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ISLAMIC FINANCE & CAPITAL MARKETS

MoU signing between Etihad Credit Insurance and Republic of Indonesia State-Owned Indonesia-Re

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The UAE Federal Company Etihad Credit Insurance and Indonesia Re to work on easing trade and export between UAE and Indonesia; facilitate access of SMEs and Mid-caps to funding; and utilise Shariah compliant insurance and finance solutions to grow halal trade

Partnership follows the official economic mission led by His Excellency Dr.Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade to Bogor last September, where he met the Honorable Mr. Joko Widodo, President of the Republic of Indonesia and His Excellency Muhammad Lutfi, Minister of Trade of the Republic of Indonesia and talked about enhancing trade ties,economic and investment opportunities

Etihad Credit Insurance, the Federal export credit company of the UAE and Indonesia Re, the state-owned reinsurance agency of Indonesia have signed an agreement to boost bilateral exports and investments through their trade credit insurance, reinsurance and guarantees.

The MoU was signed by Benedictus Mulyawan Waworuntu, President Director of PT Reasuransi Indonesia Utama and Massimo Falcioni, CEO of the Federal Company Etihad Credit Insurance, in the presence of His Excellency Dr. Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade and Deputy Chairman of ECI Board of Directors and His Excellency Kartika Wirjoatmodjo, Vice Minister of State-Owned Enterprises Republic Indonesia and a high delegation from both countries of Government officials, Chamber of Commerce and UAE entrepreneurs.

Indonesia, which has the largest economy in Southeast Asia, is one of eight countries which the UAE is seeking trading agreements with as part of the ‘Projects of the 50’.

Commenting on the agreement His Excellency Dr. Thani bin Ahmed Al Zeyoudi, said: “The UAE considers Indonesia as a vital strategic partner and this agreement will be a significant force in creating new opportunities, attracting FDI, boosting trade and exports, and accelerating the global economic recovery. Greater collaborations like this will enhance sustainable development and will fuel the growth of UAE’s knowledge-based economy.”

Meanwhile, His Excellency Mr. Kartika Wirjoatmodjo, said: “Indonesia and the UAE have enjoyed remarkable trade and relations for a long time. With this agreement, we are pleased to strengthen these ties by collaborating with Etihad Credit Insurance in the area of trade credit insurance and reinsurance. This will assist us in achieving our goals in developing more export markets for Indonesian companies.”

Under this agreement, ECI and Indonesia Re will work on easing trade and export between UAE and Indonesia; facilitate access of SMEs and Mid-caps to funding; and utilise Shariah compliant insurance and finance solutions to grow halal trade.

Both organisations will also collaborate in enhancing business relations of the two countries; provide information on ongoing and potential new projects; explore opportunities for insurance, reinsurance, and co-insurance for export and investments; explore recoveries of claims to be collected in Indonesia or in the UAE; and share expertise and best practices in commercial underwriting, risk management, country assessment, claims and recovery. ECI and Indonesia Re will also support strategic economic sectors such as steel and aluminium, ceramics, renewable energy, mechanical, and waste management industries.

Though the two predominant Muslim nations established diplomatic ties 45 years ago, their relationship started to gain momentum over the last few years as Indonesia began seeking new sources of investments to finance ambitious infrastructure programs, while the UAE accelerated efforts to wean itself off reliance on oil.

The UAE’s long-established bilateral relationship with Indonesia is rooted in close cultural ties and a shared commitment to facilitating greater economic development and prosperity between the countries. During the last five years, the total worth of non-oil trade between the countries surpassed $11 billion. In 2020, the total value of the UAE’s non-oil trade with Indonesia stood at $2 billion.


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ISLAMIC FINANCE & CAPITAL MARKETS

Islamic Finance Industry Still Facing Shortages of Scholars, Trained Professionals

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The Islamic finance industry has grown rapidly over the past few decades, evolving from a niche market into a global phenomenon with assets exceeding $3 trillion. Despite its remarkable growth, the industry continues to struggle with a critical issue: a shortage of qualified scholars and trained professionals. This talent gap poses a significant challenge to the sustainability and further expansion of the sector.

This article explores the reasons behind the shortage, its impact on the industry, and potential solutions to address the gap. We will also discuss the opportunities this situation presents for aspiring professionals and the steps needed to build a more robust talent pipeline in Islamic finance.

Current State of the Islamic Finance Industry

Islamic finance refers to financial activities that comply with Shariah (Islamic law), which prohibits interest (riba), excessive uncertainty (gharar), and investments in businesses considered haram (forbidden), such as alcohol and gambling. The industry encompasses various segments, including Islamic banking, Takaful (Islamic insurance), Sukuk (Islamic bonds), and Islamic funds.

