By Al-Zaquan Amer Hamzah
KUALA LUMPUR, Oct 29 (Reuters) - Finding a job is often harder than expected for graduates hoping to enter Malaysia's Islamic banking industry, the world's second-largest with $124 billion in assets - employers are proving choosy about qualifications.
Thousands of students, a large number of them Muslims from across the globe, have flocked to the many Islamic finance courses offered in Malaysia, seeing them as springboards to a career.
Malaysia has an estimated 50 course providers and 18 universities which offer Islamic finance degrees, and it boasts the largest academic output globally. The country has published 169 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 in monetary terms is growing about 20 percent annually, employment in it is expanding at less than half that rate - even though an additional 22,400 jobs are needed to support the growth, according to a blueprint for the financial sector prepared by the central bank.
Malaysia is experiencing a problem faced by Islamic finance sectors around the world: training and qualifications often do not provide the levels of specialism and sophistication that employers need.
The problem is limiting growth of the industry and, some say, stifling innovation that is necessary to bring Islamic finance fully into line with religious principles, and prevent its products from merely being pale reflections of conventional financial instruments.
"A common misunderstanding of these young graduates is that they believe there is such a thing as a generic job in Islamic finance. In reality, the industry is looking to employ specialists," said Raymond Madden, chief executive of the Asian Institute of Finance (AIF), set up by Malaysia's central bank to develop human capital for the region's financial industry.
This means graduates are often inadequately equipped, and few in the industry are actively trying to solve the problem, he said.
"It's a major issue - nobody wants to take ownership of training graduates in areas that are most needed by the industry," added Sofiza Azmi, AIF's head of strategy and development.
The Islamic finance sector's need for specific skills in risk management as well as internal audit and governance, plus a basic grounding in sharia law, is not being communicated, she said.
"Moving forward you need to understand where the banks are going, how they are going to expand, what their plans are. Then you can map out their talent needs."
One reason for the skills mismatch in Islamic finance is the youth of the industry; it was born in its modern form in the 1970s, and in many countries has only become a mainstream industry in the past decade.
The industry has moved into relatively complex areas, such as Islamic money market instruments and hybrid Islamic bonds with equity-liked characteristics, only in the last few years.
The fragmentation of Islamic financial regulation, with sharia boards and national regulators in various countries taking 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 so because of the time and cost involved. Instead they tend to poach skilled staff from rivals, a quicker and cheaper alternative.
"The banks will have to step up. If they need people specialising in areas, they will have to train internally," Azmi added.
Universities also need to revamp their curricula to suit industry needs, but it inevitably takes a long time to evaluate and implement changes, she said.
Malaysian authorities have responded by trying to intervene directly in the job market; the International Centre for Education in Islamic Finance (INCEIF) was set up by Malaysia's central bank in 2009 to help with training.
But Syed Othman Alhabshi, INCEIF's chief academic officer, said the centre's signature Chartered Islamic Finance Professional qualification, a one-year postgraduate programme, had only attracted a handful of industry executives to its staff.
Only five of the centre's full-time lecturers boast actual exposure to the sector and most have retired from active involvement in the corporate world, he said. The centre's 12-member professional development panel, which meets quarterly, has only two Islamic bank heads, from Bank Islam and OCBC Al-Amin.
About 60 percent of INCEIF's graduates find employment within six months, according to an internal survey, the centre said, declining to provide further details of the survey.
While the centre's programmes have evolved over time, its graduates are not designed to be specialists, so the task of further 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 employer whether they want to take the extra mile."
Syed added that job opportunities for Islamic finance graduates were limited partly because companies such as Maybank Islamic, the largest Islamic bank in Asia, did not need large workforces as they could leverage staff from their parent firms - in Maybank's case, Malayan Banking.
AIF hopes a new advisory panel comprising representatives from across the industry can close the gap.
A new Financial Services Talent Council, being planned by the central bank, is to include individuals from the education ministry, Islamic banks and universities, in the hope of setting a national agenda for the industry's talent needs.
"If you've got this diversity of people to discuss a particular issue, you'll be able to come up with a better solution," Azmi said.
Many foreign students expect easy access to Malaysia's job market 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 with this," said Omar Alaeddin, an INCEIF graduate and current member of its student representative council.
So many students return to their home countries with Malaysian Islamic finance qualifications. This has the benefit of spreading knowledge globally, but the students can also have difficulty finding jobs back home.
"At the beginning they come here thinking there are hundreds of banks and employees," said Alaeddin, who teaches risk management and sharia auditing at Universiti Kuala Lumpur.
"Then some go back and work in their previous jobs, which have nothing to do with Islamic finance." (Additional reporting by Bernardo Vizcaino; Editing by Andrew Torchia)