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CIMB Islamic launches 1st Syariah-compliant product in Hong Kong

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Points of Essence:

  • CIMB Islamic recently launched its Commodity Murabahah Deposit via its Islamic window in Hong Kong. Using commodity products as underlying assets, the Islamic money market instruments will tap into the potential market of Hong Kong as a vibrant Islamic financial hub as well as providing a window for the mainland market.

HONG KONG: CIMB Islamic, the Islamic banking arm of Malaysia’s second largest bank CIMB Group, on Tuesday launched its first Syariah-compliant product in Hong Kong and signed the first transaction with Hong Leong Bank for its Commodity Murabahah Deposit.

The product will utilise commodities like crude palm oil, metal or any tradeable commodities as its underlying asset.

CIMB Islamic chief executive officer Badlisyah Abdul Ghani said the Hong Kong Monetary Authority (HKMA) gave its clearance last week for the launch of the interbank money product.

“It is important for CIMB Islamic to be here because Hong Kong has great potential as an Islamic financial market,” he said.

HKMA deputy chief Eddie Yue witnessed the the memorandum of understanding signed between the Hong Kong branches of CIMB and Hong Leong, the first institutions based here to offer Islamic banking.

Hong Kong is charging ahead into developing an Islamic banking centre to tap the huge global Islamic assets that are estimated to reach US$1 trillion by 2010.

Badlisyah said the launch marked the opening of CIMB’s Islamic banking window not only in Hong Kong but also to mainland China where the group had acquired a 20 percent state in the Bank of Ying Kou in north-eastern Liaoning province earlier this year.

CIMB Islamic plans to expand from wholesale Islamic banking business in Hong Kong to other activities, namely asset management, and if viable, consumer banking.

“But in the long term, the biggest opportunity and probability is to do wholesale business and asset management. We are looking at a timeline of three to five years. Consumer banking is still quite remote,” he told Bernama.

The Commodity Murabahah Deposit based on the Islamic principle of Murabahah gives fixed returns to investors and is widely used in the global Islamic market to facilitate deposit-taking. It works through the purchase and subsequent sale of a commodity at cost plus a specified profit.

CIMB obtained Bank Negara Malaysia’s approval last December to undertake Islamic banking operations in all its overseas branches.

Hong Kong is an important platform into mainland China to which all eyes are turned to remain a growth engine for the stuttering world economy in the wake of the global financial crisis.

“When the market is opened to us, through our Hong Kong branch as well as Bank of Ying Kou, we will see how to develop wholesale banking, asset management and consumer banking on the mainland,” Badlisyah said.

The viability of starting consumer banking would have to be closely evaluated because the Muslim population was distributed widely across China, raising the question of how to service the market, he said.

“What we are going to concentrate on is the easy part, bringing what we have from Malaysia into this market. I think as for the mainland, the proper timeline is one to two years rather than immediate,” he added.

CIMB Islamic is a global player in the industry and is the world’s largest sukuk or Islamic bond issue with a 20 percent share worldwide.-Bernama

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Written by Suapi Shaffaii

November 29, 2008 at 12:09 am

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