The sector’s assets are expected to grow significantly, driven by the increasing demand for ethical finance and the expansion of Islamic finance markets in countries like Malaysia, Saudi Arabia, and the United Arab Emirates. However, to sustain this growth, the industry requires a steady supply of scholars and professionals who can navigate the complexities of Sharia-compliant finance.

Shortage of Qualified Scholars in Islamic Finance

One of the key challenges facing the Islamic finance industry is a shortage of qualified Shariah scholars who possess both in-depth knowledge of Islamic jurisprudence (Fiqh) and a strong understanding of modern financial practices. Here are some reasons behind this shortage:

1. Limited Number of Dual-Qualified Scholars

The field of Islamic finance requires scholars who are well-versed in both traditional Islamic law and contemporary financial systems. However, there are only a limited number of scholars who possess this dual expertise. Many traditional Islamic scholars lack formal education in finance, while finance professionals may not have a deep understanding of Islamic jurisprudence.

2. High Demand for Shariah Compliance Services

The rapid growth of the Islamic finance industry has outpaced the availability of qualified scholars. Financial institutions need Shariah scholars to review and certify the compliance of their products and services. This high demand has resulted in a small pool of scholars being stretched thin, leading to potential conflicts of interest and a heavy workload.

3. Aging Workforce of Shariah Scholars

Many of the leading Shariah scholars in Islamic finance are nearing retirement age, and there are not enough younger scholars to replace them. This generational gap could further exacerbate the shortage as the industry continues to grow.

4. Complex Regulatory and Jurisdictional Requirements

The requirements for Shariah compliance can vary significantly across different jurisdictions. Scholars need to understand the local regulatory environment and how it aligns with Shariah principles. This complexity adds to the difficulty of finding qualified scholars who can operate across multiple markets.

Shortage of Trained Professionals in Islamic Finance

Beyond the need for Shariah scholars, the Islamic finance industry also faces a shortage of trained professionals across various roles, including banking, insurance, asset management, and legal advisory. The reasons for this shortage include:

1. Limited Educational Programs

While there has been some progress in establishing academic programs and certifications in Islamic finance, the availability of specialized training remains limited. Few universities and institutions offer comprehensive courses that cover both theoretical and practical aspects of the industry.

2. Lack of Awareness and Interest

Many young professionals and students are not fully aware of the career opportunities within Islamic finance. There is often a perception that the industry is niche and offers fewer opportunities compared to conventional finance, leading to a lower level of interest among potential talent.

3. Insufficient Professional Development Opportunities

There is a lack of structured career development programs for those entering the Islamic finance field. While some institutions offer on-the-job training, few provide a clear career path or specialized training for new hires.

4. Complex Skill Requirements

Islamic finance requires professionals who understand both finance and Shariah law. Bridging this gap can be challenging, as it involves acquiring knowledge in two distinct fields. Additionally, financial institutions need professionals who can develop innovative Sharia-compliant products to meet evolving market demands.

Impact of the Talent Shortage on the Islamic Finance Industry

The shortage of scholars and trained professionals in Islamic finance has several far-reaching effects on the industry:

1. Slow Product Development

A lack of qualified Shariah scholars and experts can delay the approval process for new financial products. This not only affects the speed at which Islamic financial institutions can innovate but also limits the variety of Sharia-compliant products available in the market.

2. Inconsistent Shariah Interpretations

With a limited number of scholars handling multiple assignments, there is a risk of inconsistent Shariah rulings, which can lead to confusion and a lack of standardization in the industry. This inconsistency makes it difficult for financial institutions to operate across different jurisdictions.

3. Higher Costs for Shariah Compliance

The high demand for a small number of qualified scholars can drive up the cost of Shariah compliance services, making it more expensive for financial institutions to certify their products. This, in turn, can increase the overall cost of Islamic financial products for consumers.

4. Limited Geographic Expansion

The shortage of trained professionals also hampers the expansion of Islamic finance into new markets. Without the necessary human resources to support growth, institutions may struggle to establish a strong presence in regions with emerging Islamic finance sectors.

Strategies to Address the Talent Shortage in Islamic Finance

To overcome the shortage of scholars and trained professionals, the Islamic finance industry needs to take proactive steps to build a robust talent pipeline. Here are some strategies that could help:

1. Enhancing Educational Programs

Expanding the number of universities and institutions offering specialized courses in Islamic finance is crucial. Programs should focus on providing a comprehensive curriculum that covers both Islamic jurisprudence and modern financial practices. Partnerships with established Islamic finance institutions can also offer practical training opportunities.

