Will Asian Finance Bank succeed in M'sia?



With the global Islamic financial services pie expanding about 15 percent a year, it's no wonder that Asian Finance Bank has decided to open its first branch in Malaysia this month, with future expansion plans across Asia.

The Kuala Lumpur-based bank is 70 percent owned by Qatar Islamic Bank, 20 percent owned by RUSD Investment Bank, the Labuan-based offshore unit of Saudi Arabia's RUSD Group, and 10 percent by Kuwait's Global Investment House KSCC. The group got a license from Malaysia's central bank in October 2004 to establish a new Islamic bank in the country. It plans to add as many as seven more branches around the country within the next two to five years.

"Malaysia is one of the pioneers in Islamic banking," said CEO Faisal Alshowaikh, 46. "We will be using Malaysia as a hub for the business in the Far East, including China and Japan. Asian Finance is set to be a bridge to channel funds from the Middle East into Malaysia and the region."

Asian Finance is not the first to set up shop in South East Asia, home to more than half of the world's Muslim population of 1.5 billion. HSBC and Allianz are already offering products that comply with Shariah, or Islamic law.

Asian Finance will offer consumer products such as loans, wealth management, Islamic commercial, corporate and treasury services, along with investment banking, Alshowaikh said. The company may also open representative offices to offer investment banking services in Brunei and Singapore by early 2008, Alshowaikh said. It may also expand to Indonesia, which has the world's largest Muslim population, with operations that would originally focus on consumer banking.

Malaysia, Southeast Asia's third-largest economy, is the world's biggest issuer of Islamic debt, with the value of such bonds sold by companies and the government rising 23 percent to 131.3 billion ringgit ($37.4 billion) in 2005, according to the
central bank. About 20 billion ringgit to 30 billion ringgit of new Islamic bonds are expected from Malaysia this year, Alshowaikh said.

"If we can take 5 to 10 percent of that share, we will be happy with that initially," he added. The Islamic financial services industry worldwide, including banking assets, is estimated at $700 billion to $1 trillion, according to Malaysia-based Islamic Financial Services Board and Saudi Arabia's Islamic Development Bank.

How well will Asian Finance Bank fare? Will the growing Islamic Finance pie attract more financial institutions into Malaysia? What other possible measures could the Malaysian government adopt to attract more Islamic Finance?

Let us know what you think.