Foreign banks step up Islamic banking expansion

Lenders eye to dominate market share via more branches, innovative products.

Realising the rapid growth and further potential of Islamic finance in Malaysia, foreign banks are aggressively expanding their Islamic banking operations locally.

Faced with competition from both foreign and local banks, they have devised strategies to help them garner a larger share of the local Islamic finance market.

Analysts and industry observers opine that Malaysia was at the forefront of Islamic finance owing to its conducive regulatory and legal framework coupled with the right Islamic financial infrastructure and human capital development.

Most foreign players are upbeat about Malaysia's Islamic banking sector, given that Muslims make up over 50% of the population and more than half of the Islamic finance customers are non-Muslims.

HSBC Bank Malaysia Bhd's Islamic subsidiary, for instance, HSBC Amanah Malaysia Bhd, last year contributed about 10% to the bank's overall profitability and it expects the number to grow in the coming years.

Another example is OCBC Bank's Islamic unit, OCBC Al-Amin Bank Bhd, which achieved an operating profit of RM43 million ($13.32 million) and a net profit of RM17 million ($5.27 million) in its first full year of operations that started in December 2008.

View the full story in the Star.