I agree with Barry that the face is very bat-like, though the wings are not particularly. The tail also throws me and from the back it reminds me of Hanuman. Could this be some kind of composit animal. Bats do have some significance in the area, though i don't know exactly what. I have a fairly large, wooden hanging sculpture of a bat from Bali, so i wouldn't be all that surprised to find the creature in the form of a hulu. The material appears to be some kind of nature material. Maybe some kind of horn? It appears to have real age, not a new piece aged to look old. It has wear and a patina. I can't image what kind of composit material would have existed back then. Have you taken the hilt off yet?
The blade is a nice classic form, probably late 19th or early 20thC. Really needs a good etch and stain to bring out that pamor that i can just see traces off.
I think any uwer with real stones would look nice on here, though i am partial to the red stones like ruby and garnet.