The Islamic Financial Services Industry (IFSI) is challenged on many fronts in meeting the evolvement of the marketplace. Some of the challenges are, to a certain degree, intertwined  but  all of  them  are  essential  to  restore the  health  and  sustainable growth of the industry.

Firstly, there is significant variation in how Shariah principles are interpreted and implemented  among  the  countries  involved  and  this  is  more  prevalent  for  its financial laws. This has led to the existence of many regulations on various issues. For example, there are several forms of tax to be accounted for,hence all parties involved should form a Global Shariah Advisory Council. A collaboration amongst jurisdictions  and  among  member  authorities  will  strengthen  and  integrate  the regulatory system. This will not only result in the resilience and stability of the IFSI but will pave the way for the Islamic Financial system to move forward and facilitate greater cross-border financing.

On the issue of Shariah governance, it is imperative that the Shariah Framework is legally  binding  to  resolve  legal  conflicts  as  in  the  case  of  Malaysia.  In  view  of numerous legal issues, the need to have a comprehensive legal framework and an effective Shariah governance system is crucial. Failure to provide efficient Shariah governance, either through law or legislation, would lead to radical disruption to the industry.

On the education front, research suggests that the lack of cooperation between the academia and industry to develop a wholesome curriculum in Islamic Finance has resulted in a mismatch between the graduates produced and the skills required by the industry. Graduates go through a system which is more theoretical than practical and are therefore, are not suitably equipped for the industry. Bank Negara Malaysia (BNM) in its comments on ‘Talent development in Islamic finance over the next decade’ highlighted that a more comprehensive approach and close collaboration between the industry and the academia are essential to meet the highest standards of  employees  required  in  the  workforce.  This  would ensure  a steady  stream  of competent and versatile talent to support greater innovation and dynamism of the Islamic finance industry. Additionally, new systems and technologies will provide the bedrock for the Islamic Finance Services Industry (IFSI) to become more competitive and efficient and to deliver value, and ultimately to restore confidence and trust. The Islamic finance services industry is a very specialised field and acquiring the right competencies and skills sets is critical. A lack of qualified Islamic Finance graduates with the required talents by the industry could impact industry growth.

This further reinforces research findings released by various parties on the shortage of skills for the industry. Studies conducted by The Capital Market Regulators Forum revealed that 82% of the countries which responded experience shortage of talent in the IFSI areas such as Shariah and Takaful. The studies also revealed that another 60% of Islamic finance professionals require further training and skills development. The scarcity in talents in Islamic Finance poses a significant impact on the industry as the contribution to the growth of Islamic financial assets will be greatly affected.

The importance of global benchmarked standards for Islamic Finance and Training cannot be overemphasised. It identifies the required activities and tasks that are necessary to successfully identify, define, select, apply and improve benchmarking for the training programmes offered to IF practitioners. In simpler terms, it is a published  document  that  establishes  specifications and  procedures  designed  to ensure the reliability of the training programmes, products, methods and services used within the IFSI seek to improve their practices. The absence of these protocols that can be universally understood and adopted decreases the compatibility and interoperability of IF services that fuel the development of the industry.

Another challenge that is more visible now is the unavailability of an international accreditation body for Islamic finance. Accreditation is  a significant  achievement pronouncing high quality learning as well as an enhancement process for the IFSI in terms of quality and performance of employees. There is no similar setup that deals comprehensively  with  accreditation  standards  for  industry-based  learning programmes in Islamic Finance to show evidence that the training programmes lead to  the  development  of  competencies  needed  in  the  marketplace.  Acquiring document proof of employee training such as accredited programmes is essential for any regulated industry such as the Islamic Finance which should not differ across economies and jurisdictions as they are derived from Shariah.

Diversity of regulations and operations across borders require careful studies and review before a common understanding can be achieved for best practices. This is particularly so in the Islamic financial industry where understanding of Shariah and practices could differ from different practitioners and countries. The absence of an Islamic  Finance  Qualification  structure  or  framework  can lead  to  fragmentation, whilst a framework forms a uniform approach to quality assessments of learning standards  and  accreditation  processes  that  enhance competencies  of  IFSI employees.

As it stands, the Islamic finance sector remains a demand-driven market with scarce supply. This is more pronounced in Asia than other countries due to the extent of its growth in the region, and this should compel the industry to act. If these issues remain unresolved, the growth in Islamic Finance could be short-lived.

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