2. Promoting Dual Qualifications

Encouraging professionals to pursue dual qualifications in both finance and Islamic studies can help address the skills gap. Financial institutions could offer scholarships or sponsorships for employees who wish to gain expertise in Islamic finance or Shariah law. Additionally, certification programs from institutions like AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) or INCEIF (International Centre for Education in Islamic Finance) can provide specialized training.

3. Developing Shariah Scholars Training Programs

To address the shortage of Shariah scholars, targeted training programs can be established to groom the next generation of scholars. These programs should focus on mentoring young scholars, providing them with practical exposure to Islamic finance, and equipping them with the skills to handle complex Shariah compliance issues.

4. Increasing Awareness About Islamic Finance Careers

Raising awareness about career opportunities in Islamic finance is essential for attracting young talent. Outreach programs, university partnerships, and industry conferences can help promote the benefits of working in the sector. Highlighting success stories of professionals in Islamic finance can inspire more people to consider it as a career path.

5. Leveraging Technology and Fintech

Technology can play a significant role in bridging the talent gap. Islamic fintech solutions can automate some Shariah compliance processes, reducing the reliance on a limited number of scholars. Additionally, digital learning platforms can offer accessible training programs for aspiring professionals, allowing them to gain skills remotely.

Opportunities for Aspiring Professionals

The talent shortage in Islamic finance presents a unique opportunity for aspiring professionals who are willing to bridge the gap between finance and Islamic studies. With the right skills, there are significant career opportunities in areas such as:

  • Shariah Advisory: Providing Shariah compliance services to banks, insurance companies, and asset management firms.
  • Islamic Banking: Developing and managing Shariah-compliant banking products, such as profit-sharing accounts and Sukuk.
  • Takaful (Islamic Insurance): Offering risk management solutions that comply with Islamic principles.
  • Legal Advisory: Specializing in Islamic finance law and helping institutions navigate the regulatory landscape.
  • Fintech: Creating innovative digital solutions for the Islamic finance market, including mobile banking and investment platforms.

Aspiring professionals who acquire dual qualifications in finance and Islamic studies will find themselves well-positioned to fill high-demand roles in a growing industry.

The Islamic finance industry continues to face a significant shortage of qualified scholars and trained professionals, presenting both challenges and opportunities. To sustain growth and address this talent gap, the industry must invest in education, promote dual qualifications, and leverage technology to build a more skilled workforce.

By taking proactive steps to develop the next generation of Islamic finance experts, the industry can not only overcome current challenges but also position itself for long-term success. The shortage of talent should not be viewed solely as a problem but also as an opportunity for aspiring professionals to make a meaningful impact in a dynamic and ethically driven field.


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ISLAMIC FINANCE & CAPITAL MARKETS

What is a Halal Economy?

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A halal economy is an economic system based on Islamic principles, encompassing various sectors like food, finance, tourism, and fashion that adhere to halal (permissible) standards. It emphasizes ethical, transparent practices in line with Shariah law. Globally, the Halal economy is rapidly growing and is projected to exceed $2.3 trillion, driven by the increasing demand for halal products and services among Muslim and non-Muslim consumers.

What is a Halal Economy?

A halal economy is an economic system based on Islamic principles, encompassing various sectors like food, finance, tourism, and fashion that adhere to halal (permissible) standards. It emphasizes ethical, transparent practices in line with Shariah law. The halal economy is rapidly growing globally, driven by increasing demand for halal products and services among Muslim and non-Muslim consumers.

While food is the most commonly recognized aspect, the halal economy includes finance, tourism, fashion, cosmetics, pharmaceuticals, and entertainment. It’s an ecosystem that ensures ethical practices, transparency, and moral values, offering a holistic approach to commerce that appeals not just to Muslims but to many non-Muslims as well.

Key Sectors in the Halal Economy

Halal Food and Beverages

The most prominent sector of the halal economy is food and beverages. Halal food is prepared following Islamic dietary laws. It must be free from pork, alcohol, and other prohibited substances. The meat must be slaughtered humanely and with specific prayers. The global halal food market is rapidly expanding, offering opportunities for businesses and consumers who value high-quality, ethically sourced products.

Islamic Finance

Islamic finance is another cornerstone of the halal economy, distinguished by its adherence to Shariah law. Key principles include the prohibition of interest (riba), risk-sharing, and ensuring that financial activities are tied to real assets. Common Islamic finance products include Sukuk (Islamic bonds), Takaful (Islamic insurance), and Murabaha (cost-plus financing). Islamic banking has grown exponentially in recent years, providing an ethical alternative to conventional finance for millions worldwide.

