Reducing labour demand, supply gap in Islamic finance

Observer Report

HAVING sustained significant growth since 2013, the world Islamic finance industry is estimated to be worth $1.81 trillion and is expected to reach $3.24 trillion by 2020, according to Thomas Reuter’s latest State of the Global Islamic Economy report. As the industry continues to grow, the demand for a highly specialized and skilled workforce capable of meeting industry demands and requirements increases.
A rapidly evolving market, the Islamic finance industry has naturally experienced a demand-supply gap in workforce competencies. With limited human resources and cohesion among the academic sector and the Islamic finance industry, education and training institutions often have difficulty providing relevant in-depth instruction in Islamic banking and finance. A fairly nascent industry with new emerging products and services, it is challenging for academic institutions to equip professionals with unique specifications for day-to-day operations and knowledge on Shari’ah compliance.
This combined with conflicting interpretations of the Islamic economy and Shariah compliant regulations among scholars in the field further perpetuate uncertainty in the industry thereby hindering innovation and interest in studying and pursuing a career in Islamic finance professionals fearing the risks associated with an unsustainable industry.
Further to this, with the majority of Shari’ah and Islamic economy courses taught in Arabic, the industry fosters an entry barrier for non-Arabic speakers interested in the field thereby limiting the industry’s global reach.
From the perspective of academic professors and industry trainers, a lack of standardized text material in Islamic finance education and the constantly evolving practices of the Islamic economy has made it difficult to create a focused, comprehensive academic curricula. Instead, education and training experts today are continuously revising course materials and programe objectives to keep pace with local market requirements – their response to the changes a reactive rather than a proactive one.
Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates, and Ruler of Dubai, has in recent years expressed his desire for Dubai to be the capital of the Islamic economy. According to a report by Ernst and Young (EY), the Islamic banking assets in the UAE reached $127 billion in 2014 and is projected to reach an estimated $260 billion by 2019.
To match these growth projections, the region must develop a skilled and qualified cadre of professionals for a vast range of banking operations. While there has certainly been a lot of work done to help achieve HH Sheikh Mohammed’s vision, there is still room for banks, governments and educational institutions to improve their training services and initiatives and further bolster the quality and quantity of the industry’s workforce.
According to talent recruitment professionals, the majority of the workforce currently employed in the Islamic banking industry have transferred from a conventional background, and while they are performing at a high level, they are unable to keep pace with the specification of the industry and lack the relevant knowledge to deal with the Islamic banking and finance product structure. While those engaged in product design and structure are well-versed in Islamic finance either through education or long-term association with the industry, those who are engaged in operations, sales and marketing pay less attention to the nature of the product – whether Islamic or conventional. Therefore, this gap between product design, structuring and operational sales is where the Shari’ah knowledge and expertise is required.
To counter this, banks should promote a more unified structure within their system to ensure innovation in product design and successful articulation of product offerings to the public, highlighting the unique nature of Shari’ah compliant products.
For their part, education institutions must ensure that the programmes and courses provided align with industry requirements and demands and equip students and professionals with real time experience. Cohesion and constant communication among the government, academia and financial industry experts and employers will transform the education and training curricula, encouraging up-to-date course materials that incorporate the dynamic demands of the industry.
Governments, on the other hand, should increase investments in hard skill education along with technical and vocational training and research and development in the fields of science and technology. Moreover, to guarantee an adequate supply of highly skilled banking and financial professionals, governments and institutions must collaborate to develop corporate financial education both short term training along with long-term undergraduate and diploma degrees.
The UAE cabinet has taken a significant step in this regard with the recent establishment of a new Shariah board under the Central Bank. With the objective of unifying Islamic banks in the region, the role of the Shariah board will be responsible for setting the standards for Islamic finance products and Shariah compliancy in the region. The Central Bank will appoint scholars and oversee the board, who will not replace but liaise with the existing individual Islamic bank boards around the region. A report by Deloitte argued that this board could “reduce future disputes and increase transactions”, further ensuring sustainability in the industry.
The launch of the Dubai Islamic Economy Development Centre in 2013 has also promoted Islamic finance through various initiatives, including the Global Islamic Economy Summit, forums to educate the public and funds to support small and medium enterprises in the Islamic economy space. Moreover, published reports and studies on the state of the Islamic economy further educate the public on the booming industry and shed light on Dubai’s strategic objectives to become the capital of the Islamic economy.
In the end, the cooperation between banks, scholars, the government and educational institutions will foster a stable, mature and attractive Islamic finance industry. As we work together to promote the Islamic economy, from educating the public on product benefits and offerings to demonstrating the value of obtaining a degree in the field, the region will have the human capital needed to sustain both the industry’s growth and Dubai’s position as a central hub for Islamic banking and finance.

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