Islamic finance higher education expands worldwide

Research shows the demand for this niche sector will grow 12% year-on-year for 2022. Salaam Gateway looks at the state of education in Malaysia, Pakistan, Turkey, the GCC and the UK.

Karachi and Kuala Lumpur: The global demand for higher education courses in Islamic finance is growing with the current $2.2 trillion turnover anticipated to increase 12% this year, according to the S&P Global Ratings’ Islamic Finance Outlook 2022 Edition.

Abdul Rahim Abdul Rahman, president of the International Council of Islamic Finance Educators (ICIFE), said Islamic finance education was expanding in theoretical and practical applications.

“The main business areas are Islamic banking, Islamic insurance (takaful) and Islamic capital market including the growth of sukuk (Islamic bonds) issuance and Islamic equity market globally,” Rahman said.

Currently, Islamic finance higher education is especially strong in Malaysia and taught, to a more limited extent, in the Gulf Cooperation Council (GCC) countries including the United Arab Emirates (UAE), Qatar and Bahrain, as well as the UK, he added.

Rizwan Malik, head of standards implementation and strategic developments, at the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), said the role of higher education in Islamic finance was key to the sector’s success. It enables professionals to understand how to apply Sharia law principles in finance in Muslim-majority countries with important Islamic financial sectors including the Middle East (especially the GCC); Malaysia and Indonesia in south-east Asia and Pakistan and Bangladesh in south Asia.

The AAOIFI plays a direct role in Islamic finance education, offering professional qualification programmes in becoming a Certified Islamic Professional Accountant (CIPA) and a Certified Sharia Advisor and Auditor (CSAA) and in corporate compliance.

Irum Saba, associate professor for Islamic banking and finance at the Institute of Business Administration (IBA), Karachi, Pakistan, said: “This is a growing opportunity for academic institutions, because they can provide the trained human resource for this growing industry”.

Malik said businesses seeking the benefits of Islamic financial services and regulators were encouraging the training of experts in the field, while the madrassahs (seminaries) trained scholars, who could later gain financial expertise, in Islamic principles.

The Refinitiv Islamic Finance Development Report 2021 states there are now more than 1,000 Islamic finance education providers globally, while in 2020 close to 3,000 research papers and over 2,000 peer-reviewed Islamic finance articles were published based on an assessment of 135 countries.

Malaysia – a major hub for Islamic finance

As a major hub for Islamic finance, Malaysia has taken the issue so seriously that its central bank, Bank Negara Malaysia, established the Global University of Islamic Finance (INCEIF), in the capital Kuala Lumpur in 2005.

INCEIF president and CEO Dato’ Azmi Omar told Salaam Gateway its goal was to develop human capital and knowledge leadership for the global Islamic finance industry by offering instance post-graduate courses. These include a doctorate in Islamic finance, a master’s degree in Islamic finance practice, an executive master’s degree MSc and a professional certificate in Islamic finance. The institution does not offer bachelor’s degrees or other undergraduate courses.

“INCEIF carries Malaysia’s aspiration to share the Islamic finance experience and contribute to the development of talent and technical skills globally, because we realise education is a key component of any Islamic finance ecosystem,” said Azmi.

Having an efficient higher education programme to “produce qualified human capital for the Islamic finance industry is a prerequisite”, particularly for expanding services to new relatively untapped “frontier markets”, he explained.

According to Malaysia’s central bank’s Financial Sector Blueprint 2022-2026 report, the next stage of Malaysia’s financial development, including Islamic finance, requires a more adaptive, agile and highly skilled workforce.

“The financial sector continues to observe healthy demand for senior and middle management level talent with job vacancies for senior, middle and entry or lower-level management increasing in the last few years, indicating job opportunities in these categories remain healthy amid sizable unmet demand,” Azmi added.

International students constitute 40% of INCEIF’s intake with Indonesia, Pakistan, Nigeria, the United States, Uzbekistan, Bangladeshi, India and the Maldives accounting for the top eight overseas student nationalities.

