Is it time to add Islamic banking to our university curricula?

Branding and cognitive learning have the potential to expedite the expansion of the country's Islamic banking and finance industries. Tertiary educational institutions, especially universities, can play a pivotal role in facilitating the process. 

Promoting the Islamic financial system by practitioners and regulators, as well as the creation of competent resource pools by the universities, may make a difference.

In Bangladesh, Islamic banking systems are expanding at a rapid pace. The number of full-fledged Islamic banks reached ten by December 2022, in addition to the 23 Islamic banking branches of 11 conventional commercial banks and the 534 Islamic banking windows of 13 conventional commercial banks. 

According to Bangladesh Bank data, the total financing and investment of the Islamic banking system stood at Tk4,052.02 billion at the end of December 2022, representing 29.20% of the total banking industry loans and advances. Furthermore, overall Islamic banking system deposits reached Tk4,099.49 billion by the end of December 2022, making up 25.81% of all banking sector deposits.

According to the Islamic Finance Development Report 2022, published by REFINITIVE, a London Stock Exchange Group business, the massive growth of the Islamic banking system is evident in more than 76 countries around the world, including some major non-Muslim economies such as the United Kingdom, Germany, and Australia, with an asset portfolio of $2.8 trillion.

However, currently, the sale of Islamic banking products and services is primarily supply-driven, with Islamic banks supplying products such as Murabahah, Ijarah, Musharakah, Mudarabah, and so on to their customers. Most of the customers are solely interested in receiving monetary assistance from the bank, but not in the underlying methods that the bank employs. To establish a solid foothold in the coming days, a demand-driven Islamic financial system would be required.

Adoption by the International Monetary Fund (IMF)

Multilateral organisations all over the world are cognisant of the Islamic Financial System's contribution to the international economy. As such, the International Monetary Fund (IMF) recognised the core principles of the Islamic Banking System as a distinct operation with its own risk management and balance sheet structure.

In May 2018, the Executive Board of the IMF endorsed a proposal on the use of the Core Principles for Islamic Finance Regulation, which were developed by the Islamic Financial Services Board (IFSB) with the participation of the Secretariat of the Basel Committee on Banking Supervision.

The current standing of the Islamic Banking System and its acceptability among non-Muslim economies as well as multilateral institutions indicate its growth potential. According to the Islamic Finance Development Report 2022, Islamic banking assets will grow to $4.03 trillion by 2026.

What are the solutions universities can offer?

The most pertinent question is whether the skill resource pool is available in our country to keep up with the industry's fastest growth. It is widely assumed in the market that a scarcity of high-quality resources impedes the development of Islamic banking and finance in Bangladesh. Besides, the lack of policy support and a negative belief system among the general population are hampering the ultimate growth of Islamic banking and finance in Bangladesh.

Even though Islamic banking assets have reached a significant level in Bangladesh, asset quality, Shariah compliance, and governance structure are still sources of concern for a wide range of stakeholders, including general investors, depositors, borrowers, regulators, and so on. 

With the development of a standardised curriculum, universities may provide quality resources as well as learned customers to the Islamic banking and finance industries in Bangladesh. Furthermore, advanced research by universities could assist in developing new products that will provide pragmatic solutions to customers' contemporary demands.

In the long run, universities may develop skilled resources for industry who, as a result of their academic studies, could employ Shariah principles in economic transactions. 

Through detailed study and research, students, faculty, and other researchers may push the industry one step ahead of its conventional counterpart. Furthermore, these students will be future government policymakers who may help the industry through their academic learning.

The most beneficial fact of delivering Islamic banking education through a university might be that it helps brand the industry and create significant demand-driven sales prospects. Each business student, faculty member, and researcher can be an ambassador for the industry if the institution has the necessary framework and ensures skilled faculty members to deliver a basic to high-level understanding of the Islamic Financial System.

With a rise in the number of business graduates in this field, a positive attitude towards the sector will grow since educated people's opinions regarding the industry will rapidly shift. Furthermore, few business graduates will become entrepreneurs, and few will seek careers in other fields other than the financial sector. Amazingly, these entrepreneurs and business graduates will be the industry's potential customers. Due to the necessary understanding of key decision makers, demand for Islamic banking products will generate in the near future from small and medium firms to large corporations in the country.

What primary initiative is required?

Despite the fact that Islamic banking has a sizable market share, academic education and research are not established in Bangladesh. Other Asian countries, such as Malaysia, the United Arab Emirates (UAE), Bahrain, and Egypt, are far ahead of us when it comes to Islamic banking and finance education.

INCEIF University was founded specifically for Islamic banking and finance education by Bank Negara Malaysia (the Malaysian Central Bank), and it offers graduate programs, PhD programs, and various specialised certification programs in this field. Furthermore, some other universities provided the same services, making Malaysia a global hub for Islamic finance education. Even the Institute of Business Administration (IBA) in Karachi offered a master's degree in Islamic finance.

The Islamic financial economy is spreading throughout the world. Bangladesh can also serve as another hub for Islamic finance education, allowing the country to capitalise on its capabilities while earning foreign income. To begin, universities must develop a comprehensive academic curriculum for Islamic banking and finance that covers important financial sectors such as banking, finance, insurance, real estate, capital markets, and so on. 

The sharing of knowledge among academicians, industry practitioners, and regulators can be beneficial in developing a contemporary curriculum. Universities could utilise the expertise of AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) fellows in Bangladesh for a prevalent understanding of the industry.

Currently, a few universities in Bangladesh offer Islamic banking and finance courses in an undergraduate or graduate program, which may not be as effective as needed. However, universities can initially introduce one core Islamic banking and finance course for all business programs and two advanced courses at the major level. Gradually, they may eventually provide undergraduate, graduate, and PhD programs in it.
 
Islamic financial institutions such as banks, finance companies, insurance companies, and others should also step out and urge both public and private universities to establish Islamic financial education programs. Financial institutions must enhance technical and strategic collaborative relationships to brand this education at universities.

Furthermore, Bangladesh Bank may serve as a strong advocate for this comprehensive educational program throughout the country. Bangladesh Bank might also host Islamic finance education seminars in Bangladesh, as well as fruitful dialogue sessions with the Ministry of Education and the University Grants Commission (UGC) to develop relevant curriculum at various universities. A strong push from regulatory organisations to enhance Islamic finance education is required, similar to the steps taken by Bangladesh Bank to increase awareness and compliance regarding anti-money laundering and terrorist financing. Besides, it may be worthwhile to invite well-known foreign universities to establish branches in Bangladesh to offer Islamic banking and finance programs.

To summarise, branding is crucial for popularising anything new. Though the Islamic banking business model has been in place for more than 40 years, many people in our country are unaware of the applicable Shariah principles and the business model. University-level Islamic Financial Education, as well as professional training provided by other organisations, may effectively educate people in this field, which will surely have an impact on market dynamics and help to build a level playing field for demand-driven sales of Islamic Financial Products.

Syed Nazmul Hossain is a banker who got CIPA and CSAA certifications from Bahrain-based AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions), and he is an adjunct faculty member of a private university in Bangladesh.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.