New class for Islamic finance

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It is a far cry from the glass skyscrapers, oil wealth and searing heat of Dubai. But the University of Reading, on a campus complete with rugby pitches and redbrick buildings in southern England, is hoping to establish itself as a teaching centre for Islamic finance.

Last year the university launched a master’s degree in investment banking and Islamic finance, making it one of a growing number of universities in the west to offer a postgraduate course in a sector that has boomed in the Muslim world in recent years. One of the sector’s greatest challenges is finding enough specialist bankers to meet that growth.

“We think Islamic finance is enormously short of people and is now prominent enough to be considered a semi-permanent part of the banking scene. So we need to address it,” says John Board, director of Reading’s International Capital Markets Association centre, which offers the programme.

“We started to get prospective students asking us if we knew about it [Islamic finance], while current students going to job interviews, even for non-Islamic posts, said it came up as a conversation piece,” he adds.

Reading is not alone in spotting this gap in the postgraduate market – Bangor University in Wales also recently started offering a master’s degree in Islamic banking and finance. With 23 students in the first intake, lecturers say the course attracted more applications than other recently launched programmes.

In the north of England, Durham University plans later this year to relaunch its master’s degree in Islamic finance, which ran from 2002 to 2005. France’s Université Robert Schuman, in Strasbourg, last month also launched a master’s degree in Islamic finance.

“I’ve seen a growing interest from students during the last two or three years as the Middle East has grown in importance,” says Michel Storck, head of the business law centre at Université Robert Schuman and course director for the Islamic finance programme.

“And now, after what happened in the US, Islamic finance is even more attractive as it seems ‘safer’.”

Islamic finance has grown rapidly over the past decade, as the region’s Muslim investors sought to invest profits from soaring oil prices in accordance with their faith.

Sharia law forbids interest, or riba, on the grounds that money should measure rather than create value. The sector has thus avoided many of the debt-backed instruments that have recently caused trouble in conventional banking.

Islamic banking assets were worth $600bn at the end of 2008 and the industry has been growing at just under 20 per cent a year since 2000, according to Moody’s, the ratings agency. Others suggest the assets are worth closer to $700bn.

The new master’s degrees explore topics such as the Islamic concept of money, so that students will learn the reasoning behind sharia laws, as well as the technical skills to construct sharia-compliant products.

Graduates should then be able to work alongside an Islamic bank’s sharia board – a panel of scholars who ultimately decide if products obey religious tenets.

“A master’s allows you to reflect on the rules, not just learn how to do it,” says Mr Board. “It doesn’t work to have conventional financiers just following the instructions of sharia scholars – they are often clerics who don’t have a deep knowledge of finance.”

It is perhaps not surprising that UK universities are leading the charge – London has in recent years strived to promote itself as a hub for Islamic finance.

Paris has more recently shown an interest. The French senate – the upper house of parliament – last summer held its first meeting with politicians, bankers and sharia scholars to discuss how to support Islamic finance by raising awareness and changing certain tax laws.

There are already professional courses on offer to those in the west, such as the Islamic Finance Qualification, provided by the UK’s Securities and Investment Institute and Lebanon’s Ecole Supérieure des Affaires. But both academics and professionals say a university degree is likely to provide a better grasp of ethical issues, which are central to Islamic finance.

“They [the masters graduates] should have a deeper understanding of sharia, as they will have studied it for nine months, or even a year and not just a few weekends,” says Mohammed Amin, UK head of Islamic finance at PwC.

European universities say most applicants have come from Muslim countries. This appears to be due to a lack of comparable courses in their domestic countries.

But this trend could change. London’s Cass Business School in 2007 launched an Executive MBA in Dubai, which offers a specialism in energy – with a focus on managing oil wealth – or Islamic finance.

In March, the Bahrain Institute of Banking and Finance is set to launch an Islamic finance masters programme. A small number of universities in Malaysia, considered a world leader in Islamic finance, already offer postgraduate courses.

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