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posted: 9/25/2011 5:00 AM

Islamic finance industry needs more MBAs

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Bloomberg News

A Bahraini group that sets standards for Islamic finance in 45 countries is helping universities start Shariah-compliant business courses to avert a shortage of experts in the $1 trillion market.

The industry will need 15 percent more personnel over the next five years and 25 percent more in a decade, Khairul Nizam, deputy secretary general of the Accounting & Auditing Organization for Islamic Financial Institutions, said in a Sept. 20 interview. Pakistan is offering its first doctorate in Shariah banking, while the United Arab Emirates has introduced an Islamic Masters of Business Administration.

"There is a shortage of people in the industry at the entry level," Nizam said. "We will need to make sure there are enough heads in the future."

Shariah-compliant bonds returned 7 percent this year, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index, outpacing the 6.3 percent jump in emerging-market debt, data compiled by JPMorgan Chase & Co. shows. Countries including Nigeria, Thailand, Australia and France plan to introduce legislation to facilitate Islamic financing, moves that will boost demand for scholars to certify that the products meet Islam's ban on interest payments.

"If you don't have quality people, then growth in the industry won't be sustainable," Azahari Kamil, the chief executive officer of Kuala Lumpur-based Asian Finance Bank Bhd., a unit of Qatar Islamic Bank SAQ, said in a Sept. 20 interview. "Governments and central banks should encourage universities to come up with more professional courses."

Singapore, U.A.E.

The Canadian University of Dubai is offering a U.A.E.-accredited MBA in Islamic banking, Foteini Lavda, the institution's marketing manager, said in a statement on Sept. 20. The International Islamic University in Islamabad, Pakistan started its doctorate course in Shariah banking to compliment its Masters program in August, Shagufta Haroon, the director of academics, said in a Sept. 19 interview. La Trobe University, based in Melbourne, began courses in the subject last year.

Experts in Singapore are also setting up an association focused on Shariah-compliant investments to foster links between bankers, lawyers and investors in the Persian Gulf and Asia, Raj Mohamad, managing director at Five Pillars Pte, a consulting firm in the city-state, said in an interview yesterday. Mohamad will be the secretary of the new body.

The Accounting & Auditing Organization, known as AAOIFI, has more than 200 members from 45 countries and its standards are used in Islamic finance in Bahrain, Jordan, Lebanon, Qatar, Sudan and Syria, according to its website. The organization may issue 35 Shariah standards for Islamic institutions in 2012, according to a Sept. 7 statement, citing Secretary General Mohamed Nedal Alchaar.

Improving Courses

Under the Islamic law of Sharia, commercial transactions can take place as long as the provisions don't violate the Quran. The charging or receiving of interest on a loan or bond is banned and investment in businesses that deal in tobacco, gaming or alcohol are prohibited, making conventional stock and bond indexes off limits to those wanting to invest in accordance with Islamic principles.

"We have been speaking with a few universities to help them introduce some courses on Islamic finance and we are helping other universities to improve the courses they offer," AAOIFI's Nizam said. "We are also offering our own courses."

Assets that comply with Islam's tenets are estimated to almost triple by 2015 to $2.8 trillion, according to the Kuala Lumpur-based Islamic Financial Services Board, a standards-setting body.

Global sukuk

Global sales of sukuk have risen to $17.3 billion in 2011, from $10.7 billion in the same period last year, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.

The difference between the average yield for sukuk and the London interbank offered rate narrowed two basis points, or 0.02 percentage point, to 249 on Sept. 20, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows. Average yields dropped two basis points to 3.54 percent.

The Bloomberg-AIBIM-Bursa Malaysia Sovereign Shariah Index, which tracks the most-traded ringgit-denominated government securities, was at 104.7380 on Sept. 20. The gauge has climbed 3.6 percent this year.

The yield on Malaysia's 3.928 percent dollar-denominated sukuk due in June 2015 rose one basis point to 2.55 percent yesterday, according to prices from Royal Bank of Scotland Group Plc. The difference in yields between Malaysia's bond and the Dubai Department of Finance's 6.396 percent note maturing in November 2014 shrank two basis points to 243, Bloomberg data show.

Malaysian pioneers

Islamic banking assets in Malaysia, which pioneered financing along religious guidelines 30 years ago, have grown an average 20 percent annually since 2006 to 350.8 billion ringgit ($112 billion) in 2010. The Southeast Asian nation accounts for 66 percent of global sukuk outstanding, according to the central bank's annual report issued in March.

Australia and Thailand are pushing through legislation to remove tax barriers on Shariah-compliant products that would pave the way for issuance of Islamic bonds. Nigeria's Stanbic IBTC Bank Plc., a unit of South Africa's Standard Bank Group Ltd., has been issued with a preliminary license to offer Islamic banking services. Stanbic would be the African nation's second lender to gain approval.

Harvard courses

The International Islamic University of Malaysia offers postgraduate and Ph.D. courses in Shariah-compliant banking and finance, according to its website. The U.K.'s Durham University, also offers Islamic finance courses, while Harvard University in Cambridge, Massachusetts, runs an Islamic legal studies program through its law school, according to data on their websites. The Paris-based French Institute for Islamic Finance in partnership with the French Institute for Management is providing vocational training in Shariah-compliant finance through 15 programs, according to its website.

"There's been a surge in Islamic finance courses," Nik Norzrul Thani, chairman and senior partner of Kuala Lumpur-based legal firm Zaid Ibrahim & Co., said in an interview on Sept. 15.