bigger resource pool. Now, is that resource pool coming through? That question needs to be asked. I believe it has been asked. There is a need to meet the supply-demand trend. It will be met through the various strategic initiatives that regulators have taken, but market players have to take it to heart, as well.

Q: What about conversion of conventional to Islamic bankers?
A: As this business grows, there will have to be a mix of people from within the bank who will work in the Islamic subsidiary. Let's just take Shariah, as an example. Not only do we have Shariah scholars, but also you have internal coordination functions. That's an obvious area where there may be deemed to be a shortage right now. But there are demands on resources across all aspects of our business. It's not limited just to one particular function. There is no doubt that there has been a lot of progress.
The industry, whether in Malaysia, Pakistan or other markets, very much recognises the need to develop talent across the board. Malaysia has so many examples: INCEIF, IBFIM (Islamic Banking and Finance Institute Malaysia), BNM's talent enrichment programme, IIUM (International Islamic University Malaysia) and many other institutions. Perhaps what we need is a coordinated approach. You have many institutions roving, perhaps, in the same direction. But you can have some element of better coordination, maybe some alignment, some consolidation the way the calendar is developed. More hand-in-hand partnership approach between the practitioners, as in the industry, academia and regulators towards talent development. That certainly might help accelerate the pace of talent development and the kind of talent the industry needs.

Q: You don't get the sense that it is happening at the moment?
A: Well, a lot of good things are happening. It is just that if you look at it from a different perspective to see how can it can be even better. Q: Is the industry fragmented? A: Supply-demand, there is a gap. No doubt. It's also fair to say that the initiatives in this area that Malaysia is taking far exceeds the initiatives that any other market is taking at the moment. Very proactive, indeed.

(The Malaysian Reserve, March 10, 2008)

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