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Posted on 02/01/2010

The remarkable rise of the Islamic finance sector by Dr Mohd Daud Bakar, President and CEO of the In

Dr Daud Bakar, President & CEO of the International Institute of Islamic Finance Inc

The Islamic finance industry is growing at an exponential rate. The sector’s global worth is estimated to be between £150bn and £250bn with an annual growth rate of 15% to 20%. This growth has continued throughout the global economic crisis –albeit at a slower pace - largely because of its vigorous screening processes and stringent corporate governance practices in dealing with excess liquidity in many oil producing countries.

Islamic finance is both a new and old phenomenon. Its guiding principles originate in the early days of Islam. The modern form under the current financial framework is new to many stakeholders such as regulators, standard setting bodies, shareholders, practitioners and much of the general Muslim population.

The modern rebirth of Islamic finance took place in the Middle East in 1975 when the Dubai Islamic Bank became the first Islamic commercial bank in the world. The first Islamic insurance companies, or Takaful, were established shortly afterwards in Sudan and Dubai in 1979. Today, there are 300 Islamic finance institutions operating in more than 75 countries.
By and large, Islamic finance has been accepted and practised in various jurisdictions even in non-majority Muslim countries such as the United Kingdom, Singapore and Japan. The most recent entrants include South Korea, France, Hong Kong and Australia.

Surprisingly, there is more of a synergy between the two financial systems than might be supposed. The practice of Islamic finance is deemed compatible with traditional finance in terms of governance standards, capital requirements, Know Your Customer (investment protection) policies, not to mention product innovation and sophistication. One of the underlying reasons for this is that Islamic finance has departed from loan-based transactions to include a variety of new contract arrangements to deliver either the same economic benefits as conventional instruments or entirely new financial benefits.

However, there is a real global shortage of people with demonstrable expertise in the complexities of all areas of Islamic finance. As this sector is growing at such a rapid rate there is a growing demand for a standardisation of Shari’ah principles, legal and product documentation, accounting and prudential standards, cross border transations, etc.

Running alongside this requirement is the need for an increased industry focus on nurturing talent and developing cross-border expertise - if it is to continue to drive previously impressive growth rates and flourish alongside its conventional counterpart. Global qualifications such as CIMA’s Certificate in Islamic Finance has been designed to be an essential tools in developing the best talent from around the world.

CIMA’s Cert IF marks a major step forward for the Islamic Finance industry. It is the first global qualification of its kind to be created by a professional chartered accountancy institute. In conjunction with an advisory group of Shari'ah academics and scholars, we have worked closely with the International Institute of Islamic Finance Inc. to develop a relevant and highly applicable qualification that will help drive the world's Islamic finance institutions.

As the sector grows, an international focus becomes more important. One of the key strengths of the CIMA certificate is that it is an internationally recognised qualification and a more robust alternative to regional qualifications available in isolated geographies. This ensures that the qualification provides a comprehensive and unbiased picture of the subject.

Another advantage of the qualification is that it is a self-study, distance learning qualification that allows students to progress at their own pace. An additional assurance to employers is that the assessments are computer-based and can only be taken at CIMA accredited assessment centres, ensuring the same examination

The certificate covers Islamic commercial law, banking and Takaful, Islamic capital markets and instruments and accounting for Islamic financial institutions. Because Islamic finance is constantly changing, study materials are updated regularly to ensure students are always at the cutting edge of the industry.

The recent move to offer the certificate in Arabic - the language of one of most important Islamic Finance regions in the world - is core to CIMA’s strategy to ensure this global qualification is accessible to all. Arab professionals need to develop their knowledge and skills if they are to harness the fastest growing financial services sector in the market.

CIMA’s professional qualification in management accounting is a unique form of training. The aim is not just to ensure that students are well-grounded in all areas of general management and finance but that they are provided with the foundations to become the business leaders of the future. CIMA’s syllabus and its international reputation as a leader in management accounting provides an ideal foundation to create a truly rounded qualification in Islamic finance.

A career in Islamic finance requires unique management skills and knowledge. Conventional finance practices do not always satisfy Shari'ah rules. Good practice in Islamic finance means establishing relevant Shari'ah compliance control systems (SCCS). Financial services professionals in this field must make sure that all financial activities are carried out in accordance with Shari'ah principles, Shari’ah standards and best practices established by governing bodies including the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).

CIMA has ensured that its new certificate will be relevant to professionals already working within the sector, those who are thinking about moving into a career in Islamic finance, employees already working in the industry who want to have more detailed knowledge of Islamic finance and employers which need to increase their talent pool of Islamic finance staff.
The financial crisis brought about by the traditional financial system has made Islamic finance more relevant than ever before and developing knowledgeable practitioners in this discipline is crucial. CIMA is looking forward to contributing to the development of this fascinating area of finance.

Sources : CIMA