The growth of Islamic finance continued strongly through 2009 and 2010, even as most of the world’s financial systems found themselves deleveraging amid the capital market downturn in global economies.
Standard & Poor’s (S&P’s) Ratings Services show that Shari'ah-compliant assets reached about $400 billion across the globe in 2009; with the potential market figures coming in at $4 trillion. Islamic banking - untouched by subprime-mortgage-backed securities and other “noxious assets” that devastated many Western institutions during the recession - continues to grow at a rate of about 20 percent a year.
In S&P’s Islamic Finance Outlook 2010 report, the company says that assets of the top 500 Islamic banks grew 28.6% to $822 billion by the end of 2009, adding that Islamic finance has become a “recognised and specific segment of finance on its own, with bright growth prospects”.
The Chartered Institute of Management Accountants (CIMA) was the first professional chartered accountancy body to offer a global qualification in Islamic Finance, launched by the CIMA Centre of Excellence in 2007. In meeting the needs of its employer and student stakeholders, CIMA launched the self-study qualification - which was developed alongside the International Institute of Islamic Finance - with detailed input from its CEO and renowned Shari’ah Scholar, Dr Mohd Daud Bakar.
According to Dr Bakar, the rebirth of Islamic finance began in the Middle East in 1975 when the Dubai Islamic Bank became the first Islamic commercial bank in the world. The first Islamic insurance companies, or Takaful, were established in Sudan and Dubai some four years later. Today, more and more countries are implementing Islamic banking to facilitate investment by those who must follow Shari'ah.
Non-majority Muslim countries such as the UK, South Africa, Singapore, Japan, South Korea, France, Hong Kong and Australia are among those who have seen that Islamic finance is compatible with traditional finance in terms of governance standards, capital requirements, investment protection policies, as well as product innovation and sophistication.
Samantha Louis, regional director of CIMA Southern Africa, says her organisation has identified a considerable demand from the global business community to develop the knowledge and skills required to service this increasingly important market. “The CIMA qualification is available at Certificate level and comprises four modules: Islamic commercial law; Islamic banking and Takaful (insurance); Islamic capital markets and instruments; and accounting for Islamic financial institutions,” she says, adding that a student can complete these modules in two to six months depending upon prior experience.
In August 2010, consultancy Grant Thornton stated that South African Islamic investors and financiers are “likely to be recognised by way of a new insertion in the Income Tax Act”, and that the proposed new section of the act would take into account Shari’ah practices which involved profit and risk sharing and forbade the paying or receiving of interest or investment in certain industries.
The company said that, in the absence of particular rules, the way Shari’ah transactions are treated for tax purposes creates unfair distortions. The goal would be for the South African revenue Service (SARS) to “achieve a ‘level playing field’ (or neutral tax treatment) when ‘conventional’ and Islamic financial transaction take place side by side”.
Louis says the proposed new section of the Act is another reason management accountants will need to upgrade their current qualifications. “An understanding of Islamic financial operations is key in countries that are developing this sector and adopting regulations to attract investors who are looking for Shari’ah compliant assets.”
Dr Bakar, too, suggests that a career in Islamic finance requires unique management skills and knowledge. “Conventional finance practices do not always satisfy Shari'ah rules. Good practice in Islamic finance means establishing relevant Shari'ah compliance control systems (SCCS). Financial services professionals in this field must make sure that all financial activities are carried out in accordance with Shari'ah principles, Shari’ah standards and best practices established by governing bodies including the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).”
With many suggesting that the financial crisis brought about by the traditional financial system has made Islamic finance more relevant than ever, Louis says that developing knowledgeable practitioners in this discipline is crucial. “We’re encouraging a head start for those awaiting the announcement by the minister of finance as to when proposed tax amendments will take place.”