As the world financial industry sheds jobs by the tens of thousands, the $1 trillion Islamic banking sector has a growing load of work for sharia scholars but few candidates coming forward to do it.
Experts steeped in the Muslim scriptures are critical to Islamic finance, which requires a religious stamp of approval before a bond, mortgage contract or other financial product can be marketed as moral according to the standards of the holy Qur’an.
But qualifying for this work takes much more time and effort than other jobs in finance require. Candidates must first study Islamic law or sharia for many years, and then master finance.
Globally, and especially in Europe and America, there is a shortage of scholars familiar with both fields,” said Mufti Abdul Kadir Barkatulla, an Indian-born imam in London who sits on sharia boards for six banks including Lloyds TSB Bank.
“A few scholars are going around the world [advising banks] and new scholars are not being trained fast enough to take their place,” he said at an Islamic finance conference in Paris.
Part of the problem is linguistic. Many Middle Eastern scholars work only in Arabic, the language of Islam, but the global market needs scholars fluent both in Arabic and in languages such as English or French.
A study for Paris Europlace, an industry group trying to develop Islamic banking in France, said there were fewer than 100 scholars in the world qualified to sit on sharia boards.
Demand for Islamic banking has grown in recent years and expanded from the Middle East as more of the world’s 1.3 billion Muslims seek investments that comply with their faith.
The current financial crisis has also hit the Islamic sector, but Islamic banks say they are better placed to weather it because of their more conservative stance.
“We’re not immune, but we’re not failing catastrophically,” said Sheikh Nizam Yaquby from Bahrain, who advises the Islamic units of HSBC and BNP Paribas , among others. “The scholars stopped us from buying subprime loans.”
Islamic law bans fixed interest rates and trade in companies dealing in alcohol, pork or pornography. But like sharia in any other field, there are no fixed rules that all scholars accept.
“About 90 percent of all sharia board rulings are consistent so there’s only about 10 percent difference,” Yaquby said.
Some differences are theological. Malaysia, home to over half the global Islamic bond market, follows the Shafi school of Sunni Islam and is the most flexible with debt.
Saudi Arabia, with its Wahhabi form of the Hanbali school, is the strictest, while the Gulf states chart a middle course. Islamic finance in western countries generally follows the Gulf.
Shi’ites used to have some striking differences, such as the view that the interest ban did not apply to interbank lending, “but now they are joining the mainstream,” Barkatulla said.
Mufti Ahmed Said Louqman Ingar from the French Indian Ocean island of Reunion said an investment fund there almost failed despite approval by an international sharia board. “Clients wanted approval by local French-speaking scholars,” he said.
One sharia board might reject an airplane leasing deal because the airline served passengers alcohol while another might ignore that and approve the contract, he said.
There are also no set fees for sharia advisers, who Gulf media say can earn up to $100,000 per fatwa, or religious edict, on a contract. But Barkatulla said money was not the issue.
“There is enough economic rationale for people to get trained,” he insisted. “This will not be a problem.”