Halal Travel and Tourism

The halal travel industry caters to the specific needs of Muslim travelers, offering services like halal food, prayer facilities, and family-friendly entertainment. Halal tourism is designed to respect Islamic values, allowing Muslims to explore the world comfortably while adhering to their religious beliefs. Countries like Malaysia, Turkey, and Indonesia have developed comprehensive halal travel sectors to attract this market.

Halal Cosmetics and Pharmaceuticals

Halal cosmetics and pharmaceuticals are rapidly growing sectors of the halal economy. Products in these categories are free from haram (prohibited) ingredients like alcohol and animal derivatives not slaughtered according to Islamic guidelines. Halal certification for beauty and health products is becoming increasingly important to ensure that Muslim consumers can maintain their lifestyles without compromising their beliefs.

Modest Fashion

Modest fashion, also known as halal fashion, is designed to align with Islamic guidelines for dressing modestly. This sector has gained global attention in recent years, with brands and designers creating stylish yet modest clothing. The rise of modest fashion showcases the demand for apparel that respects cultural and religious values while staying on-trend.

The Global Growth of the Halal Economy

The halal economy is not confined to Muslim-majority countries; it is a global phenomenon. The increasing demand for halal products and services is driven by the growing Muslim population, higher awareness of halal standards, and a desire for ethical and sustainable options.

According to the State of the Global Islamic Economy Report, the global halal economy is projected to exceed trillions of dollars. Muslim consumers are looking for products that align with their values, and non-Muslim consumers are also turning to halal products for their perceived benefits, such as ethical sourcing and high quality.

Benefits of a Halal Economy
Ethical Standards and Transparency

The halal economy emphasizes ethical production, consumption, and financial practices. From humane animal treatment in halal food to profit-sharing models in Islamic finance, transparency and moral responsibility are cornerstones of the halal economic system.

Economic Opportunities

The halal economy creates opportunities for entrepreneurs and businesses worldwide. The demand for halal products has led to increased exports, new job opportunities, and the rise of innovative halal startups. Countries like Malaysia and the United Arab Emirates have become global hubs for halal certification and trade.

Social Well-being and Community Support

Since the halal economy aligns with the moral and social principles of Islam, it supports community welfare, fair trade, and ethical consumerism. Islamic finance, for example, includes the concept of Zakat (charitable giving), ensuring wealth distribution and helping those in need.

Challenges and Opportunities

While the halal economy offers tremendous growth potential, it is not without challenges. These include:

  • Standardization and Certification: The lack of uniform global halal standards can lead to confusion and hinder market growth. Efforts are being made to develop universal certification processes.
  • Consumer Awareness: Educating consumers about halal products’ benefits is crucial for expanding the market beyond Muslim communities.
  • Market Accessibility: Expanding into non-Muslim markets requires addressing misconceptions and emphasizing the ethical and high-quality aspects of halal products.

However, these challenges also present opportunities. As awareness and demand increase, businesses can innovate to provide better products and services that cater to both Muslim and non-Muslim consumers alike.

Frequently Asked Questions (FAQs)

Q: Is halal only about food?
A: No, halal extends beyond food to include finance, tourism, fashion, cosmetics, pharmaceuticals, and more.

Q: Can non-Muslims participate in the halal economy?
A: Absolutely! The halal economy is open to everyone who values ethical practices and high-quality standards.

Q: How can a product be certified halal?
A: A product can be certified halal by meeting specific Islamic guidelines and obtaining certification from recognized halal authorities.

Q: What is the difference between halal and haram?
A: Halal means permissible or lawful, while haram means prohibited or unlawful according to Islamic teachings.

The halal economy represents a holistic approach to commerce that aligns with Islamic principles while offering ethical, high-quality options for all consumers. Its impact extends across food, finance, travel, cosmetics, and fashion, fostering a growing global market. With increasing demand and awareness, the halal economy holds significant opportunities for businesses and communities alike, offering a sustainable and value-driven path to growth.


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ISLAMIC FINANCE & CAPITAL MARKETS

How Islamic Finance and Digital Identity are Advancing in Kenya and Somalia

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By Aamer Yaqub

Africa’s financial and digital landscapes are experiencing a remarkable transformation, driven by the rapid adoption of digital banking and the development of innovative market solutions such as Sharia-compliant online services. This shift is particularly evident in Kenya and Somalia, where the integration of Islamic finance principles with modern digital platforms is revolutionizing financial inclusion and modernizing the banking sector.

