The world is on the brink of a game-changing explosion in the financial services sector, propelled by Islamic finance. The rising demand for Sharia-compliant financial products, the need for innovative investment opportunities and the search for new ways of accessing finance continues to drive the double digit growth of the Islamic finance industry.
Islamic finance assets grew at double–digit rates during the past decade, from about $200 billion (Sh20.5 trillion) in 2003 to an estimated $1.8trillion (Sh184 trillion) at the end of 2013, according to the latest International Monetary Fund report on the sector.
Sharia-compliant banking has evolved to become an integral part of the global financial system, and witnessed considerable progress worldwide. The growth potential of the Islamic finance industry is hinged on the huge Muslim population that represents a significant proportion of the global population. Governments, business organisations, corporate institutions and individuals seeking for sustainable solutions to help address social, financial and environmental challenges have been exercising flexibility in the adoption of innovations in Islamic finance.
As the Islamic finance industry continues to register success stories of growth globally, we are bound to have an increasing demand for people with the appropriate skills and knowledge to contribute to its further growth and stability. Competitiveness in an industry is determined by the quality of its human capital and the culture of continuous learning. The growth of Islamic finance, just like other industries, shall be facilitated by investment in human capital development, among other considerations.
Opportunities for growth
Institutions of higher learning have come in handy to support the growth of Islamic finance by having their curriculum and training materials aligned to the needs of the industry, which speaks to the questions of skill. Durham University, the third oldest university in United Kingdom, has been offering Islamic finance programmes for over a quarter of a century. The University of East London and Aston and Warwick Universities, among others in the UK, have also ventured into the Islamic finance programs. They have proactively designed programmes to cater for the Islamic finance as a niche market.
A number of organisations and institutions have also channelled their resources and focus on research and development in the area of Islamic finance following the increased global emphasis for effective, efficiency and ethically responsible financial intermediation that promotes sustainable development.
Regionally, Kenya was the first country to introduce Islamic banking in the Eastern and Central African region a decade ago, and while the business is still in transition, it has been growing steadily and shows big potential for growth. The uptake of Islamic banking is projected to grow exponentially in sub-Saharan Africa. The establishment of the fully fledged Islamic banks like the Gulf African Bank and First Community Bank, and the Islamic banking windows within the traditional conventional banks as well as the registration of the first Islamic Insurance service provider, Takaful Africa, has enhanced financial inclusion and risk management for a significant component of our population who have been shying away from conventional finance on ethical and spirituals grounds.
The potential for growth of Islamic finance in Kenya is huge given the phenomenal growth of our population, the gaps in infrastructure financing and the ever increasing demands for alternative financing models that promotes risk. The realisation of the benefits accruing from the Islamic finance can, however, not be possible without the relevant capacity and skills being put in place to foster the growth and stability of the industry. The development of these capacities can best be handled by institutions of higher learning and development centres among other key professional bodies in Kenya.
If we have to adequately address the gaps in the existing banking and finance laws, regulations, tax policies as well as legal and supervisory framework that adversely affect the maturity of the Islamic finance industry, institutions of higher learning and the professional bodies have to actively seek to understand and promote this sub-sector.
Bodies like the Law Society of Kenya, Kenya Institute of Bankers, Institute of Certified Public Accountants of Kenya and other agencies need to professionally engage in deepening their knowledge and enhance and integrate the contribution of Islamic finance to economic growth and development.
We are bound to soon experience an increasing demand for judicial processes and determination in the interpretation of Sharia contracts, and management of dispute resolution mechanisms in the provision of Islamic finance. Are our legal experts ready?
Kenya cannot be the hub of Islamic finance in Eastern Africa as envisaged without our universities and professional bodies supporting the development of human capital with the right skills and knowledge in Islamic finance. It would be sad if we had to, for instance, import the skills required to handle the issuance and advisory services of Sharia-compliant bond, popularly known as Sukuk.