Islamic finance has long been criticised for its lack of standardisation – from the disunity in the way scholars interpret Shariah law to the various qualifications available for professionals dealing in the rapidly-expanding industry.
But times are changing as a new qualification developed by both Muslim and non-Muslim industry experts from East and West is embraced across the Gulf region and beyond.
The Islamic Finance Qualification, or IFQ, was developed by Britain’s Securities & Investment Institute in partnership with the Central Bank of Lebanon and incorporated scholars from Saudi Arabia, Bahrain and the United Arab Emirates.
Interest in Islamic finance has been rising in line with the value of global Shariah-compliant assets amid growing demand for products such as Islamic bonds known as sukuk, Islamic insurance contracts known as takaful as well as Islamic mortgages.
In 2007, the value of Shariah-compliant assets worldwide surpassed $500bn for the first time, according to a recent report by Standard & Poor’s.
Accountants at Ernst & Young put the 2007 figure even higher at $900bn and expect Islamic assets to grow at a rate of 20% annually. The industry is set to hit $2tn by 2010.
Kuwait Finance House, or KFH, forecasts that Islamic assets in the six-member Gulf Co-operation Council (GCC), will grow to 18% of system assets by 2012 from its current 13%.
A total of $19bn new sukuk were issued in the Middle East alone in 2007, according to Zawya.com data.
Ruth Martin, head of the London-based Securities & Investment Institute, or SII, is one of the people who helped develop the new Islamic finance qualification from its infancy.
“GCC countries are reacting very warmly to the IFQ because when we were developing it we incorporated experts from around the Gulf, so it has a resonance in the region,” Martin told Zawya Dow Jones in an exclusive interview in Bahrain’s capital Manama.
Test centers in the United Arab Emirates, Bahrain, Qatar, Lebanon and Kuwait are now offering the qualification and SII is in talks to formally introduce the qualification in Saudi Arabia, Oman and Egypt.
The qualification, which was launched in March 2007, is studied through workbooks or training centers before the final examination is taken at a test center or online.
Nine months after its launch over 1000 workbooks were sold, Martin said.
“So far the exam has been taken in 37 different countries ranging from South Africa to New York to Dubai,” she said, adding another factor for the success of the IFQ is its basis on a stricter interpretation of Shariah Law.
Islamic law differs widely from country to country with Gulf countries such as Saudi Arabia preferring a stricter interpretation to Asian countries such as Malaysia.
Islamic law prohibits the charging of interest, so Islamic banking products are based on a tangible underlying assets while proceeds take the form of profits or rent from those assets, rather than interest on debts.
Islamic investments also prohibit support to businesses seen to negatively impact the welfare of their communities such as companies dealing in alcohol, pork products, arms and pornography.
“Our qualification follows the Gulf model of what is Shariah-compliant – the main issue with this model is debt cannot be treated as an asset unlike the Malaysian model – it is stricter but we deliberately took that approach,” Martin said.
Another advantage is that most high net worth individuals investing their money in Islamic Finance, whether in the a non-Muslim country such as Britain or a Muslim country such as Saudi Arabia, are from the Gulf.
“What we have been trying to achieve over the last year is organic growth with the local partners who work with us but we are keen to expand to other countries,” Ruth said.
For Muslim and non-Muslim banks looking to gain a foothold in this lucrative industry there are various qualifications but none as tailored as the IFQ, said one industry expert.
“The IFQ is popular because the industry is still an emerging market and there are not many comprehensive qualifications available at present,” said the expert, who declined to be named.
But competition is heating up. The Diploma in Islamic Accounting and Compliance by Bahrain Institute of Banking and Finance, or BIBF, in partnership with the Association of International Accountants, or AIA, is being pitted by industry experts as the new main competitor for the IFQ.
The diploma was launched in January and its course-structure and format is compiled by the BIBF while the AIA sets the exam syllabi and papers for the diploma.
Until professionals go through both the IFQ and BIBF training and test the skills they have learnt in the work environment it is still too early to tell whether or not the IFQ qualification will be a true global benchmark, the expert said.
Ruth is aware of the competition and plans to maintain an edge in the industry. “We need to review our syllabus every year to make sure we are up-to-date with what’s happening – it’s very important that we do things slowly, properly and safely,” she said
source : gulf times