Islamic banking booming

Despite a harsh recession and uncertainty in the banking sector, Islamic finance is showing remarkable growth. 

New courses at all levels are beginning to spring up everywhere.

At the start of the new academic year in September there will be more courses and postgraduate qualifications on offer than ever before.  The growth in this particular area remains unaffected during the financial downturn. 

Islamic banking has become one of the fastest growing sectors of the global banking industry and is expanding between 15 to 20% per year, creating banking jobs across the world. 

The value of assets held by financial institutions that subscribe to Islamic finance principles now amounts to nearly $1 trillion.

The UK in particular is promoting itself as a centre for Islamic finance.  The government has publicly stated that it is committed to the ideals of Islamic finance and the country leads Europe in the number of training courses on offer, from entry to postgraduate level. 

A research paper published by the UK Treasury estimates that there soon will be a skills shortage in the sector.  The paper warned that the market will grow rapidly and that there could be future problems if the pool of potential applicants to the UK does not grow with it.

Islamic banking follows strict principles.  Following the recent public mistakes of the global banking sector, it is easy to understand the attraction to the approach.  Sharia law prohibits any transaction that involves paying interest or investing in certain economic sectors such as gambling or pornography. It also demands that both the investor and recipient of the investment must share risks and transactions have to be supported by tangible assets.

Islamic finance as an alternative approach to banking dates back to the mid-1970s, when an attempt was made to make certain products available through conventional banking, such as loans and mortgages, compatible with sharia principles.

However, in the years immediately after 9/11, any financial transaction carried out by a Muslim was viewed with suspicion and this negative perception has held Islamic finance back in the US, although the sector continues to grow in popularity in the UK and France. 

The principles of the banking approach are becoming increasingly sought after.

"There is an extent to which, to a westerner, Islamic finance products look very similar to ethical finance products," Stefan Szymanski, professor of economics at Cass, told The Guardian. "There is a demand for morally upright investment vehicles, and Islamic finance is the Islamic version of that."

It is definitely the idea of the moment, Szymanski believes, and while the university waits to see how the market responds before adding more courses in this subject, it is certainly considering the possibility.

"You just have to measure how many billions of dollars Islamic finance already handles in a year," he says. "If that grows over the years, it will become a universal part of every business school."