To be a regional, knowledge based centre in Islamic Banking and Finance.
MISSION
To conduct innovative and professional driven capacity development programs, to pursue industry related research and to provide consultancy services in areas of Islamic Banking and Finance.
GOALS
To provide need assessment capacity development programs in Islamic Banking and Finance.. To act as a regional authoritative body for consultation and advisory services for conventional and Islamic Banking and Finance Industry.. To pursue genuine industry – related research in Islamic Finance. Demonstrate appropriate analytical and problem-solving techniques (gained from their CoC studies) when implementing real-world IT solutions..
SYNOPSIS
In addressing International conference on Islamic Finance (Nov 2010), Mahathir Mohamed – (ex Prime Minister of Malaysia) argued that: “If the ability of Islamic finance is to help create a better future for the Muslim world then the financial institutions themselves must come out and aggressively promote Islamic-compatible ways of investing the great wealth of Muslims. Thus the Islamic financial institutions can do, by identifying secure investment opportunities which give a fair return, but transgress no Islamic injunctions.”
Professor Habib of School of Government and International Affairs at Durham University (UK) added that (2010): “However, the industry has not performed as expected and during recent times, the crisis has also dampened its growth.”
In modern economies, financing has long become a dynamic device in attaining growth in developed and developing countries alike. Islamic finance is among the fastest growing components of International finance under debt and equity – based mechanism. Under the concept of diversification of banking products, western countries have taken practical steps towards islamization of financial dealings. The interest in Islamic finance has found a fertile land not only in the business circus but education and knowledge – based centres. Universities in the west, Asia and Africa (Harvard, USA, Durham, UK, Tokyo (Japan), Cape Town (South Africa)) are embarking on industry-related research activities and academic programs in Islamic finance. The value of Islamic finance assets in the six countries of the Gulf Co-operation Council (GCC) reached a total of $328 billion by the end of 2010. That gives them 56 percent of the worldwide market for Islamic finance, more than double the total five year earlier(competitive Report, 2010).
Al Ghurair University (AGU) as a leading knowledge-based centre in the GCC region and based on its market-driven force as an integral part of Al Ghurair Group, has taken the initiative by establishing Islamic Banking and Finance Centre (IBFC) as a professional body addressing the real needs of Islamic and interest based financial institutions. As Islamic finance industry is moving beyond its historic boundaries into new regions, cultures and markets, the IBFC with support of its strategic partners is thinking and reacting globally providing quality of services in capacity development, consultancy and industry-oriented research activities.
The significance of Islamic finance market
Top Based on estimates of the International Monetary Fund (IMF) (2010), that there are more than 390 Islamic banks and institutions spread across 75 countries. The CIBAFT reported that Islamic financial institutions are managing US$500 billion. However, this figure does not include Islamic window operations of conventional banks, which CIBAFT estimates to manage US$200 billion, coming to the total of US$700 billion. Based on the Islamic Development Bank records, the average annual growth rate of Islamic financial institutions assets during the period 1995-2010 was estimated to be within the range 10-15%. It is anticipated that Islamic Financial Institution’s assets could grow to US$1.40 trillion by the end of 2011 and to US$2.8 trillion by the year 2015. The GCC countries account for nearly 56 percent of the total Islamic banking assets. Based on Mckinsey projections, by 2015, more than half of financial services provided are expected to become Sharia complaint in the the GCC countries.
The banking community in the UAE comprises 46 banks, the largest in the GCC counties after Kingdom of Saudi Arabia. Islamic financial assets are about 10 percent of the total assets held in the UAE by all operating banks. Islamic financial institutions in the UAE have produced growth rate of 15-18 percent, twice the average growth rate of conventional banks.
In European continental, fully Shaira complaint financial institutions have been established and UK stands as a hub for Islamic finance industry. As in the Middle East, North Africa and Asia, Islamic financial institutions in the western part of the world, compete not only with each other but also with all other institutions offering conventional finance. Thus, competitiveness in the global financial market is the road path for growth and development. This escalated by the fact that competition is so fierce in certain financial services (sukuk, insurance products etc).
