Islamic Finance Malaysia

Wednesday 22 August 2012

Skill shortage obstructs growth of Islamic finance


KUALA LUMPUR/JAKARTA – Southeast Asian universities are adding Islamic finance courses as Bank Negara Malaysia’s Shariah Advisory Council warns a skill shortage in the industry is hampering growth, Bloomberg reported.

Universitas Muhammadiyah in Malang, Indonesia and Kuala Lumpur-based International Centre for Education in Islamic Finance (INCEIF) said this month they plan to start new programs. Malaysia needs 40,000 more qualified people in the industry by 2020, Dzuljastri Abdul Razzaq, head of the International Islamic University Malaysia’s finance department, said. Indonesia will require 17,000 more over three to five years, according to a central bank survey.

The shortage of skilled professionals is exacerbated by a mismatch between what is taught in courses and the abilities sought by employers, according to Kuala Lumpur-based Aberdeen Islamic Asset Management Sdn.

“Many graduates are knowledgeable in the various terminologies and products but don’t know the basic tenets of fund management and how the Shariah component then fits into the whole picture,” Abdul Jalil Abdul Rasheed, who helps manage $3 billion as chief executive officer at Aberdeen Islamic, said.

Malaysia’s Shariah banking assets rose 24 percent last year, while Indonesia’s have grown by an average of 38 percent over the past five years, central bank data show. This has helped drive a 67 percent jump in global sales of Islamic bonds in 2012 to $29.1 billion. The skill shortage is slowing product development and preventing the industry from expanding at even quicker rates, according to Lee Hishammuddin Allen & Gledhill, a Kuala Lumpur-based law firm that has a Shariah practice.
“The Islamic finance sector is growing faster than the supply of talent,” Mohammad Akram Laldin, who sits on the Malaysian central bank’s Sharia Advisory Council, said in Kuala Lumpur. “The industry has to continue its efforts to bridge the gap.”

Universitas Muhammadiyah plans to start an Islamic economics degree within five years in response to requests from banks, H. Nazaruddin Malik, dean of the business and economics faculty, said. The institution currently runs short courses on Shariah-compliant accounting. 

INCEIF is in talks with colleges to start programs in Oman, Turkey, and Kenya, said chief executive officer Daud Vicary Abdullah.

“The shortage impedes growth because you don’t have the best people making the best decisions,” he said in an August 10 interview in Kuala Lumpur.


In Malaysia, about 56,000 new finance industry jobs, including non-Islamic roles, will become available in the next 10 years, particularly in areas such as wealth management, Shariah advisory and corporate finance, according to the central bank’s Financial Sector Blueprint 2011-2020 released in December.

Indonesia’s Shariah-compliant banking industry currently needs 36,933 professionals, Harisman Sidi, director at the International Centre for Development in Islamic Finance at the Indonesian Banking Development Institute in Jakarta, said, citing data from the country’s monetary authority.

Bank Indonesia is encouraging Shariah-compliant lenders to put more resources into staff training to help meet its target of expanding Sharia-compliant banking assets to 10 per cent of the total by 2020 from about 4 percent, Edy Setiadi, director of Islamic banking, said.

“Because the market share is still small, Islamic banks are still not the top destination for many graduates of the country’s best universities,” he said.

Malaysia, home to the world’s largest sukuk market, has 16 Shariah lenders, according to data from the central bank’s website. That compares with 26 commercial and 15 investment banks which do not comply with religious tenets.

“There isn’t a lack of talent, there’s just a lack of opportunities,” Raj Mohammad, the Singapore-based managing director at consulting company Five Pillars Pte, said. “There aren’t a huge number of Islamic financial institutions that are popping up everywhere.”

Shariah-compliant notes returned 6.6 percent in 2012, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index, while debt in developing markets climbed 12.2 percent, JPMorgan Chase & Co.’s EMBI Global Composite Index shows.

The average yield on worldwide sukuk was little changed at 3.14 per cent, and has declined 85 basis points this year, according to the HSBC index. The difference between the average and the London interbank offered rate, or Libor, narrowed one basis point, or 0.01 percentage point, to 205 basis points, the gauge showed.


(Saudi.Gazette.Com.Sa / 21 August 2012)

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