The question of adequate human capital has always resonated across the Islamic finance industry. Will Asia, with its growing significance on the international finance scene, take the lead in terms of exporting expertise to the global Islamic finance industry and how popular are Asia-based industry players on a global scale? NAZNEEN HALIM enquires.
It is becoming harder for the global financial community to ignore Asia. While the western markets are virtually on life support, the Asian market is seeing unprecedented growth in almost all sectors; and is most definitely capitalizing on its headstart in Islamic finance. Jurisdictions such as Malaysia, Indonesia, Dubai and Singapore are becoming increasingly rife with Islamic finance activity, and the question of adequate talent is becoming more relevant than ever.
In Malaysia, for instance, the challenge of retaining and nurturing the current Islamic finance talent pool in the country is obvious. With global players constantly citing Malaysia as the benchmark for product innovation and regulatory and tax guidelines, the country’s talent pool is a toothsome temptation especially for international players seeking to emulate the Malaysian Islamic finance model. “Many of the talented Malaysians are seeing increasing opportunities to move cross-border now, and experience different cultures, and it is important to come to grips with that. But that is a greater socio-economic issue, in terms of what environment you operate in. What are the things that retain people? I think a lot of young people and mid-level professionals are interested in going abroad and experiencing different cultures. That is where Malaysia is starting to see a shift, especially in Islamic finance,” an industry player revealed.
Despite steps forward by Bank Negara Malaysia in setting up initiatives such as the Asian Institute of Finance and the International Center for Education in Islamic Finance (INCEIF) to continuously harness new talent in the industry, the domestic market is still struggling to seek and retain experienced industry players who are constantly being lured by more lucrative opportunities within Asia and the Middle East, as well as Europe. “I think this is a slight shock for Malaysia, which has not traditionally encountered such global competition, and they are starting to realize that this is a precious resource, and address what needs to be done,” a market player stated.
However, outside of Malaysia and the Middle East, markets which Davide Barzilai, the head of Islamic finance at Norton Rose, considers to be unique, there is admittedly a sore lack of Islamic finance expertise, or even demand for individuals with specific training in the field: “The market is not deep enough to have talent outside of Malaysia and the Middle East. Malaysia and the Middle East are unique markets in Asia, and there is a talent requirement for cross-border work. It is still rare for the Asian market as a whole to hire talent with a specific focus on Islamic finance; it does occur, but in pockets,” he revealed.
Barzilai went on to explain: “Outside of these jurisdictions, you only have very limited Islamic finance dedicated teams. Most of those involved in the industry have to be specialists in other areas first; such as in real estate, corporate finance, banking, shipping or aviation, and the fact that they can do Islamic finance is an added bonus that helps them in the market.
“However, there is not enough international cross-border work in Asia for dedicated teams outside of Malaysia. And there might be local teams again in Indonesia, or Thailand (Islamic Bank of Thailand), but their focus is more domestic. I personally have not seen an increase in Islamic finance specialists outside of these two jurisdictions over the last few years, as there is not enough Islamic finance work for international or pan-Asian business to create a genuine need for Islamic finance specialists. Therefore, there hasn’t actually been a genuine talent shortage for international work.
“For instance, there might be a real estate boom in Hong Kong, and part of that might involve some Islamic finance work, but you wouldn’t just be doing Islamic finance. So, if you needed talent, you’d be looking for talent in that specific area first; and Islamic finance second – as a subset of a specialty. Not as a primary talent,” he added.
Statistically speaking
According to a September 2010 survey by Deloitte on Islamic finance leaders in the Middle East, 61% of industry players in the Middle East are of the opinion that Islamic finance professionals require more training and skill development; while a mere 18% are satisfied with the quality of talent in the market. In terms of market sector, 32% of industry leaders believe that the area that requires the most attention and skilled expertise is retail banking, followed by investment management and capital markets at 24% and 20% respectively.
In terms of staff turnover, 12% of the survey’s respondents saw a turnover of 50 people a year, while a majority of 56% experienced a turnover of less than 10 people a year. The numbers however are still not very encouraging; with the report citing the scarcity of Islamic bankers and leaders in the industry and the constant head-hunting of professionals by new institutions, as well as talent migration to other countries and regions as the main reason for the relatively high turnover rate each year.
Hooman Sabeti-Rahmati, a Singapore-based partner at Allen & Overy, has witnessed firsthand the tussle for talent within jurisdictions in Asia and the Middle East: “I am currently working with an Islamic organization which has been trying to look for people, and I have to say it has been quite a struggle. There is demand for Malaysia-trained talent due to the various schools and dedicated training programs there, but demand from jurisdictions such as Bahrain has stagnated; or even declined to some extent as the kingdom is witnessing some shakiness in its position as an international finance center in light of the unrest there.
“Demand for expertise in Shariah advisory and structured products is perhaps the most prevalent, and the industry is also constantly seeking people with a sound background in conventional finance but also conversant with Islamic finance. We also need more people with international experience,” he added.
Asian appeal
With the global finance industry seeing a tectonic shift towards Asia in terms of investments and real economic opportunities in project and infrastructure financing, the need for Asia-based expertise and those with experience in handling the Asian market and business norms has increased; making global market players more inclined to tap the Asian market for expertise in Islamic finance.
Barzilai revealed: “If you’re looking at investments in Asia Pacific, and you are based here, then you will have more knowledge on the market. For instance, an investor from the Middle East looking for opportunities in this region would also want to work with someone familiar with the Asian market norms. You might be an expert in Islamic finance in the Middle East, but not understand how investments are made in China or Indonesia; therefore, if you can offer Islamic finance expertise coupled with Asian expertise, then you are one step ahead – you have a differentiating factor to someone who’s coming from other jurisdictions.”
Sabeti also affirmed this, stating: “The two major centers for Islamic finance in Asia are currently Kuala Lumpur and Dubai, so most Asian-based expertise would have spent some time in these main hubs, and there is no substitute for that. They clearly would have had the benefit of exposure to a lot of developments in the area.”
With the upcoming renminbi Sukuk; China’s first foray into the sovereign Sukuk market, a growing economy and increased capital market sophistication across the board, there is no doubt that Asia will continue to be at the forefront of the Islamic finance sphere; provided sufficient talent and expertise is harnessed for both domestic and international markets.