Daily News Egypt

Incorporating Islamic finance into MBA program - Daily News Egypt

Advertising Area



Advertising Area




Incorporating Islamic finance into MBA program

Course addresses growing need for Islamic skills CAIRO: Over the past 40 years, Islamic banking has grown from a niche business to a promising alternative to mainstream banking. Today, multi-billion dollar deals are made Sharia-compliant to tap into an estimated supply of some $500 billion in funds seeking consistency with Islamic principles. In order to …


Course addresses growing need for Islamic skills

CAIRO: Over the past 40 years, Islamic banking has grown from a niche business to a promising alternative to mainstream banking.

Today, multi-billion dollar deals are made Sharia-compliant to tap into an estimated supply of some $500 billion in funds seeking consistency with Islamic principles.

In order to address the demand for knowledgeable practitioners in the field of Islamic banking, the American University in Cairo has incorporated seminars on the topic into its MBA program.

The seminars are taught by Joseph Connolly, who was recently appointed as the Willard Brown Distinguished Professor of Management and just completed his first term at the university.

Connolly has 30 years of experience with Citibank and UBS. He also helped establish Noriba, UBS s Islamic banking subsidiary in Bahrain.

Foremost amongst the principles that distinguish Islamic banking from conventional forms of banking is the explicit prohibition of riba (usury or interest) in the Quran (hence the name of the UBS subsidiary No-riba).

Since interest is a fundamental aspect of the conventional banking system, substantial work is required to redesign a range of financial products in a manner consistent with the Quran.

While the prohibition of interest is a universally accepted principle amongst Islamic banking practitioners, there are a number of contentious issues relating to the Sharia-compliance of several conventional financial instruments.

All of my students will agree that gambling, pork and alcohol are definitely sinful, says Connelly. They begin to disagree on issues like life insurance or even tobacco.

In actuality, decisions on the compliance of instruments are made by a group of religious experts know as a Sharia board that are appointed by individual Islamic banks.

However, the seminars focus on practical applications such as how to create a Sharia-compliant financial structure rather than the details of religious matters.

We looked at how we can develop financial instruments according to Sharia, says Mohamed El-Naggar, one of Connelly s students who just completed the MBA program. Fuqaha (Islamic law experts) work out Sharia matters and study the sources, including the Quran and Sunnah. They derive from this certain judgments. We learn these judgments and apply them to financial or business practices.

Students are taught through discussions of case studies written by Connelly.

In my class, we don t take arbitrary decisions, says Connelly. Instead we listen to debate. For example, when we consider life insurance [and] whether it is halal (permissible) or haraam (forbidden) we listen to both sides and both sides are represented in my class.

Connelly explains that the market for Islamic finance is growing exponentially, in part because of the increasing conservatism of the new generation of Muslims.

$80 billion [of the estimated market of $500 billion] is individual wealth, and that has been really growing, says Connelly. It s what in private banking we call intergenerational transfer, which is when the father dies and the son takes over … What we find is that the new generation that s inheriting this wealth is more conservative than their fathers were and more likely to want to invest that wealth in Sharia-compliant products.

Connelly also rejects the common assertion that Islamic finance is a mere window dressing of conventional financial products to make them appear to be consistent with Sharia.

In Islamic banking, there is no room for preference or for giving people precedence over any other people who are involved in a transaction or a deal, says Connelly. That is why we, for example, do not allow people to invest in preferred shares … And so in the instruments that we do have [such as] mudharaba we are sharing the risk and we are sharing the rewards.

Mudharaba is a Sharia-compliant lending arrangement in which, in lieu of interest, profits are shared between the bank and the borrower. Sukuk is an Islamic banking form of bond.

With a sukuk or mudharaba you are sharing the risk, so if everything goes to hell, you (the lender) lose everything, says Connelly. In a conventional bank, you would have tiers of debt, so that if everything goes to hell, the senior with senior debt would have a preference on claims. Preference is the key word. Risk must be shared in Sharia-compliant instruments.

El-Naggar explains that he intends to pursue a career in Islamic banking because it is a developing and growing industry, unlike conventional banking, which is more mature.

Islamic banking is now providing very creative solutions to the extent that it s becoming attractive to non-Muslims, says El-Naggar.

Topics: FJP

Advertising Area

Advertising Area



https://www.dailynewsegypt.com/2006/06/09/incorporating-islamic-finance-into-mba-program/
Breaking News

No current breaking news

Daily News Egypt Android App Available for free download on Google play
View
Daily News Egypt Ios App Available for free download on APP Store
View