IFC highlight challenges in developing expertise

By Dana El Baltaji

April 26 (Bloomberg) -- A shortage of skilled Islamic
scholars and banking officials versed in Shariah-compliant
finance is hampering the industry’s ability to develop global
standards, said an official at the Islamic Finance Council U.K.

“People from conventional banks need to understand Islamic
finance, but Shariah scholars also need to learn more about
conventional finance,” Omar Shaikh, a board member of the
Glasgow-based Islamic Finance Council, said in a telephone
interview in Dubai. “The industry is growing fast globally and
this creates challenges associated with standardization.”

Regulators around the world, including Bahrain and
Malaysia, are looking for ways to better evaluate risks of the
Islamic banking industry and make products suitable for
investors globally. Malaysia’s central bank in March said it
plans to standardize so-called Shariah-compliant contracts such
as those used in real-estate and project financing.

Islamic products are reviewed and approved by a board of
scholars. Without globally accepted standards, financial
institutions and bond issuers rely on rulings by these scholars
to be able to offer services to devout Muslims.

“We have seen different approaches,” to standardize the
structure of Islamic products, Rifaat Ahmed Abdel Karim,
secretary general of the Islamic Financial Services Board, said
last month in Kuala Lumpur. “It may explain part of the dilemma
we face. In the long-run, I believe we should have a mechanism
that should harmonize this.”

Facilitating Growth

Demand for Shariah-compliant products is increasing as the
wealth of Muslims rises, spurred by export-led Asian economic
growth and crude oil income in the Persian Gulf. Created in the
1970s, the Islamic finance industry’s assets may quadruple to
$2.8 trillion by 2015 from about $700 billion in 2005, according
to the Kuala Lumpur-based IFSB.

The IFSB was established in 2002 and sets guidelines
including reserves for Islamic banks and insurance companies.
Islamic law, or Shariah, bans the payment of interest and
stipulates agreements be based on the transfer of goods or
services.

"The limited number of quality people inherently creates
challenges, which are particularly sensitive around product
structuring, Shariah compliance and customer service,” Shaikh
said last week. The Islamic Finance Council, which counts the
Birmingham-based Islamic Bank of Britain Plc as a member,
provides training for scholars, education and research,
according to its Web site.