This is an analysis of the case study "Saudi British Bank: HSBC’s Saudi Arabian Experience" by me & Seema Singh, as students of SDMIMD as a part of their International Marketing course. This has insights on how HSBC adapted to Saudi's needs while trying to remain relevant in an Islamic Banking scenario.

1. Saudi British Bank: HSBC’s Saudi
Arabian Experience
International Marketing Case Study
Presented By:
Group – 6
Seema Singh (10104)
Srikiran C. Rai (10048)

2. Case Facts
• Saudi British Bank (SABB), its experience in Saudi
Arabia and Islamic Banking
• Parent Bank – HSBC
• Entered Gulf with a decision in line with HSBC’s
thrust on globalization
– Commenced operations in Middle-East in 1959
• Established SABB in 1978, a joint stock company
(40% HSBC, 60% public)
• Was well known for customer centric products and
financial services

3. Question 1
i. Study HSBC group’s evolution into one of the
largest financial and banking services
providers in the world
ii. Why did HSBC decide to enter Saudi Arabia?
iii. How did SABB distinguish itself from other
banks?

4. HSBC decided to enter Saudi Arabia
• Globalization
• Development of oil industry in Middle east
• Especially oil-rich economies of the Gulf, the
bank reinforced its branch network or entered
local banking alliances

5. Differentiation
• Customer First Policy
• Catered to all possible customers –
professionals, individuals, women, corporate,
students, children
• Offer Banking & Financial Products/Services
that suited the needs of the Saudis
• Offer Banking & Financial Products/Services
according to Islamic Law(Sharia)

6. Differentiation
• Value-added Islamic Banking
• Attention to the development of better
products and services for the customer

7. Question 2
i. Briefly discuss the innovative aspects of the
products and services launched by SABB
ii. Critically examine the decision to launch
value added and customer focused banking
products and services.

8. Innovative Aspects of SABB’s services
• ATMs for the visually impaired in Riyadh and
Makkah, Jul ’00
• Al Amal and Al Manar – financial planning
services, similar to insurance policies, Nov ’00
• SABBNET internet banking services, Jun ’01
– All personal account and credit card transactions
• ‘Manazel’ home ownership scheme, Jun ’01
– First home financing scheme that complied with the Sharia
• Internet cards, for use in internet transactions, but not
ATM, Jul ’01
– Had lower credit limit

9. Innovative Aspects of SABB’s services
• Al Amanah Current Account and Islamic
Charge Card, considered Saudi’s first Islamic
current account, Nov 2001
– Allowed customers to pay bills online
• Focused on better service and products rather
than retail expansion
• Extensive Training for all employees
– First bank in KSA to employ women in early 1990s

10. Innovative Aspects of SABB’s services
• Aug’ 2002, introduced Cash Deposit Machines
(CDM) for automated cash deposits to any account
– Amount would be automatically credited to account
– Displayed account balance information to account
holder only
• Developed an IT system for the IPO of Saudi
Telecommunication Company(STC)
– Linked all banks and ensured quick refund of
oversubscription charges, regardless of the number of
subscriptions

11. Question 3
i. Analyze the Islamic Banking system and
describe its salient features.
ii. Why do you think SABB launched Islamic
Banking products and services?
iii. Briefly discuss the various Islamic Banking
products and services, launched by the bank
and comment on the way in which they
differed from other services?

12. Why SABB launched Islamic Banking?
• HSBC identified, if SABB is to have a greater
impact in Saudi Arabia, it had to offer it
• Reason
– Staunch followers avoid commercial banks
– 100 plus Islamic Banks operating in 40 countries
by the end of the 20th century
– Total asset deposit base held by Islamic Banks was
$60B in ’94 – up 12 times from $5B in 1985

13. Islamic Banking – salient features
• Concept of money
– Is only a medium of exchange
– Money cannot create money
– Human effort and risk in the project more
important then the money used to finance it
– Money invested is debt – not capital and is not
entitled to any interest/return
– Money has purchasing power and that is the only
‘value’ that money has

