Islamic finance is a system of banking that complies with Islamic law, also known as Shariah law. Broadly speaking, it focuses on avoidance of “Riba” (usury), the prohibition of speculation and gambling, the encouragement of saving and investment for future generations, and the promotion of fair trade.
There are two major aspects of Islamic finance that differentiate it from conventional finance. First, traditional financial institutions charge interest rates - this is prohibited according to the Quran. Second, the profits of a business venture cannot be distributed among shareholders until after the company is profitable, which is different compared with conventional investments where profits are distributed before the venture is completed.
Through the use of various Islamic finance concepts such as Ijarah (leasing), Mudharabah (profit sharing), and Musyarakah (partnership), financial institutions have a great deal of flexibility, creativity and choice in the creation of Islamic finance products.
According to Bank Negara Malaysia, Malaysia's Islamic banking assets reached US$254 billion as at December 2019, with total funds placed with Islamic banking products now representing 38 percent of total local banking sector deposits.
As with many other investment roles, graduates typically start out as analysts in this field, before eventually taking on more client-facing responsibilities. If you are entering through a graduate programme, you can expect a general rotation across different departments ̶ with a particular emphasis on Shariah banking principles.
Given the specialised nature of this field, you will have to attain Chartered Islamic Finance Professional certifications at some point if you intend to keep advancing.
Once you have acquired Chartered Islamic Finance Professional status, you can choose to specialise in areas of banking such as wealth management, Takaful, Islamic structured products, or regulation and compliance. Alternatively, you can also switch over to serving the retail segment of the Islamic financial market, as retail or personal finance managers, or wealth and estate planners.
As Malaysia is a global Islamic finance hub, you can expect to work with international clients as well. Potential employers include the Islamic finance divisions of local banks, international banks that offer Shariah-compliant services to clients in specific locations, or Islamic firms that market their investment products in various financial centres.
Though finance degrees or Islamic finance diplomas are advantageous, they are not a requirement. Demonstrating strong numeracy, communication, and client-facing skills are more important, as is being able to demonstrate a broad knowledge of Islamic finance practices.
Foreign language proficiency is very useful, particularly languages from other countries with Islamic majority populations. Some examples include Arabic, Bahasa Indonesia, Turkish, or Bengali.
As Islamic finance has a responsibility to invest in products that are beneficial to society, many investors identify Islamic financial products as similar to SRIs (socially responsible investments).As such , a great deal of integrity and responsibility is necessary when working with strict rules and a very specific code of conduct.
However, the nature of Islamic finance is made complex due to the role of Shariah advisory boards. These boards, along with professional bodies and think tanks, pass judgements on existing products and advise on the development of new products, ensuring that the evolution of Shariah-compliant markets and financial products can keep up with developments in other markets.
Therefore, staying constantly up-to-date on the latest developments in Shariah-compliant financial practices will be vital for an Islamic finance professional. Not just in Malaysia, but in other markets around the world as well.