More than 20 years after Malaysia launched its ambitious plan to become a centre for Islamic banking and finance, the country’s central bank – Bank Negara Malaysia (BNM) – is trying to persuade global groups to enter the market.
Its move comes at a time when a shortage of employees who are qualified to assume positions of responsibility is proving a stumbling block for the industry.
With specialist bankers, financiers and other professionals in demand, where are the specialists to take on the responsibilities and keep up with the growth?
Malaysia may be able to offer some useful insights.
The central bank’s push to attract more international institutions specialised in the area comes ahead of its 2010 deadline for 20 per cent of the banking sector to convert to Islamic finance. This compares with approximately 15 per cent at the moment.
For BNM, “what is important is the quality” of that transition, says Dato Mohammad Razif Abdul Kadir, BNM’s deputy governor. And the quality of institutions is directly linked to the extent that some of the most promising professionals are attracted into this field.
Malaysia’s efforts to promote the growth of the sector may, in part, be driven by domestic considerations.
It is a predominantly Muslim country in Asia, which has successfully established the concepts and also the practice of Islamic banking and finance.
But the push also coincides with the oil boom in the Middle East, which has prompted Arab investors, armed with petro-dollars, to seek investments outside their region.
With oil prices moving from one historic high to the next, and analysts predicting further increases, there is not likely to be a shortage of money pursuing investment opportunities.
BNM hopes that laying strong foundations as a global destination for Islamic investors will make a difference to opportunities.
In the Middle East, some of the main industry participants are the first to acknowledge the problem of the shortage of personnel.
“We are in a situation where so much demand for talent is chasing very few people,” says Hussain al-Qemzi, chief executive of the Dubai-based Noor Islamic Bank, launched earlier this year.
For Mr Qemzi, making the bank prominent in the sector will depend to a large extent on its finding professionals who are not only qualified, but have the relevant experience too.
In Malaysia too, senior policymakers and executives at Islamic banks highlight the importance of finding top-ranking professionals to underpin the success of their business.
“We are aggressively looking at the new environment. We are not just looking at the domestic environment. We are also looking at the internationalisation of Islamic finance” says Mr Kadir of BNM.
“The biggest challenge [for Islamic banking and finance] is the people” says Yakub Bobat, managing director of HSBC Amanah in Malaysia, the Islamic banking arm of HSBC.
Rafe Haneef, managing director for Fajr Capital, an Islamic investment management company in Kuala Lumpur, the Malaysian capital, stresses the number of professionals that is required for the smooth functioning of this area of business.
“It is not just the practitioners but also the scholars. What about the lawyers, the tax accountants? We need all of them,” he says.
One answer is to offer academic training in Islamic finance. In the past few years, locations such as Malaysia and Dubai have begun hosting academic and professional programmes.
These are aimed at young aspiring Islamic banking and finance professionals, as well as those who already have experience in mainstream banking.
Bankers note that such academic opportunities are no substitute for on-the-job training in banks and financial institutions, where new employees are taught formally and given time off to study.
However, companies have been slow to adopt this approach for a variety of reasons, including the fear of having their trained professionals poached by rivals.
“This is a serious gap. If all Islamic institutions were to embark on structured inhouse training programmes, maybe there is a chance the shortages could be met,” says a senior banker.
“If Islamic banks and other institutions were to look at their own long-term interests, overcoming human-resource shortages would suit everyone.”
Others note that the way forward may be eased by following the example of countries such as Malaysia, which has encouraged growth of the Islamic finance industry.
While a number of countries in the Asia-Pacific region, including Pakistan and Indonesia, have supported the growth of Islamic banking and finance, they fall short of the Malaysian example of a country that has seen the active involvement of the central bank, which has linked with a network of financial institutions participating in the sector.