Is Islamic banking the ‘new China’?

HSBC, Europe's biggest bank by market value, expects demand for its Islamic insurance
products in Malaysia to soar as more young Muslims seek financial products and services that comply with their religious law.

Some 75,000 customers have paid 150 million ringgit in premiums to HSBC Amanah Takaful Malaysia, a bank joint venture, since August last year, said Keith Driver, chief executive officer of the Kuala Lumpur-based company.

“We expect to grow at a fast pace. There is a great deal of opportunity there. We are looking at hundreds of thousands of Malaysians entering the economically active stage of their life.” said Driver.

Islamic insurance, or Takaful, accounts for 6.6 percent of the 116 billion ringgit industry in a country where almost two thirds of the 27 million population is Muslim and a third is aged under 15. HSBC Amanah Takaful offers family, home, general and casualty protection, along with investment-linked insurance products. It is one of eight sellers of Islamic insurance in Malaysia.

Islamic insurance is based on the Koranic principle of mutual assistance in which members are the insurers as well as the insured. Shariah forbids interest payments and any gambling or speculative investments.

The venture is also studying opportunities to grow in Singapore and Saudi Arabia. There is strong demand for Takaful in Asian countries including China, Indonesia and Brunei. The region is home to more than half of the world's Muslim population of 1.5 billion.

There has been a quantum shift in emphasis onto the Islamic market since the then nascent Chinese and Indian economies are tapped. Is Islamic banking the new China? Or will political instability jinx economic growth?