The word ‘profit’ in Islamic banking may sound similar to ‘interest’ in commercial banking.
But the Shariah- (Islamic law) compliant model is more than just ethical reassurance to customers. It is also dynamic and innovative, which requires a different approach, say experts.
B-schools and universities are now trying to match this fast growing banking sector by churning out executives who understand and develop culturally suitable solutions for customers.
“Looking at the growth pattern and prospects in the global practices of Islamic banking and finance, there is a definite need for more formally trained personnel in Islamic banking and finance,” says Professor Humayon Dar, CEO of BMB Islamic UK Limited.
Dar, who is the founder of the first ever Master’s programme in Islamic banking and finance in the western hemisphere, is also responsible for establishing these courses in several universities around the world.
According to him conventional bankers initially served a purpose in setting up Islamic banks in the past “but continuing with it will only dilute authenticity of the practice and hurt future growth in the long run.”
Islamic Banks apply the principles of Islam in financial transactions. In order to ensure justice and eliminate exploitation in transactions, it is prohibited to involve any source of unjustified enrichment and deal in transactions that contain excessive risk or speculation.
Three basic cornerstones of the Shariah used in Islamic economics distinguish them from conventional banking — no interest (Riba), speculation (Gharrar) and subscribing to the concept of profit and loss sharing among parties. Financial deals must be transparent above all else.
The Cass Business School that offers its Executive MBA at the Dubai International Financial Centre has seen a growing interest for the Islamic Finance course in Dubai. The B-school will soon be offering the elective at its parent campus in London as well.
“There is a massive interest for Islamic banking,” says Prof. Roy Batchelor, director of the Cass Executive MBA Programme. “Many banks are moving towards this structure, finding the most beneficial terms and products that are Shariah compliant.”
When the Cass EMBA programme began in 2007, 11 students took up Islamic Finance. The school expects more than 15 students to opt for the elective in its current cohort of 60 students.
Islamic Banking and Finance, Islamic Economics and Islamic Law of Business Transactions are a part of the module taught.
“We bring in scholars to talk about the principals of Islamic finance. The course explains the regulatory framework and students are exposed to more complex structured banks and offerings to customers,” says Batchelor.
The American University of Sharjah (AUS) has collaborated with the Sharjah Islamic Bank to establish a centre for Islamic banking and finance to bolster education and research activities.
The agreement aims to address the shortage of institutions specialising in Islamic banking and training, says Mohammed Abdallah, Chief Executive Officer (CEO) of Sharjah Islamic Bank.
“There is a great demand in the field of Islamic banking which has seen dynamic growth over the past two decades. Despite growing at a rate of between 20 and 50 per cent, its framework still requires renewal and update.”
The centre will contribute to research in Islamic business studies and financial products and services. Academic courses including scholar-in-residence programme, research fellowships and grants will further the innovation in the sector.
AUS is also planning to launch Islamic finance at the undergraduate level and as an MBA concentration.
A graduate of Cass Business School’s Executive MBA in Dubai Rehan Pathan believes many practioneers in Islamic finance come from a conventional background and need to broaden their perspectives. “You have to adopt new reference points and attempt to develop services that are acceptable according to slamic law.”
‘The increasing presence of local Islamic banks and international banks with Islamic wings have opened up a niche that B-schools must cater to,’’ he says.
The emerging Islamic finance industry has close to $1 trillion worth of assets globally. It is attracting both Muslims and non-Muslims due to its ethical operations. The ban on investment in areas of arms, gambling, alcohol or anything unacceptable to Islam, as well as prospects of better returns are the main attractions.
“In the Muslim world there is a trend among locals to look for Islamic provisions, and some of the largest banks that have been conventional for more than two decades are catering to that need,” he says.
In the West, many universities have recognized the potential in the Islamic finance sector and have started courses to enhance skills of executives.
Dar also conducts an ‘Islamic Access Programme’, a one-day training course in financial centers like London, Frankfurt and Brussels.
“Those who are looking for some short courses might also find Islamic Finance Qualification (IFQ), offered by the Chartered Institute for Securities and Investment in London, as a quick and easy way of entering the market,” he says.