Universities are expanding Islamic finance courses as demand for professionals qualified in Shariah law outstrips supply in the $1 trillion industry.
The International Islamic University of Malaysia plans to start postgraduate courses specializing in Shariah-compliant capital markets, banking and insurance after enrollment for its general program in finance complying with Muslim tenets tripled in the past year, said Professor Mohd Azmi Omar, the dean of the institute. La Trobe University in Melbourne, which started classes this year, is working with officials in Malaysia to offer industry-recognized qualifications.
A lack of skills is among the biggest challenges for the expansion of global Islamic banking, said Washington-based Patrick Imam, an economist at the International Monetary Fund. About 50,000 professionals will be needed over the next five to seven years to meet demand, according to Ishaq Bhatti, the director of La Trobe’s Islamic banking and finance program.
“There are very few people who are really good at both finance and the interpretation of Shariah law,” Imam said in an e-mailed reply to questions on Dec. 10. “To do Islamic banking you must be fluent in finance and Islamic principles, and typically they are either one or the other.”
The Islamic finance industry, with assets the Kuala Lumpur- based Islamic Financial Services Board estimates will climb to $1.6 trillion by 2012, is developing global standards to improve regulations. The Manama, Bahrain-based Accounting & Auditing Organization for Islamic Financial Institutions said a shortage of scholars increases the risk of conflicts of interest as many sit on various advisory boards.
Sheikh Nizam Yaquby of Bahrain and Syria’s Abdul Sattar Abu Ghuddah, who each serve on 85 boards of Islamic financial institutions, ranked first among the top 20 religious experts in an October report from Zawya, an online Middle East business news and directory, and Funds@Work AG, a Kronberg, Germany-based consulting company.
Experts are preparing the first standardized certification for scholars. A permanent committee is due to be selected by year-end to work on setting up a body to issue permits for those qualified to sit on Shariah boards, Aznan Hasan, the president of the oversight committee, said in an Aug. 30 interview in Kuala Lumpur.
“You could see the hunger and the thirst for Islamic finance when we first announced this program in July 2009,” La Trobe’s Bhatti said in an interview on Oct. 28 in Kuala Lumpur. “Initially, we thought 100 people were going to register, then we started getting very high-profile requests from governments and the industry, so we increased it to 200.”
Thailand, Senegal and Sudan are among countries seeking to tap the wealth of the world’s 1.6 billion Muslims by selling Islamic bonds, which are vetted by scholars for compliance with Shariah law.
Global sales of sukuk, which pay returns based on asset flows to comply with the religion’s ban on interest, fell 28 percent this year to $14.5 billion from the same period in 2009, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.
Shariah-compliant bonds returned 12 percent in 2010, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows, while debt in emerging markets gained 13 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.
The difference between the average yield for sukuk in developing nations and the London interbank offered rate has narrowed 160 basis points, or 1.6 percentage point, to 308 this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index.
The yield on Malaysia’s 3.928 percent sukuk maturing in June 2015 was little changed today at 3.06 percent, according to prices from the Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s was also little changed at 342, data compiled by Bloomberg show.
The U.K.’s Durham University, Al-Azhar University in Cairo and Ethica Institute of Islamic Finance in Dubai also offer Islamic finance courses. Harvard University in Cambridge, Massachusetts, runs an Islamic legal studies program through its law school, according to data on its website.
Schools and colleges are facing a shortage of teaching staff for Islamic finance courses as demand increases, said Professor Rodney Wilson, a lecturer at the Centre for Middle East and Islamic Studies at Durham University.
“We need to appoint more staff” as Durham only has four lecturers for the classes, Wilson, who is based in London, said in an e-mailed response to questions yesterday.
La Trobe University is working with Malaysia’s Kuala Lumpur-based International Centre for Education in Islamic Finance to gain approval to provide the Chartered Islamic Finance Professionals certification, said Bhatti.
The Institute of Islamic Banking and Finance at the IIUM will start a Masters in Islamic capital markets in September 2011 in conjunction with the Malaysian Securities Commission, the institute’s dean said in an interview on Dec. 6.
“We have bankers, lawyers and fresh graduates attending our classes,” said Mohd Azmi, who also teaches Islamic capital markets at Trisakti University in Jakarta, Indonesia.
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