What are some of INCEIF’s current operations?
ABDULLAH: INCEIF was established six years ago to increase and improve the supply of human resources for the Islamic finance industry. We are the only university dedicated to providing Islamic finance, and we run post graduate programs. We have a PhD program, a Master’s in Islamic finance program, and an industry focus professional program that is equivalent to a Master’s called the Chartered Islamic Finance Professional. Since I started here about nine months ago, we have also introduced a number of other programs which enhance and support those academic programs. We are running executive programs and courses for high level executives, to introduce them to issues around Islamic finance. We also are running a capability for consulting. In our faculty, we not only have academics but we also have practitioners, so we are capable of helping set up an Islamic financial institution. We are also very much engaged in research. We do a lot of academic and industry related research on behalf of clients, such as examining new products, new markets, and market entry strategies. Besides that, the area where I am currently sitting is our knowledge management center, which has an extensive library both in book and in digital form. This is offered to not only students and alumni but also to the industry as well to facilitate research.
In what ways has the global financial crisis impacted INCEIF?
ABDULLAH: I think the global financial crisis has had quite an impact on INCEIF in the following ways. Firstly, there is much more focus on Islamic finance as a result of the crisis. Islamic finance is centered on the real economy. As a result, we have seen increasing numbers of students coming from Western Europe and North America, in particular. Also, there is an increasing interest in our services coming from those areas and for potential collaborations with universities and with teaching bodies in the West. I think the second thing that we have noticed is that with the advance of Islamic finance, particularly in the last five years, we have to be very focused on the industry requirements. In other words, to make our programs relevant, we have to keep in very close touch with the industry, the industry not only here in Southeast Asia but also in the Gulf, in Africa, which is emerging rapidly, and in Europe as well, so that we ensure our programs, and therefore, our graduates are best equipped to deal with the challenges of the future.
What is the breakdown of domestic versus foreign students at INCEIF?
ABDULLAH: Currently, a majority of our students, just over 50%, are from Malaysia. However, we have increasing percentages coming from the Middle East, and from South Asia, including Bangladesh, Sri Lanka, and Pakistan. We also have increasing numbers coming from other areas in Asia, such as Central Asia, Japan and Korea, as well as Australia, New Zealand, and European countries. In terms of target areas, I think the nature of the business is changing. In this sense, not as many students are migrating to where the education is, but rather, they are doing it online. We are seeing a great increase in the number of online students who are predominantly from the Americas and from Europe. We are seeing more students visiting us and using scholarships from both Africa and Central Asia. Target areas for us will, of course, be Africa where there is a great deal of development as well as Central Asia, Europe, and North America.
Where do you see the biggest changes occurring within Islamic finance?
ABDULLAH: The major changes are specifically around the areas of cross border liquidity, risk management, and product innovation. Not necessarily brand new products coming from shariah based, but re-examining products which existed two or three hundred years ago. One of the areas we are quite focused on right now is researching the Ottoman archives in Istanbul. We are looking at Islamic and shariah compliant products which we used during the 17th, 18th, and 19th centuries in the times of the Ottoman Empire. We are reinventing, if you like, those products which are shariah compliant and dusting them off and making them applicable to current requirements.
What role does Malaysia play as a leader in Islamic finance?
ABDULLAH: I think Malaysia is certainly leading the way in the world for Islamic finance overall. Therefore, it is incumbent upon Malaysia to try and improve the quality and supply of resources as well as to demonstrate leadership. This is indeed the reason INCEIF was set up six years ago. The Malaysian role is important. Recently, it was recognized at the Islamic Financial Service Board’s summit meeting in Istanbul. This summit is the Islamic equivalent to the Basel committee. All the sessions recognized the leadership of Malaysia and INCEIF’s leadership in education for Islamic finance. I think what is very significant is that as a follow up from those meetings, I will be going to Washington DC for further discussions with the World Bank, the IMF, the Islamic Development Bank, and the Islamic Financial Services Board looking at global education as well as accreditation and professional standards for the industry. Therefore, Malaysia’s role in terms of leadership is very significant.