14. Islamic Banking – salient features
• Any predetermined payment above the actual
amount of principal is prohibited – no interest,
only ‘good loan’ allowed
• Lender must share the risks and benefits arising
out of the enterprise for which the money as lent.
– Creditor gives a loan only to win the blessings of Allah
and not for any profit motive
• Speculation is prohibited
– Contracting parties should be aware of the values
intended to be exchanged as a result of transaction

15. Islamic Banking – salient features
• Concept of indexation not accepted
– Wages and interest cannot be tied to the cost of
living index so that the rise or fall depending on
the rate of inflation
• Investments should only support practices or
products that are not forbidden – example
gambling, alcohol and loaning money to build
a casino, or even lending to other banks at
interest

16. Transactions under the Sharia
• ‘Murabahah’ – Mortgage Transaction
– Bank buys item and sells it to borrower for a profit
– Bank’s profit not made explicit and no additional penalties
for late payment
• ‘Musharaka’ – Joint Venture
– A partnership entity of borrower and bank created, property
bought by pooling in money
– Entity then rents out property to borrower
– Bank and borrower share proceeds from the rent
– Simultaneously, borrower periodically buys his share of
property from a bank until he owns it completely
– If property to be sold midway, then both bank and borrower
share proceeds from sale in proportion to their current
equity in the property

17. Transactions under the Sharia
• ‘Musharaka’ – loan for companies
• ‘Mudarabah’ – Venture Capital Funding
– Financing provided by bank, borrower provides
labour, both share the profits
• ‘Musawamah’ – Same as buying and selling for
profit (Murabahah), but no obligation to reveal
cost by seller
• ‘Bai Salam’ – advance payment for goods to be
delivered later; allowed form of speculation

18. Transactions under the Sharia
• ‘Mal-al-Tawrruq’ – Trade financing scheme
– Bank buys commodity from international market
– Commodity sold to customer at certain profit
– Customer allowed to pay for it in installments
– After customer owns it completely, “Power of
Attorney” given to the bank, bank becomes agent
and customer becomes principal
– Bank allowed to resell the commodity in
international market and give customer proceeds

19. Various services by SABB
• Launched Al Amanah Islamic Banking Division
• Services – Personal Banking, Wealth
Management, Corporate and Institutional
Banking
• Personal Banking
– Al Amanah Savings Account
– Al Amanah VISA® card
– Murabaha Sale
– Mal-Al-Tawrruq
• No interest or service charge on services

20. Various services by SABB
• Corporate and Commercial banking services
– Murabaha Liquidity Finance
• Similar to Mal-Al-Tawrruq
– Domestic Murabaha for goods
– Domestic Murabaha for real estate
– Musharaka DC
• Customer and SABB enter into a partnership to invest in goods
from overseas market
• Once SABB receive DC, it sells its share to customer at
Murabaha
• DC – Documentary Credit =Letter of credit
– Murabaha DC
• SABB purchased and sold to customer by way of Murabaha

21. Various services by SABB
• Wealth Management Program
– Individuals and capital investors could make
investments according to Sharia principles
– ‘Trading fund’ created that allowed customers to
invest collectively
– Open ended and customers could redeem their
investment at any point of time

22. Question 4
i. What sort of benefits did SABB reap through
its localization and customer centric
strategies?
ii. What steps or initiatives should the bank
take in order to beat competition from other
medium and large commercial banks in the
future?

23. Benefits reaped by SABB
• Improved financials and growing clout
• Only bank from medium size category to
feature in top 10 companies of Saudi Arabia
• 6th largest commercial bank in Saudi Arabia
• Growing customer satisfaction has led them to
release more Islamic Banking products
• Commendation by Govt. for great service

24. Future steps to beat other banks
• SABB’s core competence is customer service
• They must look at the top 5 banks for
inspiration to create new banking products
• And replicate them with better service
delivery
• Since they have already covered all age
groups, its time for them to increase the
number of branches to move from a medium
sized company to a large company