Training gap overshadows Malaysia's Islamic finance growth


By Al-Zaquan Amer Hamzah

KUALA LUMPUR, Oct 29 (Reuters) - Finding a job is oftenharder than expected for graduates hoping to enter Malaysia'sIslamic banking industry, the world's second-largest with $124billion in assets - employers are proving choosy aboutqualifications.

Thousands of students, a large number of them Muslims fromacross the globe, have flocked to the many Islamic financecourses offered in Malaysia, seeing them as springboards to acareer.

Malaysia has an estimated 50 course providers and 18universities which offer Islamic finance degrees, and it boaststhe largest academic output globally. The country has published169 research papers on Islamic finance in the last three years,according to data from Thomson Reuters.

But while the Malaysian Islamic banking industry's output inmonetary terms is growing about 20 percent annually, employmentin it is expanding at less than half that rate - even though anadditional 22,400 jobs are needed to support the growth,according to a blueprint for the financial sector prepared bythe central bank.

Malaysia is experiencing a problem faced by Islamic financesectors around the world: training and qualifications often donot provide the levels of specialism and sophistication thatemployers need.

The problem is limiting growth of the industry and, somesay, stifling innovation that is necessary to bring Islamicfinance fully into line with religious principles, and preventits products from merely being pale reflections of conventionalfinancial instruments.

"A common misunderstanding of these young graduates is thatthey believe there is such a thing as a generic job in Islamicfinance. In reality, the industry is looking to employspecialists," said Raymond Madden, chief executive of the AsianInstitute of Finance (AIF), set up by Malaysia's central bank todevelop human capital for the region's financial industry.

This means graduates are often inadequately equipped, andfew in the industry are actively trying to solve the problem, hesaid.

"It's a major issue - nobody wants to take ownership of training graduates in areas that are most needed by theindustry," added Sofiza Azmi, AIF's head of strategy anddevelopment.

The Islamic finance sector's need for specific skills inrisk management as well as internal audit and governance, plus abasic grounding in sharia law, is not being communicated, shesaid.

"Moving forward you need to understand where the banks aregoing, how they are going to expand, what their plans are. Thenyou can map out their talent needs."


One reason for the skills mismatch in Islamic finance is theyouth of the industry; it was born in its modern form in the1970s, and in many countries has only become a mainstreamindustry in the past decade.

The industry has moved into relatively complex areas, suchas Islamic money market instruments and hybrid Islamic bondswith equity-liked characteristics, only in the last few years.

The fragmentation of Islamic financial regulation, withsharia boards and national regulators in various countriestaking different approaches to some core products and concepts,may also be an obstacle to effective training.

Employers could provide some of that specialised training,but banks in Malaysia have so far been reluctant to do sobecause of the time and cost involved. Instead they tend topoach skilled staff from rivals, a quicker and cheaperalternative.

"The banks will have to step up. If they need peoplespecialising in areas, they will have to train internally," Azmiadded.

Universities also need to revamp their curricula to suitindustry needs, but it inevitably takes a long time to evaluateand implement changes, she said.

Malaysian authorities have responded by trying to intervenedirectly in the job market; the International Centre forEducation in Islamic Finance (INCEIF) was set up by Malaysia'scentral bank in 2009 to help with training.

But Syed Othman Alhabshi, INCEIF's chief academic officer,said the centre's signature Chartered Islamic FinanceProfessional qualification, a one-year postgraduate programme,had only attracted a handful of industry executives to itsstaff.

Only five of the centre's full-time lecturers boast actualexposure to the sector and most have retired from activeinvolvement in the corporate world, he said. The centre's12-member professional development panel, which meets quarterly,has only two Islamic bank heads, from Bank Islam andOCBC Al-Amin.

About 60 percent of INCEIF's graduates find employmentwithin six months, according to an internal survey, the centresaid, declining to provide further details of the survey.

While the centre's programmes have evolved over time, itsgraduates are not designed to be specialists, so the task offurther training falls on banks, said Syed.

"Our first job is to train them. If they can get a job here,its fine. But if not, we can't do much. It's up to the employerwhether they want to take the extra mile."

Syed added that job opportunities for Islamic financegraduates were limited partly because companies such as MaybankIslamic, the largest Islamic bank in Asia, did not need largeworkforces as they could leverage staff from their parent firms- in Maybank's case, Malayan Banking.

AIF hopes a new advisory panel comprising representativesfrom across the industry can close the gap.

A new Financial Services Talent Council, being planned bythe central bank, is to include individuals from the educationministry, Islamic banks and universities, in the hope of settinga national agenda for the industry's talent needs.

"If you've got this diversity of people to discuss aparticular issue, you'll be able to come up with a bettersolution," Azmi said.


Many foreign students expect easy access to Malaysia's jobmarket when they obtain local Islamic finance qualifications,but some are turned down because banks face costly,time-consuming visa requirements to hire foreign students.

"They waste one year here, and many of them are upset withthis," said Omar Alaeddin, an INCEIF graduate and current memberof its student representative council.

So many students return to their home countries withMalaysian Islamic finance qualifications. This has the benefitof spreading knowledge globally, but the students can also havedifficulty finding jobs back home.

"At the beginning they come here thinking there are hundredsof banks and employees," said Alaeddin, who teaches riskmanagement and sharia auditing at Universiti Kuala Lumpur.

"Then some go back and work in their previous jobs, whichhave nothing to do with Islamic finance." (Additional reporting by Bernardo Vizcaino; Editing by AndrewTorchia)

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