"We are well on our way to become truly, The Global University in Islamic Finance," declared Agil Natt, president and CEO of The International Centre for Education in Islamic Finance (INCEIF), the Islamic finance education arm of Bank Negara Malaysia (BNM), the central bank.
Natt was addressing his latest crop of "graduands" at their convocation (the second only one) in Kuala Lumpur in October in the presence of its Chancellor and Governor of BNM Zeti Akhtar Aziz, Pro Chancellor Rozali Mohd Ali, President of the Islamic Development Bank Ahmed Mohammed Ali, and members of the INCEIF governing council, the Professional Development Panel, and INCEIF and ISRA faculty members.
Perhaps Natt, a former senior executive banker, can be forgiven for his unacademic exuberance, but just as two swallows don't make a summer, so does two convocations not make a "global university" or any other university, at least of proven academic substance.
That, INCEIF like any other fledgling university (and it is a nascent institution) has to earn through the quality of its teaching, its staff, its curriculum, its facilities, its resources, its extra-mural activities, its governance, its accreditation and above all its academic research program and its independent evaluation. As any academic would attest, this process takes a long time, if not decades. No amount of cooperation agreements and MoUs can detract from the above process.
It would have been helpful had the CEO perhaps given a hint when he expected INCEIF, which was established as a trust with a 500 million-ringgit endowment from Bank Negara Malaysia in 2006, will actually achieve this aspiration of a truly global university.
INCEIF, and its evolution and model, has got its critics -- both at home and abroad. It may have been accorded the status of a university by the Malaysian Ministry of Higher Education and that of a "Project of National Interest" by Malaysian Prime Minister Mohd Najib bin Abdul Razak earlier this year, but in reality it is a postgraduate institution. Herein lies its primary weakness, because it has been deprived of that undergraduate feeder stock, which is the backbone of a "normal" university.
This near-obsessive rush to gain quick recognition is more symptomatic of the marketing tactics of commercial banks. Instead, INCEIF should concentrate on building capacity, a world-class research capability and a sustainable academic reputation -- a plan of action some of its council members and academic staff do recognize and privately aspire to.
Compared to other such educational establishments, especially in the Middle East, INCEIF has got everything going for itself -- financial resources and proactive support from Bank Negara and Putrajaya. Under its "Project of National Interest" status, individuals and institutions are also encouraged to make donations to INCEIF's coffers, which can be offset against taxation.
INCEIF would be making a serious mistake should complacency set in. It is faced with new competition in the Islamic finance education space, as other countries, some perhaps with a better education infrastructure than Malaysia, are eying this sector for various reasons.
At a conference in Bahrain last week, for instance, Ng Nam Sin, assistant managing director (development), Monetary Authority of Singapore, trumpeted Islamic finance education in Singapore where the Singapore Management University has set up an Islamic law and finance center to meet the need for more finance professionals with the necessary competencies in Islamic finance.
"This is the first institution in the world to combine Islamic law, banking and finance programs in a single, multi-disciplinary university center. Beginning next year, SMU Law School will also be launching a post-graduate Masters program in Islamic law and finance, which will be open to both lawyers and non-lawyers interested in pursuing a career in this field. We hope that more institutions will come in to help build greater capacity in Islamic finance," he explained.
The importance of the human capital challenge for the Islamic finance industry cannot be overstated. The International Monetary Fund (IMF) in September published a working paper -- titled "The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study" -- in which it warned that expertise in Islamic finance has not kept pace with the rapid growth of the industry. The human capital challenge is dire given that Islamic bankers need to be familiar with conventional finance and be versed on the different aspects of Shariah, particularly on the Islamic law of transactions.
Such a requirement is becoming essential given the increasing degree of sophistication of Islamic financial products. But as the IMF paper points out, "professionals with this dual qualification are hard to find, although the number of newcomers in Islamic finance is steadily growing. Not surprisingly, the shortage of specialists also has an impact on product innovation, and could hinder the effective management of risks relevant to the industry, including the lack of instruments to hedge against the volatility in currency and commodity markets and the relatively higher liquidity, legal, and reputational risks."
Zeti, a champion of human capital development especially in the Islamic finance space and in leadership in finance in general, nevertheless would be happy with the qualified progress the center has made in its first four years as the postgraduate educational institution for the Islamic finance industry.
This year's convocation saw the graduation of 74 Chartered Islamic Finance Professional (CIFP) students compared with 32 last year, one Posthumous CIFP student and seven inaugural masters in Islamic finance students. The CIFP is the flagship program offered by INCEIF, which was set up primarily to offer postgraduate programs in Islamic finance. The 74 CIFP graduates come from 10 countries including Afghanistan, India and the UK. The seven masters in Islamic finance graduates include those from Indonesia and Nigeria.
Natt, in his convocation speech, outlined INCEIF's achievements in 2010 and future developments. INCEIF started its CIFP program in Bahrain in collaboration with the University of Bahrain. Indonesia has also accorded accreditation to INCEIF, which is also working on accreditation in Iran and Yemen. The number of students in the Joint MSc in investment banking and Islamic finance program at the Henley Business School, University of Reading/INCEIF has increased.
INCEIF will also start collaborating with the University of Luxembourg, the Chinese University of Hong Kong, and the Reims Management School in France in 2011. INCEIF should also have its first batch of doctorates in 2011. The center is expanding its faculty to bring in international representation, to bring diversity and to expose students to different thoughts in Islamic finance.
Earlier this year, INCEIF also signed Memoranda of Understanding (MOU) with three institutions in Jordan -- namely The World Islamic Sciences & Education University (WISE), The Arab Academy for Banking and Financial Sciences (AABFS) and the Institute of Banking Studies (IBS) -- to cooperate in Islamic finance education.
CEO Natt maintained that his institution is focused on its core mandate and thus contributing to the national effort to make Malaysia the hub for education, including in Islamic finance. The center is continually reviewing the relevance of its curriculum to help effect its role as leaders for change in the industry.
Islamic finance, he contended, "needs to question its true identity. Is finance the entity or is it Islam? Do we market Islamic finance only to the devout and the faithful, or should it be to the world at large, which is neither Muslim nor Islamic. As a strategy we never made Islamic finance exclusive to Muslims, and we pride ourselves in saying that Islamic finance can be practiced even by non-Muslims.
"Indeed, because Islamic finance is trying to catch a fast moving train in the form of conventional finance, the structures and the structuring of our instruments are formulated in a way that the practitioners of conventional finance can comprehend, indeed, which the cynics say laconically, except for the use of Arabic terms, are but the same thing. The issue is not to choose between equity and debt, the issue is whether Islamic finance has the technical and technological structures to help humanity address the financial problems of man."
The INCEIF president emphasized that the future direction for Islamic finance is to come up with structures to alleviate poverty and create a more just and equitable world. He urged the sector to stay true to the basic tenets of Islam without compromise when structuring products. This would help establish and preserve the identity of the industry.
But this strategy needs people crafting the instruments to be knowledgeable in both finance and Shariah. In Malaysia, the regulators have done much to streamline the operations of Shariah advisers. But internationally, he rued the fact that the differences in the positions taken by Shariah advisers can cause confusion in the industry.
© Arab News 2010
