Apr. 17, 2015


Daud Vicary Abdullah

Malaysia

Daud Vicary Abdullah

President & CEO, INCEIF

"The message is clear: Islamic finance is here to stay."

BIO

Daud Vicary Abdullah is the President and Chief Executive Officer of INCEIF, The Global University of Islamic Finance. He has been in the finance and consulting industry for over 41 years, with significant experience in Asia, Europe, Latin America and the Middle East. Prior to INCEIF, Daud was the Global Islamic Finance Leader with Deloitte. He was also previously Acting CEO of Asian Finance Bank, an Islamic bank based in Malaysia, and was the first Managing Director of Hong Leong Islamic Bank.

INCEIF is known as the Global University of Islamic Finance. When did the need for a university dedicated solely to Islamic Finance arise?

It began 12-15 years ago. I was a practitioner then, both as a partner at Deloitte and then when I set up an Islamic bank here in 2005. There was an increasing recognition from about 2000 onwards, and that intensified from 2003 to 2005. So we had Kuwait Finance House, Asian Finance Bank, and Al Rajhi Bank all come into the market. This put pressure on the supply of human capital, and the people with money tended to get the best players. That also began to expose a shortage of quality supply in the marketplace, because international players were coming in and offering higher salaries. The market was expanding—there were huge growth rates and people were starting to see that this was a real trend. The Central Bank under Governor Tan Sri Dr. Zeti's leadership started taking charge of the situation and addressed this through a number of policies. One of these policies is that if you poach staff from another bank you had to pay six months of their salary into a staff-training fund. That created a pool of funds for education and training. The second move was to create INCEIF. The idea behind this center was to address the medium- to long-term development of industry-ready human resources that would move through quickly to senior positions. INCEIF was founded and help was sought from the industry—not just financial help, but from experts to help formulate the courses. A recent Thompson-Reuters report published in December last year on the Islamic economy indicated that as far as Islamic finance education, 11% of the world's accredited and referenced output in research came from our center and the International Sharia Research Academy for Islamic Finance (ISRA). We also offer executive programs.

Besides personnel shortages, what other challenges need to be overcome in order for Islamic finance to compete with conventional banking?

The shortage of talent is one thing, but it's also a case of having the right talent to fit market needs. There needs to be closer alignment between academia, the industry, and aspiring students. I think we are doing reasonably well with this at INCEIF, but we need to improve. Regarding other challenges for Islamic finance, my preferred answer is called the EPL theory: Education, Perception, and Liquidity. To outline a few examples of this theory's relevance: if you do not have education—professional, or financial inclusion, or literacy education at a primary level—you do not empower people professionally. You need to educate people for what the market needs. In terms of Islamic finance, if somebody asks “What is Islamic finance?" I think the answer is, “It is about the efficient and effective mobilization of capital for the benefit of the real economy." This defines it completely. It may surprise you to know that in the US every year $33 trillion is churned in the capital markets. That is 10 times the size of global Islamic finance. One can ask how much of that $33 trillion goes into the US's real economy; in other words into creating jobs, buildings and making things, and creating substantial underlying assets? It is less than 1%. 99.2% goes into the financial economy. We look to create a balance that both addresses market needs, and the needs of the wider economy.

What role can Malaysia play in exporting Islamic finance abroad and how do you assess its potential to become the Islamic finance capital of the world?

Malaysia is already exporting Islamic finance. Malaysia has built up a robust infrastructure supporting Islamic finance. The British and US governments have expressed interest in our work, and have researched our contributions thoroughly. Several key elements are necessary for successful Islamic finance: a sharia and legal framework; a tax framework; an accounting framework; a regulatory framework that addresses money market, liquidity management, and so on; and a standards framework—standards around professional education in Islamic finance, standards for documentation and so forth. The Thomson-Reuters report places Malaysia 50% ahead of the next competitor as a global Islamic finance center. So Malaysia is clearly becoming the Islamic finance capital of the world, but we should not necessarily overemphasize this idea of being the biggest. I am more concerned about the quality of the work and the way you influence it. We see to encourage quality and this is our focus.

What is your outlook for the industry?

The message is clear: Islamic finance is here to stay, but we need to not simply develop it expand, but to lead people to understand that it is a viable alternative to conventional finance. This concept has some traction, now much more than 10 years ago, but we still have a good deal of work to do to convey confidently that this is a realistic alternative that the market needs.

© The Business Year - April 2015

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