MUKHTAR: ‘Sharia Finance Provides Bridge Between Middle East and Indonesia’

A Jakarta-based HSBC Amanah banker agrees with the sugestion of Indonesian Vice President Jusuf Kalla that Islamic banking has proven that it can weather the global crisis.
The banker said there is inherent discipline in Islamic banking, given the fact that it focuses on the real economy. It focuses on real, asset-based financing, which means that you know it is less involved in speculative activity.
"I also think that Islamic banking has very clear criteria on the amount of leverage that can be made available in transactions," said Mukhtar Hussain is global chief executive of HSBC Amanah and CEO of Global Banking and Markets Middle East and North Africa in an interview with Jakarta Globe on Mar 3.
Therefore, he said it doesn’t promote the use of high leverage — this being one of the reasons the conventional banks have encountered the problems they have.
"The other reason is that conventional banks invested heavily in toxic assets. Many of those assets would not have been permissible in Shariah banking," he said.

Compared to the conventional sector, just how big is Shariah banking worldwide? The comparison is a difficult one to make, because in reality the Islamic financial services market is still relatively small compared with the conventional industry. But, of course, we need to acknowledge that the conventional industry has developed over two centuries, whereas the Islamic financial services industry is probably only 40 years old. So it’s a young industry that’s growing quickly, but it’s still relatively small in proportion to the overall financial services industry.