The Islamic Financial Services Board believes that there is a need for greater convergence between Islamic financial service centres. To what extent would you agree with this? How likely are we to see convergence in the short to medium term?
ABDULLAH: A study was done quite recently, two or three years ago, where it was indicated that the four main shariah schools of thought actually were in complete agreement over 95% of the fatwas that were issued for financial services. This means there is only a 5% difference, so the perception is that it is a much bigger difference when in fact it is not. Our point of view is that different shariah interpretations are actually very helpful to the industry in terms of stimulating debate and growth about future products, new products, new ways of addressing and stimulating the industry. I think the balance is probably about right. What needs to be done, however, is having a standardized process whereby fatwas and shariah decisions are publicized. This way, people understand from the database how the decision was reached, and therefore, can actually draw their own conclusions.
In what ways are Islamic financial instruments becoming more sophisticated?
ABDULLAH: I think Islamic financial instruments will grow and develop, particularly in the area of supporting the real economy. This is effectively real asset mobilization of capital having a beneficial effect in terms of micro-financing or micro-equity in areas of poverty alleviation. Our recent collaboration, which we signed with the World Bank, is indicative of the interest from those quarters and from our capabilities to research products. I think it is micro-equity that will be on sharing risk and development of the real economy, and shying away from some of the calamities of the recent past, mostly in terms of derivative instruments and speculative derivative instruments which add no value whatsoever to the real economy.
One of the areas we are quite focused on right now is researching the Ottoman archives in Istanbul. We are looking at Islamic and shariah compliant products which we used during the 17th, 18th, and 19th centuries in the times of the Ottoman Empire. We are reinventing, if you like, those products which are shariah compliant and dusting them off and making them applicable to current requirements.
Bahrain has traditionally been considered to be the hub for Islamic finance. What other areas are emerging as centers for Islamic finance?
ABDULLAH: Political difficulties in Bahrain have obviously created a level of uncertainty. Markets do not like uncertainty, and as a result, I think the growth in the sukuk market here in Malaysia has been stimulated quite significantly. I think there is room and capacity, globally, for a number of Islamic financial centers. I think Bahrain will persist because there is a deep experience in Islamic finance there. You will also see centers, such as Doha in Qatar, and Abu Dhabi and Dubai, continue to increase. However, the center that is most on the rise in terms of the development of the economy, government support, and focus on Islamic finance, is Istanbul.
What are the key challenges facing the Islamic financial services sector on a global scale?
ABDULLAH: I think there are three. The biggest challenge, overall, is the misperceptions around Islam and Islamic finance. This is an education process, and I think that is always a process of just standing up and saying what you think is right when you hear something wrong being stated. That is a long term job. The second issue is the provision of adequate human capital, human capital that understands the industry, understands the business, and can actually help us grow to the next level. The third issue and third challenge is cross border liquidity. Markets need liquidity, businesses need liquidity, and we need to be able to steer that liquidity to where it is most needed and can be most effective.
How would you describe the climate for employment within the Islamic financial sector?
ABDULLAH: Helping graduates find jobs is a challenge. It is a challenge, not only because you have to be able to generate the right quality of graduate in terms of the education they have, but it also depends on the attitude of the graduate in terms of what they want to do at work and where this occurs. In mature markets, like Malaysia, where there is a good deal of demand, it is relatively easy to place top quality graduates. The challenges start coming elsewhere in the world where Islamic finance is not on such stable footing. It is necessary to provide some level of support in educating the market that our graduates are better than anybody else. What we are looking at, and it is still a work in progress, is providing an alumni association. We are only six years old. In fact, we have only had three convocations, so it is the early days for us in terms of developing alumni globally. It is something that we are taking a close look at so that we actually get students and graduates to help each other and get the industry to help each other and get INCEIF to help graduates find employment through the relationships that we develop and maintain with the industry.