Barriers to the development of the Islamic finance industry
The global development of the Islamic finance industry requires strategic and well-planned progress actions to be enforced in addressing a number of barriers. Based on the IBFC initial survey (2010), barriers may be broadly grouped within the following categories:
Quality of human resources and the capacity development issues.
The capacity development issues rest around the question: – What typology of bankers, managers and regulators we need to develop to ensure that Islamic Financial Institutions (IFI) will be safer, sounder and more widely trusted in the future?
Under dynamic economic situation, we need to develop a better understanding of why ISFS get into trouble and causes of their pains as well as practical solution within the economic, social and political context. Despite the growing interest in Islamic finance, there is no educational institution has been launched by either governments or the financial institutions in the region. The IBFC is taking a pioneer and leading role to create knowledgeable Islamic finance professionals, capable to live with and handle properly the emerging problems. The absence of Islamic finance institutions regulation is one of the main constraints to the development of Islamic finance industry. It is believed that the involvement of Islamic financial institutions in project finance in the Gulf region is being hindered by the absence of regulation. The existing Islamic financial architecture requires further strengthening in standardization of financial reporting and corporate governance. AAOIFI and IFSB are devoting efforts and resources to develop rules rather than guidelines for Islamic finance practice and reporting. IBFC and based on its three –wing model embarks on aggressive and practical oriented investigation programs as a forum for finance specialists, jurists and bankers. The dissemination wing of the IBFC is shouldering the responsibility. The working paper series publishes research results of genuine investigation in Islamic finance industry. Development of new Islamic banking products is lacking behind the potential size of the market. This is alarming issue in the west and in the GCC countries.
The IBFC Model and Framework
As evidenced from the size and dynamic nature of the industry in the Gulf and the world at large, a systematic and collaborative effort are needed under strategic directions to contribute to the development path of the Islamic finance industry. Joint work and collaboration with peer organizations in the academic and professional circus stand as spirit of the IBFC. The IBFC is built on a three wing model that comprises capacity development, consultancy and advisory services and industry-related research activities. The Business Integrating Methodology (BIM) adopted by the IBFC is the riding force to reach its targeted group in and outside the Gulf region.
Capacity Building: Based on intensive survey of Islamic and non-Islamic finance industry, the IBFC has produced a documented package on critical factors facing the finance industry in the Gulf and the Arab World at large. The identified critical factors stand as a base for development of professional capacity development programs. Moreover, the IBFC has produced a professional banking development package as a base for certification and training programs at appreciation, application and executive level. Strategy, processes, technology and people (SPTP) are the IBFC categories in launching capacity building programs. The capacity building activities of the IBFC are built on the followings:
- Identification of training needs
- Development of training materials
- Marketability of training programs
- Development of IBFC’s professional trainers
- Creation of Network with peer institutions
- Development of Database on programs.
As training and capacity building programs are continuous processes for all organizations, the IBFC will be up-to-date in providing quality of services. A complementary approach that combines capacity building, consultancy and empirical research will lead to fruitful results.
Consultancy and Advisory Services: Based on its well qualified and professional experts, the IBFC is the trusted advisor to Islamic financial institutions and investors on all issues and future challenges. The IBFC has developed a worldwide network with practitioners, professionals, religion scholars and policy makers in the field of Islamic finance industry. Industry-related reserved activities: In pursuance of its vision, mission and goals, AGU regards research as one of the key components of its educational and academic activities. Interdisciplinary research approach is one of the models used by AGU in developing its research groups and in addressing practical questions. Within this context, the IBFC coincide its industry-related research activities with the overall AGU research strategy. The research plan of the IBFC is highly built around: Development of research capacity (people + funding). Contribution to practical and debatable issues in Islamic and non-Islamic finance industry. Creation of network with people and peer organizations. Development of dissemination network in terms of seminars, conferences and activation of the working paper series. The IBFC will work closely with the University Research Committee (URC) as a policy and operational body in the University.