A Fresh Take on Islamic Finance

As financial institutions based on Islamic law proliferate, some B-schools are taking notice. But this is one case where demand exceeds supply

by Francesca Di Meglio

Any MBA student is going to have a strong grounding in the vocabulary of finance, including interest rates and lending. But some schools are now adding programs and courses that are teaching a new vocabulary for an increasingly visible sector of the financial world—Islamic banks that conduct business according to the tenets of Islamic law.

One of the latest schools to take an interest in Islamic banking is the Cass Business School, part of the City University, London, which in the fall is launching an Executive MBA based in Dubai featuring specializations in Islamic finance, energy and general management, and finance. The school says there's a need for more MBAs with experience in the area.

The number of schools offering Islamic finance programs is still relatively small—and at some universities, relevant courses can be found outside the confines of the business programs. But experts say that, at the very least, business students should know something about this expanding industry. "Anyone who seeks to work in the Islamic world should be interested in this area, because it's booming," says Ibrahim Warde, author of the soon-to-be-updated Islamic Finance and the Global Economy (Edinburgh University Press, 2000). "Understanding Islamic finance is highly valued in the marketplace."

Travel Incentives

The basic principle behind Islamic banking—which is based on Shariah, or Koranic law—is that people shouldn't be charged interest on loans or be paid interest on investments. A venerable system of banking, Islamic finance resurfaced in the 1970s and was updated in the wake of the oil boom in the Middle East.

Today, there's an increasing number of financial products and services available that are compliant with Islamic finance. Rising petroleum prices, increased attention on the Middle East as a result of politics, and competition between Bahrain and Dubai for the title of Middle Eastern financial center are other factors contributing to the economic surge (see BusinessWeek.com, 8/8/05, "Islamic Banks: A Novelty No Longer").

Islamic institutions and banks offer everything from sukuks—bonds that are structured to comply with Shariah and have become hugely popular—to asset selling, where a bank purchases a car, for example, and resells it to clients rather than offering an interest-based loan for the vehicle. Islamic credit cards that have users essentially borrowing money from themselves and incentives, such as trips to the holy city of Mecca, are other examples of how institutions are drawing Muslim customers.

Future Hub?

With all this growth, there's a shortage of skilled workers in Islamic finance, says Hassan Hakimian, Cass's associate dean for Off-Campus Programs, which says Islamic finance is growing at about 15% per year and will continue to do so for at least the next decade. Hakimian is one of the creators of the school's 24-month executive MBA program, which will debut in September. The school purposefully decided to offer Islamic finance and energy concentrations, says Hakimian, because of the relevance of those two topics to the program's home in Dubai.

Cass seems to be in Dubai's corner when it comes to the argument about which Middle Eastern capital will reign supreme. The Cass EMBA program will include online learning complemented by one weekend a month in Dubai, part of the United Arab Emirates. "I wouldn't be surprised if, in coming years, parts of the Middle East will grow, and Dubai will become the hub of business education," says Hakimian. He expects to admit 30 to 40 students in the inaugural class.