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A New Generation Of Islamic Finance Experts Is Required In The Middle East Today's varied and fluctuating markets call for finance professionals who are both flexible in their approach and knowledgeable of different financial models.

By John O'Brien

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With the growth of new economies and the rise of markets in the Middle East, business schools are expanding the conventional method of teaching economic and finance. Today's varied and fluctuating markets call for finance professionals who are both flexible in their approach and knowledgeable of different financial models.

Many of the world's leading emerging markets -notably the GCC countries, Malaysia and Indonesia have significant Muslim populations, which have driven the rise of Islamic banking. Ernst and Young's World Islamic Banking Competitiveness Report 2016 notes that Islamic banking assets have risen about 16% each year since 2010, despite general economic and political volatility. In Qatar, the Islamic banking sector has posted bigger gains than its conventional banking counterpart in three of the last four years.

Well-established in the Middle East and select markets in Asia, Islamic banking is also a burgeoning finance model in other parts of the world: in Europe, Islamic banking is the fastest growing finance sub-sector.

The Islamic and conventional banking models differ significantly. Whereas conventional banking involves transactions that accrue interest, Islamic banking is based on the real economy and is backed by real assets, removing speculation. An intricate model with structures and transactions determined and regulated by Sharia Law, each Islamic bank has its own set of legal advisors and Sharia scholars who establish regulations and approve transactions.

Qatar's banking sector is unique in the world, featuring a distinct separation between Islamic and conventional banking. Although these sub-sectors exist independently under Qatar Central Bank, finance professionals in Qatar require a solid knowledge of both mediums. Unfortunately, Islamic banking is expanding at such a rapid pace, that the demand for knowledgeable young professionals is not being met. Industry studies estimate the Islamic finance industry will require as many as one million skilled professionals by 2020.

Related: Dubai Islamic Bank CEO Dr. Adnan Chilwan Discusses 'Treps Opting For Faith-Based Finance

Of particular note, Islamic financing is filling a void left by conventional banks in the funding of micro, small and medium enterprises (SMEs), where there is an estimated US$2.4 trillion financing gap worldwide. The World Bank, Islamic Development Bank, and Islamic Research and Training Institute suggested in a 2015 briefing that Islamic finance's asset-backed and risk-sharing nature promotes entrepreneurship, particularly among startups. With Qatar moving towards a more diversified economy, Islamic banking can help fund that evolution- if the talent is there.

There are a variety of reasons for this talent gap, from conflicting interpretations of Sharia regulations to the absence of standardized curricula. Very few business schools, even in the region, prepare their students with sufficient understanding to work in a financial sector with two vastly different models.

To respond to the need for new professionals who are proficient in the intricacies of Islamic banking, Carnegie Mellon University in Qatar has introduced specific courses in Islamic banking. This is especially crucial for business graduates from CMU-Q, who work primarily in Qatar and the region. Teaching Islamic finance occurs alongside conventional banking studies, and learning the unique characteristics of both models has led students, somewhat surprisingly, to a deeper understanding of each one individually.

A "learning by doing' approach is adopted using the CMU-Q SmartLab, which has students working with the latest financial information to understand Islamic and conventional financial institutions in terms of their operations, financial statements and market valuations. New Islamic finance coursework further teaches students contracts, consumer expectations, customer service requirements and Sharia-law structured transactions, which lead to a closer examination of how these same issues are addressed in conventional banking.

Working in silos is not an option in today's globalized world, and all finance students must have the knowledge base to succeed in an industry that is in a state of profound transformation. For those who look to careers in Islamic banking, they will need the tools to help the industry tackle obstacles of contractual complexities, customer understanding, structure of transactions and translating Sharia Law into regulations that best honor the spirit of the law.

Related: The Islamic Economy Needs To Find Routes To Connect Innovation With Financing

John O’Brien is Associate Dean, Associate Professor of Accounting, Carnegie Mellon University in Qatar.
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