Kenya’s Digital Identity and Sharia-Compliant Banking Revolution

Kenya is at the forefront of integrating digital identity systems with Sharia-compliant banking services, marking a significant milestone in the country’s financial evolution. The National Integrated Identity Management System (NIIMS), also known as the Huduma Namba, is a key initiative designed to provide every Kenyan citizen with a unique digital identity. This system aims to streamline access to various services, enhance transparency, and improve financial inclusion by making it easier for citizens to interact with government and financial services.

Craft Silicon, a prominent Kenyan fintech company, is playing a crucial role in this transformation. Craft Silicon’s digital banking platforms cater specifically to the needs of Kenya’s unbanked population, enabling users to perform a wide range of financial transactions via mobile phones. This includes making payments, accessing loans, and conducting everyday transactions. The company has also developed Sharia-compliant banking products, reflecting a growing emphasis on inclusivity and accessibility within Kenya’s financial sector.

By incorporating Sharia-compliant features into its digital banking solutions, Craft Silicon addresses the needs of a diverse customer base, including those who seek to adhere to Islamic financial principles. This approach not only broadens the appeal of digital banking but also supports Kenya’s efforts to integrate digital ID systems with financial services, aiming to improve overall financial inclusion and modernize the banking infrastructure.

Somalia’s Focus on Sharia-Compliant Banking Amidst Financial Rebuilding

Somalia’s financial sector is undergoing a significant transformation as the country works to rebuild its banking system following years of instability. Central to this transformation is a strong emphasis on Sharia-compliant banking, which caters to the needs of Somalia’s predominantly Muslim population. Salaam Bank, a leading financial institution in East Africa, has partnered with Paymentology to introduce a cutting-edge financial solution: a co-branded, tokenized tap-to-pay digital companion card, alongside a physical card for users of its Waafi mobile money app.

This innovative solution represents a significant advancement in Somalia’s efforts to enhance financial inclusion through Sharia-compliant products. The integration of mobile banking technology has been particularly impactful, enabling users to access banking services through their mobile devices. This is crucial in a country where traditional banking infrastructure is limited, and mobile technology offers a viable alternative for reaching underserved populations.

The introduction of Sharia-compliant financial products by Salaam Bank aligns with Somalia’s broader goal of rebuilding its financial system while adhering to Islamic principles. By offering Sharia-compliant solutions, Somalia is not only addressing the needs of its local population but also positioning itself as a progressive player in the region’s financial sector.

Global Impact of Sharia Compliance on Digital Finance

The influence of Sharia-compliant banking extends beyond regional innovations, with global technology companies recognizing the importance of aligning their solutions with Islamic finance principles. IOTA, a leading blockchain technology company, has recently achieved Sharia-compliant certification, underscoring its commitment to adhering to Islamic finance principles. This certification enhances IOTA’s credibility and appeal in Muslim-majority countries, reflecting a growing recognition of the need for Sharia compliance in the global financial technology landscape.

Dominik Schiener, co-founder and chair of the IOTA Foundation, highlights the significance of Sharia compliance for the IOTA Ecosystem DLT Foundation. “Shari’a compliance significantly benefits the IOTA Ecosystem DLT Foundation by enhancing its credibility and ethical standards, which are essential for promoting IOTA technology and the IOTA token within Muslim communities,” Schiener notes. This certification supports the Foundation’s efforts to foster blockchain projects in the Middle East and other regions, illustrating the broader impact of Sharia compliance on global technology and finance.

The Future of Sharia-Compliant Banking and Digital Identity

The advancements in Sharia-compliant banking and digital identity systems in Kenya and Somalia represent a pivotal moment in the evolution of financial services across Africa. Kenya’s integration of digital identity with Sharia-compliant banking reflects a strategic approach to enhancing financial services and accessibility. The National Integrated Identity Management System aims to simplify interactions with financial services and government agencies, while Craft Silicon’s innovative banking solutions demonstrate a commitment to inclusivity and modernization.

In Somalia, the focus on Sharia-compliant banking products highlights the country’s dedication to rebuilding its financial sector by Islamic principles. Salaam Bank’s introduction of a digital companion card and mobile banking services signifies a significant step toward improving financial access and inclusion in a region with limited traditional banking infrastructure.

Globally, the recognition of Sharia compliance by technology companies like IOTA underscores the growing importance of aligning financial and technological solutions with Islamic finance principles. As these trends continue to develop, they will play a crucial role in shaping the future of banking and financial services, offering new opportunities for individuals and businesses around the world. The convergence of digital innovation and Sharia compliance is paving the way for a more inclusive and modern financial landscape, creating pathways for growth and development in diverse markets.


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