By BETH GARDINER, Wall Street Journal Education Available at: http://online.wsj.com/article/SB125745015996431565.html
As Islamic finance grows into a thriving and increasingly lucrative sector, business schools around the world are adding courses, concentrations and specialized degrees to train students in structuring investments that comply with Quranic law. The vast wealth of the Muslim world, buoyed by high oil prices, and a Muslim population increasingly interested in investing its money in ways that accord with religious principles have driven a boom this decade in specialized Islamic financial products.
When a sector grows so quickly, “the very first thing that there is a shortage of expertise,” says John Board, director of the ICMA financial studies center at the University of Reading’s Henley Business School in Britain, which has enrolled about 10 students in the first year of its masters’ in investment banking and Islamic finance.
In both Muslim and non-Muslim countries, experts in the field say, there’s great demand for practitioners trained to deal in the sometimes complicated products required to turn a profit while obeying strictures like a prohibition on interest. B-schools say the boom is so great that they’ve even had trouble finding faculty with the required expertise in both financial practice and the principles of Sharia law. Both large international banks with Islamic finance divisions and specialized Islamic institutions are seeking the business of oil-producing countries’ massive sovereign funds and of wealthy Muslim individuals. The schools are eager to train prospective and current employees in both full-time masters’ programs and executive-education courses.
Universities in Muslim countries, particularly Malaysia, have added and expanded Islamic finance programs in recent years. Outside the Muslim world, Britain has sought to position itself as the main center for such work, with at least 22 banks providing some Islamic finance products and 55 British educational institutions, including business schools and private trainers, offering courses in the field, says Ruth Martin, managing director of the Securities and Investment Institute, a London-based professional body.
Lebanon’s central bank initiated a joint effort by the Securities and Investment Institute and Beirut’s Ecole Supérieure des Affaires to create an Islamic finance qualification, Ms. Martin says. The certification, started in 2007, is now being offered by more than 30 business schools in countries including Kuwait, Pakistan, Saudi Arabia and Britain, she says.
Bank Negara Malaysia, Malaysia’s central bank, started the Islamic finance university INCEIF in 2006 to help train practitioners. “We do find a number of Malaysians who work in this area are being snatched like hotcakes by the Middle Eastern countries,” says Datuk Dr. Syed Othman Alhabshi, the school’s dean.
In Saudi Arabia, the first cohort of students begins studies in March at the women’s university Effat in a new executive Islamic financial management degree course run by the Ecole Supérieure des Affaires and Erasmus University’s Rotterdam School of Management in the Netherlands.
Cass Business School is among the many British institutions with new programs in the area. The executive M.B.A. it offers in Dubai has given students the option since 2007 of specializing in Islamic finance, and corporate clients also send staff for a shorter-term overview of the field, says Zaher Barakat, who teaches in the program.
One of the central tenets of Islamic finance is its prohibition on the payment of interest, which has inspired a variety of alternatives to mortgages and other loans, as well as creative ways of helping those with capital earn a return. Techniques like leasing, equity sharing and profit-and-loss sharing offer vehicles through which an investor can, for example, finance a new plant and then lease it to a manufacturer, rather than lending the money to buy it.
Sharia law also requires clarity and openness in all transactions, involving detailed audit trails so that all parties have full information about the sources of the funds involved. Debt cannot be classed as an asset to be sold to a third party, and investments in areas like alcohol, gambling and weapons are forbidden. Islamic bonds and insurance follow their own sets of rigorous rules.
Proponents note that the prohibition on interest charging and the selling of debt shielded the sector from exposure to subprime mortgages and some of the complex debt-backed instruments at the center of the financial crisis. “There is a lot of reduction in risk,” Dean Alhabshi says. “Sharia requires Islamic financing to be asset-based, or at least asset-backed.”
And while its inherent conservatism has meant in the past that the potential for profit is lower in Islamic finance, many say that has begun to change. Environmentally conscious investments now earn as much as conventional portfolios, says Mr. Board of the University of Reading. “The same will become true of Islamic products,” he says. “It’s almost there now; that differential is getting smaller.” Finance isn’t the only area where business schools have spotted opportunity in the Muslim world.
At Oxford’s Saïd Business School, associate fellow Paul Temporal is researching marketing and branding to Muslim consumers. Almost no study has been done of consumer behavior and decision-making in the Muslim world, hamstringing local and international companies hoping to sell there, he says. “It’s a quarter of the world’s population and represents a huge opportunity, but how do we get to them and how do they behave?” he asks. Based on the results of Mr. Temporal’s research, Saïd plans to offer executive education to companies that are based in the Muslim world and need branding expertise. It also hopes to reach large international corporations that want to sell in Muslim nations but lack the cultural understanding to market effectively.
“Education is what survives when what has been learned has been forgotten”.
B. F. Skinner (1904 – 1990), New Scientist, May 21, 1964
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