In an article published by Gulf News last year, the Chairman of the UAE Banks Federation, HE AbdulAziz Al Ghurair, highlighted the skills gap as a key challenge for Islamic banks in the UAE and elsewhere. There have been many surveys done by academic and business institutions on this topic in recent years, and they all come to the same conclusion: that unless this gap is bridged, the impressive average annual growth of 15% achieved by the Islamic banking industry in recent years will be undermined.
Of course, this is not the only challenge to growth. Over the past year all banks in the UAE have faced a more uncertain economic environment, and the general consensus is that this is likely to extend through 2016.
But for Islamic finance, the challenge will be compounded if we cannot get enough specialized people to work for us.
So why does such a gap exist in the first place?
When Islamic finance first appeared in the 1970s the majority of bankers working in the new institutions came from conventional finance. Also, the Shari’a boards at the time had much less financial acumen, compared to the expertise and knowledge they possess today.
As the industry gathered momentum, those entering the industry became more adept at creating Shari’a compliant equivalents of conventional structures, while the Scholars began to develop the far more intricate framework governing the industry that exists today.
But very few specialized courses existed for those wishing to enter the industry direct, and in my view we are now paying the price for this as the industry has accelerated.
That is not to say that progress has not since been made. Globally, there are now over 500 institutions (according to the ICD Thomson Reuters Islamic Finance Development Indicator) offering courses or degrees in Islamic finance. Malaysia and the UK come top of the list, with over 50 course providers apiece, and the UAE is in third position with (as of January 2014) 31 course providers and 9 degree providers.
Yet the gap still exists. As the UAE Banks Federation Chairman said in his earlier article, it runs to thousands in the UAE alone (more than 8,000 new employees trained in Islamic finance needed just in Dubai). So what can the industry do to attract more entrants?
The first step, in my opinion, is simple. More Islamic financial institutions, individually and collectively, need to engage in formalized training. A survey conducted by the Malaysia International Financial Centre in June last year showed that the top 3 competency gaps among those in Islamic finance included Shari’a expertise, innovation and product development, and technical Islamic finance knowledge. Training needs to become more ingrained across the Islamic finance industry, rather than focused in a few of the bigger players who then feed the smaller banks.
This can be achieved through greater collaboration with academic institutions to ensure that the supply of talent matches the needs of the industry. This can be through an enhanced relationship between HR departments and colleges, but it can also be supported through scholarships, bursaries and tailored courses which have been created with the direct involvement of Islamic banks, as well as takaful and capital markets players.
Next, clear and easily understood standards need to be adopted that help to define products which Islamic banks and other institutions offer. Apart from the positive impact this would have on the regulation of the industry, this would also help to demystify what the sector offers to the general public. I believe that we as an industry should work harder to show that Islamic banking is not a specialist niche, and this would help us achieve that goal.
The progress Islamic Banks in the UAE have made to deliver their products and services is up to - or even ahead of - standards set by global market leaders. This is why, for instance, Islamic banks are seeing rapid growth in the use of their internet and mobile banking services, and why some of them are now among the top retail banks in the UAE. So from a career choice, a student going for an Islamic finance specialty has no reason to fear that this will be any kind of limitation on what they can achieve. To put it another way, it should be seen just as much of an attractive job choice as conventional banking has been historically.
In a post-financial crisis world, Islamic finance has been recognized as having a more sustainable model than its conventional counterparts. But it needs to seize this opportunity rather than to just rely on it. Even if we can show that customer trust in Islamic banking is well founded, and that what customers want is what they get, the onus is on us to deliver on that promise. So when a student thinks about a career in finance, especially in this part of the world, Islamic finance should be their natural choice. In this way the current skills gap will become a skills conveyor belt.
Tirad Al Mahmoud is CEO of ADIB and a member of the UAE Banks Federation CEO Advisory Council