With global finance on its knees, this summer’s business graduates face an even trickier jobs market than most. But there is one area of banking still experiencing boom time – Islamic finance – and universities have been quick to grasp its possibilities.
This September will see new courses and postgraduate qualifications in Islamic finance springing up throughout the UK and elsewhere in Europe, reflecting the fact that it has become one of the fastest-growing sectors of the global banking industry, expanding by between 15% and 20% a year. Assets held by institutions adhering to Islamic finance principles now amount to nearly 1 trillion dollars.
In the UK, interest in the sector also reflects the government’s commitment to promoting Britain as an Islamic finance centre. The UK already leads Europe in the number of Islamic finance training courses it offers, from entry to postgraduate level, and in 2006 saw the launch of the Islamic Finance Qualification, a joint initiative between a Lebanese business school and the Securities and Investment Institute.
Last December, the Treasury published a paper setting out the government’s aim for London to be "Europe’s gateway to international Islamic finance". This acknowledged that the industry was still young and therefore not yet experiencing skills shortages, but predicted that it soon would be. It stated: "The pool of potential applicants in the UK will have to keep up with the rapid growth of the market."
Universities have responded enthusiastically. Newcastle University is offering an MSc in finance and law with Islamic finance from next academic year. Henley Business School at the University of Reading has been offering an MSc in investment banking and Islamic finance since last year, with students spending the second part of the year in Kuala Lumpur. The University of Bangor in Wales has also been running its Islamic finance MA and MSc for a year and is considering introducing a new MBA in the subject, while the first students to take an Islamic finance option as part of an executive MBA offered in Dubai by Cass Business School will graduate this summer. Durham, which has been offering postgraduate research degrees in Islamic finance for some time, is now introducing a taught MA and MSc (the MSc is more quantitative), to respond to demand. Elsewhere in Europe, Reims Management School is offering a new specialist course in Islamic banking and finance for students on its masters in management programme, taught in English.
Student demand is driving the subject as much as any urging from governments. According to Rodney Wilson, founder and director of the Islamic finance programme at Durham, it is coming mainly from south-east Asia, particularly Malaysia, and the Middle East, although there is plenty of interest from the UK as well.
Joanna Gray, professor of financial regulation at Newcastle Law School, says she is keen that their new degree course is not just seen as something for Muslims. "It’s for anyone interested in a fast-developing industry that in the UK has been quite busy in the past few years to accommodate forms of investment in finance that are sharia-compliant."
Islamic finance really dates from the mid-1970s, with attempts to make products available through conventional banking, such as loans and mortgages, compatible with sharia principles. Sharia law prohibits any transaction that involves paying interest or investing in certain economic sectors such as gambling or pornography. It demands that both the investor and recipient of the investment must share any risk, and transactions have to be underpinned by tangible assets.
In the years immediately after 9/11, anything involving money and Muslims was viewed with suspicion by many in the west because of fears about terrorism, and Islamic finance is still taking off faster in the UK and France than in the US. But in the current global financial climate the principles it is based on have struck a chord.
"There is an extent to which, to a westerner, Islamic finance products look very similar to ethical finance products," says Stefan Szymanski, professor of economics at Cass. "There is a demand for morally upright investment vehicles, and Islamic finance is the Islamic version of that."
Philip Molyneux, head of the business school at Bangor, suggests that even if western banks do not want to introduce specific Islamic finance products – and an increasing number do – they still want to know how it is that many Islamic institutions escaped the worst effects of the credit crunch.
He has been surprised that demand for the MA and MSc has come not just from recent graduates and bankers wanting to improve their career prospects, but also from sharia scholars, who play a key role in Islamic finance. Any new financial product must be passed by them as sharia-compliant, so many financial institutions must now have scholars standing by ready to give their verdict. These scholars often disagree, and can even change their minds, but this offers plenty of scope for the kind of intellectual arguments that universities relish, not to mention graduate jobs.
On the whole, most of the new Islamic finance courses steer well clear of religious issues in favour of legal and financial questions because these are what most interest students. Khalid El Sheik applied for Bangor’s Islamic finance MA because, having taken a first degree in computer science in Sudan before switching to a career in marketing, he felt his CV needed a business boost. He saw it as a chance to mark himself out from other students and to have a headstart in an area that was likely to offer plenty of future employment opportunities. "I had read about Islamic banking and how it was going to increase in future, and how most of the banking sector is now looking to it," he says. His fellow students at the university, including one from China, had the same idea, he says.
Szymanski agrees that it is the idea of the moment in many universities, and while Cass is still waiting to see how the market develops before introducing any similar courses, it is certainly considering the possibility.
"You just have to measure how many billions of dollars Islamic finance already handles in a year," he says. "If that grows over the years, it will become a universal part of every business school."