Azmi said for Islamic finance to succeed, talent development had to happen alongside teaching expertise in Sharia law to boost compliance. The International Shari'ah Research Academy (ISRA) autonomous arm, established by the Bank Negara Malaysia in 2008, was “dedicated to conduct in-depth and applied research on Sharia” to aid INCEIF’s work.

The university also offers customised executive training programmes and industry-focused applied research, working with ISRA.

However, INCEIF is not the only Malaysian university teaching Islamic finance. Other institutions include the International Islamic University Malaysia that offers a bachelor’s degree in Islamic finance and the University Malaysia Sabah and Malaysian Science University offering similar courses.

Turkey and the Gulf states – a host of options for students seeking education in Islamic finance

Malik said there are various institutions in the GCC offering Islamic finance certificate and degree programmes including the Bahrain Institute of Banking and Finance; University of Bahrain; the Qatar-based Hamad Bin Khalifa University and the Oman College of Banking and Finance.

Saba said universities offering courses in the UAE include the Dubai Centre for Islamic Banking and Finance located at the Hamdan Bin Mohammed Smart University offering programmes and degree courses on Islamic banking and finance; the Dubai-based Jumeira University offering a bachelor’s degree of business administration in Islamic banking and finance and the Dubai-based Ethica Institute of Islamic Finance offering training and certification programmes in Islamic finance.

In Saudi Arabia important Islamic finance programmes are staged by the Jeddah-based Effat University that offers an MSc in finance with a specialisation in Islamic finance and the Dhahran-based King Fahd University of Petroleum and Minerals (KFUPM) holds Islamic finance courses for undergraduates, she added.

Turkey’s Istanbul Sabahattin Zaim University offers courses in Islamic economics, banking and finance, while the Istanbul University Centre for Islamic Economics and Finance offers master’s and doctorate programmes on Islamic economics and finance.

Pakistan – where the growth in Islamic finance assets underpins the demand for Islamic financial institutions

In Pakistan Islamic finance grew 30.6% in assets and 24.2% in deposits during 2021, boosting growth in Islamic financial institutions, said Saba. The country has three key centres for teaching Islamic finance, namely the IBA, Lahore University of Management Sciences and the Peshawar-based Institute of Management Sciences.

However, she said teaching the topic was expanding quickly in Pakistan with more than 20 universities having launched either master’s degrees in Islamic banking or undergraduate programmes in Islamic finance. Even universities lacking a fully-fledged degree often offer one or two courses on Islamic finance, said Saba.

Ahmed Ali Siddiqui, head of Sharia Compliance at Meezan Bank, Pakistan’s largest Islamic bank, said the sector in Pakistan faced serious human resource challenges.

“The industry employs between 3,000 and 3,500 graduates every year and needs professionals with solid Islamic finance understanding of concepts and products,” he said.

Britain – the opportunity for expanding Islamic finance courses exists, but there are practical issues in attracting talented students from Muslim-majority countries

Humayon Dar, director general, Cambridge Institute of Islamic Finance, said there was the potential to grow higher education courses on Islamic finance in the UK, but there were practical problems attracting talented students from Muslim-majority countries.

Standalone degrees in Islamic finance are offered – Birmingham City University in the West Midlands was one example – and courses in Islamic finance as part of broader degrees like at Queen Mary College, the University of London.

“Britain enjoys comparative advantage in offering research-based degrees and remains a leader in this respect. However, a lack of high-quality applicants, even for PhD level research, remains a bottleneck for further development of Islamic finance higher education in the UK,” said Dar.

He added while UK universities have attracted international students, when it comes to Islamic banking and finance, most of the students came from Malaysia and the GCC.

Students from countries with lower per capita incomes and exchange rate instability (such as Pakistan) found it difficult to study in the British universities unless they were offered financial help, not always readily available, noted Dar.

Without addressing these practical issues, he warned courses in Islamic banking and finance offered by the British universities would not reach their potential.

“This is a pity given the strength of financial knowledge in UK universities,” he said.

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