With Islamic finance (IF) and Islamic financial products (IFP) growing popular worldwide, there is an urgent need for training bankers in IF and IFP, says Azmi Omar, director general of Islamic Research and Training Institute (IRTI) and member of Islamic Development Bank Group.
“One of the challenges faced in the field of Islamic Financial Products (IFP) is its inability to differentiate between IFP and commercial financial products that are normally dealt with,” Omar told Arab News in an exclusive interview, on the sidelines of IFN Saudi Arabia Forum.
This is due to their lack of awareness of Islamic finance as also skilled manpower shortages for running IF institutions, he said.
“Islamic finance is not being taught as a subject in our universities; the next level in terms of supporting skills ought to be Islamic finance management,” Omar added.
“Aside from our universities, we also need to have training centers where we can train bankers in the field of IF and IFP ,” he added.
“When I say bankers, I also include regulators because the regulators need to also understand IF before they are able to regulate an Islamic bank (IB). So, the issues of financial literacy and shortage of human capital in this field are inter-related,” he said.
“Liquidity instruments are needed to establish IBs apart from financing. They need to park their investment. So, the question arises whether we have enough liquidity instruments to support the investment of IBs. This is the challenge that many IBs are facing in various countries due to inadequate liquidity instruments,” Omar said.
Omar also said sukuk is one of the important Islamic financial instruments for long-term project financing. “But they don’t understand its principles,” he added.
Aside from the issue of liquidity instrument, one other issue is of Shariah implementation since different countries have different standards of cross-border transactions, he pointed out.
Asked about Takaful, he said: “When we look at Takaful, we look at sukuk and the whole idea to make an in-depth analysis and take lessons learned from those countries. Those lessons can be transferred to other countries. For example, if country A wants to implement IF, what lessons they can learn from Malaysia, which is a successful country, and whether this is the way to attract investors into the country because we know that country has Islamic bonds.”
According to Omar, there is a growing interest in IF in Western countries, especially in the UK. “We have also seen, for example, IF especially on the capital market side. We have also seen this in France where there is a change in regulation to allow for sukuk issuance and also to allow banks to deal in IF in the future,” he said.
“There is a lot of interest in European countries, not necessarily to enter the Muslim market, but also to be an investment hub for Muslim finance,” said Omar.
He pointed out that “IF must be given dual recognition and support apart from IDB, which is promoting IF. We now see World Bank taking note of IMF and supporting IF. We hope that with all such important institutions supporting IF it will one day run in parallel to the commercial financial system.” In the case of commercial banks, Islamic commerce has been introduced in many countries; they have introduced Shariah governance, which means commercial banks and their subsidiaries have to follow Shariah requirements to the governance standards.
“This governance standard has also been evolved by Islamic Financial Services Board (IFSB); the accounting standards of AAOIFI based in Bahrain. So long as you have this governance framework standard being implemented then generally you will not find issues as regards Shariah-compliance of banking institutions even if they are subsidiaries of commercial banks,” he added.
Originally published on www.arabnews.com