Reuters
LONDON: The $500 billion Islamic finance sector may be booming but is struggling to establish a common education standard as qualifications are developed to meet the growing demand for specialized professionals.
Regional differences in how banks prepare and communicate accounts as well as how they interpret Sharia, or Islamic law, are confusing investors and holding back the sector s rate of growth to about 10 percent a year, according to credit ratings firm Standard & Poor s.
As a result, industry leaders have introduced various qualifications, each hoping to establish a global benchmark for the industry as well as develop the professional skill base.
Standardization in Islamic finance is necessary to avoid fragmentation and to ultimately create a new asset class that can fully compete with conventional finance, said Emmanuel Volland, a Middle-East ratings director at S&P.
All Islamic finance banks prohibit interest charges and investment in arms, pornography and alcohol. But banks in the Britain differ in their accounting operations from banks in Bahrain, which in turn differ from banks in Malaysia and Indonesia.
Establishing qualifications would be positive for investors, Volland added. There is a need for uniformity.
But problems are now brewing as different countries introduce different professional qualifications.
Britain, which wants London to become the global centre of Islamic Finance and is looking to issue Islamic bonds, introduced an Islamic Finance Qualification (IFQ) this year. It hopes the examination will become a global benchmark.
London-based professional training centre Securities & Investment Institute (SII) said the International Monetary Fund, Lloyds TSB, HSBC and the Financial Services Authority have already enrolled their employees onto the course.
It s about standards, criteria base, it s about benchmarks, objectivity and relevance – if you get that jigsaw right then you should have confidence in the person who is dealing with you, Ruth Martin, managing director of SII told Reuters.
The 12-month part-time course covers both ethical and practical aspects of Islamic Finance and is designed for accountants, lawyers, bankers and other professionals working in the field or looking to enter the industry.
In Malaysia, a different qualification is being offered by the International Centre for Education in Islamic Finance (INCEIF).
Set up last year, INCEIF offers a Certified Islamic Finance Professional (CIFP) qualification as well as postgraduate degrees, including Masters and PHD.
It is hoping the qualification will create Sharia-aware professionals who will be able to distinguish whether a bank is adhering to Islamic principles or not.
Professor Malik M. Al-Awan of INCEIF said the standardization would help to alleviate concerns that some banks were using religious scholars, who issue fatwas – or decrees – for Sharia-compliant products, as mere marketing tools.
We don t want to substitute established scholars. Our graduates will be Sharia auditors who will go into a bank and see if it is really complying with Sharia principles, he said.
Although the new Islamic finance qualifications have been welcomed, questions have been raised regarding uniformity.
In 1991, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) was established as one of the industry s main standard-setting organizations.
To date it has issued 68 standards on Islamic accounting, auditing, governance, ethics and Sharia.
We offer our own qualification, said Secretary-General of AAOIFI Mohamad N. Alchaar, adding it was difficult to tell what a global benchmark was in an emerging industry such as Islamic Finance.
Bahrain-based AAOIFI launched its Certified Islamic Public Accounting (CIPA) program in 2006 and accounting organizations and central banks including the Central Bank of Egypt, KPMG and Deloitte & Touche were using it, Alchaar said.
And we have another program that we will be launching in November: Sharia Auditor Advisor Certificate, he added.
With different countries offering different Islamic Finance qualifications the next stage will be to standardize professional qualifications.
Farmida Bi, head of Islamic Finance at law firm Denton Wilde Sapte, said a global standard would be reached in time.
The international markets will push towards standardization and so one or more of these qualifications will come through as being more efficient and more effective, she said.
The ones that are good will stand out.
