Is the world about to witness the first fully fledged MBA programme that combines religious tenets with mainstream business management?
That is the question now being addressed by proponents of Islamic banking and finance, as generous oil revenues from the Middle East translate into investments worldwide and Islamic money becomes a popular phrase.
The need for MBA graduates armed with a knowledge of Islamic norms has become increasingly pressing. Bankers working to put together deals involving Islamic finance point towards a fundamental skill gap in finding professionals who combine the knowledge of Islamic shariah (jurisprudence) principles with knowledge of the marketplace.
So far, the emergence of a Islamic banking and finance MBA has been more a dream than a reality. But if Hussain Hamid Hasan, a Dubai-based scholar of Islamic banking and finance, has his way, an MBA with Islamic finance at its core “should become reality much sooner than people expect”.
Mr Hasan, who has lived in Dubai for more than 25 years and has seen Islamic finance develop from an idea into a workable reality with mainstream interest, says banks and other institutions, such as Islamic insurance companies and Islamic equity funds, “all want to see it happen. There is enough demand for people to actively begin working on this”.
Participants in the world’s main financial markets with a stake in the future of the Islamic finance industry believe its growth in recent years has helped to lift the profile of this relatively new line of business.
Traditionally, Islamic finance has been widely thought to be against the use of interest-based transactions such as those provided by mainstream conventional banks. Rather, Islam seeks to promote the idea of partnership-type structures, where depositors provide money through a bank or other institution and borrowers use that money for investment purposes. Profit or loss from the investment is supposed to be shared between the provider and the borrower, with the bank charging a fee for managing the transaction.
Other obvious prohibitions include investments in anything considered a vice under Islamic law, such as pork, investments in hotels where alcohol is served and outlets for gambling, as well as businesses involved with the trade of arms.
But recent developments, such as Saudi Arabia’s decision earlier this year to issue new licences for Islamic insurance companies, have turned the spotlight on Islamic businesses beyond the banking sector. Additionally, the fast-paced growth of the world’s market of Islamic bonds known as sukkuk has further lifted prospects for growth.
For future MBA graduates who are keen to enter this area, knowledge of a variety of sectors tied to Islamic shariah principles presents challenges.
“This industry is growing very fast. That growth is helping to spur the demand in ways we haven’t seen before,” says Rushdi Siddiqui, the New York-based global director of the Dow Jones Islamic Market Index. Mr Siddiqui says that at a practical level senior managers who are trained to run Islamic banks and other financial institutions need to be aware of the unusual nature of this business.
Scholars of shariah who serve on the boards of Islamic finance institutions play a key role in overseeing all big decisions, but many such scholars have no experience of the global marketplace.
“The MBA can be important as a degree that provides key skills for business managers,” says Mr Siddiqui. “But people need to appreciate the nature of this particular business, such as being required to work with shariah scholars, as a key feature of their work.”
Leading figures in the Islamic financial world are increasingly aware of the need to hire the best possible managers and some are calling for substantial increases in spending on training and development.
According to Khalid Abdulla-Janahi, chairman of the board of Faisal Finance Switzerland, the country’s first Islamic private bank, “the amount of money spent by Islamic finance institutions on people is very low. We need to increase that.”
His comments are supported by human resource managers at Islamic banks in the Middle East. Some of these managers believe an MBA tailored to Islamic finance would be widely welcomed in the region.
“MBAs from mainstream business schools include many who just don’t successfully make a good enough transition to Islamic banking, finance and other associated businesses,” says the HR head of a Middle Eastern bank.
“If a leading business school was able to provide a new MBA programme with specialisation in Islamic business, that should attract lots of students, especially Muslim students who want to work for an Islamic bank in the future.”
However, opinion is divided on whether such a programme would succeed in the Middle East, where some of the brightest business students choose instead to head to the US for an MBA, rather than enter local programmes.
While US business schools have a proven MBA record, bankers say there would be few opportunities to gain practical experience in the US market, where Islamic finance is a relatively new phenomenon.
Mr Siddiqui believes Islamic banks have to take innovative steps, such as offering generous endowments to create chairs in Islamic finance, banking and associated areas, at leading business schools in the west.
“Such a move could help jump-start a fresh process and put the spotlight on this area,” he says. A first step, he adds, would be an executive MBA programme in which those already working for an Islamic bank could take time off and study towards an EMBA at a US university.
Opinion among bankers in the Arab world is divided over the extent to which graduates with an MBA specialising in Islamic finance could become well positioned among the top players.
While there is recognition of the need to arm senior managers in banks with the knowledge of Islamic subjects, MBA graduates may never be able to fill certain specialist slots, such as the positions held by shariah scholars who serve on boards and perform a key function.
“If banks are able to hire shariah scholars to vet their investment decisions, why do they need MBAs to be knowledgeable about Islamic principles too?” asks the country head of a western bank based in the Middle East.
But a senior executive at a Middle Eastern Islamic bank disagrees.
“Shariah scholars may have knowledge of religion but they don’t necessarily know the marketplace. As the demand grows for Islamic money and the scale of this business grows rapidly, MBAs who understand the conceptual basis may be far more successful than just plain MBAs.”