Islamic banking attract more female executives

Asian Islamic financial institutions are attracting more female executives and scholars to fill a shortage of talent, setting a precedent for companies in the Middle East.

Malaysias Shariah Advisory Council appointed a second female scholar to its 11-member board in November. Indonesia has six women on its panel of 35 experts, Maruf Amin, chairman of the country’s National Shariah Council, said in an interview Dec. 30. Malaysia’s central bank and the securities commission are both headed by women, while Liza Mohd Noor is chief executive officer at RAM Rating Services Bhd., which provides ratings for Islamic bonds.

Previously, it was difficult for women to enter the industry; now people have broken that boundary, especially in Malaysia, Aznan Hasan, associate professor at the Kuala Lumpur-based International Islamic University Malaysia, said in a Dec. 20 interview. More women are coming in and this is good because we need people.

Encouraging women to work in Islamic finance will help meet demand for experts in an industry the Islamic Financial Services Board estimates has been growing 20 percent annually since 2000, with assets exceeding $1 trillion. About 50,000 professionals will be needed globally over the next five to seven years to meet demand, Ishaq Bhatti, the director of Melbourne-based La Trobe Universitys Islamic banking and finance program, said in a Dec. 10 interview in Kuala Lumpur.

Cultural barriers

The lack of prominent female banking executives stems from history, culture and perceptions of women, said Nida Raza, senior vice president of capital markets at Unicorn Investment Bank BSC in Manama, Bahrain.

In Saudi Arabia, a Sunni Muslim-majority country where women are required to have a male guardian, about 15 percent of the labor force was female in 2009, according to a report by the Geneva-based International Labor Organization, a United Nations agency.

Getting a visa to Saudi is really difficult, and even when I am there I face various challenges, Noripah Kamso, chief executive officer of Kuala Lumpur-based CIMB-Principal Asset Management Bhd., a unit of CIMB Group Holdings Bhd., the world’s biggest sukuk (Islamic bonds) arranger, said in an interview on Dec. 23. I was once chased by a Saudi police officer because I entered from the wrong door, and travelling without a male colleague is impossible.

Global Sales

As interest in the industry grows, women, including those from the Middle East, are likely to play a greater role, said Engku Rabiah Adawiah Engku Ali, the first female appointee to Malaysia’s Shariah Advisory Council and an associate professor at the Ahmad Ibrahim Kuliyyah of Laws, International Islamic University Malaysia in Kuala Lumpur.

Global sales of sukuk, which pay returns based on asset flows to comply with the religions ban on interest, fell 15 percent in 2010 to $17.1 billion, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.

Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai U.S. Dollar Sukuk Index shows, compared with 19.8 percent the previous year. Debt in emerging markets gained 12.2 percent, from 29.8 percent in 2009, according to JPMorgan Chase & Co.s EMBI Global Diversified Index.

The difference between the average yield for sukuk in developing nations and the London interbank offered rate has narrowed 178 basis points, or 1.78 percentage point, to 290 last year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Average yields dropped 252 basis points to 4.74 percent.

Male scholars

The yield on Malaysias 3.928 percent sukuk maturing in June 2015 fell 78 basis points since June 1 to 3.1 percent, data compiled by Bloomberg show. The extra yield investors demand to hold Dubais government sukuk rather than Malaysias narrowed 51 basis points since June to 338, according to the data.

A shortage of scholars increases the risk of conflicts of interest as many sit on various advisory boards at the same time, according to the Manama-based Accounting & Auditing Organization for Islamic Financial Institutions, an industry standards setting body.

Sheikh Nizam Yaquby of Bahrain and Syrias Abdul Sattar Abu Ghuddah, who each serve on 85 boards of Islamic financial institutions, ranked first by the number of seats among the top 20 religious experts in an October report from Zawya, an online Middle East business news and directory, and Funds@Work AG, a Kronberg, Germany-based consulting company.

Talent Pool

In Malaysia, regulations are aimed at limiting such conflicts of interest. Under Bank Negara Malaysia regulations, a Shariah scholar can sit on only one board for each type of Islamic financial institution, meaning an expert on the panel of an Islamic bank can only sit on the board of another non-bank entity such as an insurance company, or takaful.

The rule enlarges the talent pool and gives more opportunities, said Engku Rabiah, who was once appointed on the board of six to seven Islamic banks and takaful companies before the rule was passed in 2004.

Unicorn Investment Banks Raza said the shortage of women in Islamic finance is easing as more female Westerners enter the market.

This will have a knock-on effect on the Middle East, Raza said in an interview Dec. 30 from New York. That may lead to a rise in women in the Islamic finance industry, she said.