- by Humayon Dar
- June 20, 2021
By Yusry Yusoff
Dato’ Muhammad Ibrahim, the Governor of Bank Negara Malaysia in his remarks at the Royal Award for Islamic Finance Gala Dinner & Award Presentation on 14 November 2016 said, “Our endeavour to enhance the vibrancy of the industry warrants a new way of thinking in the face of increasing competition and profound changes brought about by technological advancements. In facing these challenges successfully, one of the prerequisites is a pool of talent that is dynamic, adaptable and visionary.”
It is a significant statement, which calls for the industry players to be proactive in dealing with changing market environments and to take advantage of opportunities brought by technology. But more importantly, it calls for market players to adopt a fresh mindset in addressing challenges. Dato’ Muhammad Ibrahim outlined ‘dynamic, adaptable and visionary’ as the required traits for industry talents which can be surmised being applicable to the industry leadership talent as well.
In the last few decades, regulators in Malaysia namely Bank Negara Malaysia (BNM) and Securities Commission Malaysia (SC) were proactively driving the growth agenda for Islamic
finance. Sizeable resources were committed including the establishment of specialised departments or divisions, specifically BNM’s Islamic Banking & Takaful Department and SC’s Islamic Capital Market Business Group to facilitate and support the industry.
Progressive laws such as the Islamic Financial Services Act 2013 (IFSA) were enacted and relevant regulatory policies were established. The regulators were also directly involved in pursuing Malaysia’s global Islamic finance agenda and led its promotional activities. Comprehensive recommendations for the industry were incorporated in blueprints and master plans namely the Financial Sector Blueprint and Capital Market Master Plan outlining the directions and goals for the industry, for example setting a target of 40% market share for Islamic banking.
In implementing these recommendations the regulators played a leading role as well. Key industry developments such as the Investment Accounts Platform and Malaysia International Islamic Financial Centre (MIFC) were initiated by the regulators and supported by industry players at the implementation stage.
Essentially, the regulators had set the stage and in a few instances, showed the way on how to capitalise Malaysia’s comprehensive Islamic finance ecosystem and realise its full potential. The regulators demonstrated that in developing Islamic finance industry they were indeed dynamic, adaptable and visionary.
Proactive Market Players
In ensuring the sustainable development of the industry, the proactive involvement of market players is crucial. In fact, BNM and SC have been promoting the importance of market driven initiatives for many years. They are now nudging and encouraging the industry to lead these agendas. For example, the industry has been entrusted with the organisation of Global Islamic Finance Forum (GIFF) and to position it as a market driven global event. As the relevant framework and infrastructure, including dedicated laws are already being established, it is now the opportune time for the industry to step in and take on a larger role in leading its key and major development initiatives.
However, one of the questions that need an answer is the readiness of the industry to undertake this role. The three key challenges facing the Islamic finance industry in Malaysia are awareness, talent development and leadership. It is ironic that even after decades of development and being recognized as one of the leading Islamic financial markets globally, leadership is one of the issues Malaysia is still grappling to address.
At this phase of its development, the leadership issue in the Malaysian Islamic finance industry is no longer merely about developing sufficient number of talented personnel with the right qualifications, capable of running a profitable Islamic financial services business. Islamic finance market leaders have a larger role to play, larger than that of those in the conventional financial industry. The industry requires more leaders who are dynamic, who bring fresh perspectives and who are bold in realising the full potential of Islamic finance.
In addition to ensuring their institutions are well run and profitable, being in a developing industry, they also have an important role to drive the industry’s key development initiatives.
They would have to rally their stakeholders, especially their shareholders and board members, to look beyond their individual institution and to be able to collaborate with their counterparts including their competitors to proactively deliver meaningful results.
They should not be constrained by their traditional business model and should leverage on Malaysia’s progressive Islamic finance regulatory framework specifically IFSA and the Financial Technology Regulatory Sandbox Framework. These attributes in leaders will ensure the continued progress of the industry and strengthen its positioning in the mainstream financial industry. However, finding and developing these leaders will be a continuous challenge for Islamic finance institutions.
For example, currently, the appointment of CEOs of Islamic banks, were mainly through recruitment of external candidates, usually from other banks and not necessarily from the Islamic banking industry. Whilst this is a common and acceptable practice, it showcased the need to deepen the talent pool of leaders for the industry. It also highlighted the need for institutions to implement a robust and sustainable succession and leadership development framework. The scenario is not unique to the Islamic banking industry.
The onus now rests on the current crop of top industry leaders especially the Chairmen, CEOs and shareholders of Islamic financial institutions, in developing a pool of future leaders who are ‘dynamic, adaptable and visionary’ as well as passionate, who are needed to drive the industry forward. The role the industry can play is limitless. An industry driven task force should be formed to strategically and comprehensively address this challenge. Existing platforms particularly industry associations should be recalibrated to undertake this. Links to talent development institutions should be formed and collaboration in developing a structured programme like ‘Islamic Finance CEO School (IFCS)’ should be pursued.
Cambridge Islamic Finance Leadership Programme, as developed by Cambridge IF Analytica, is an excellent initiative in this respect. However, it requires great commitment to make it happen and it requires current leaders to take charge and carry it through to the end. The creation of a large pool of strong leaders, serving not only the Malaysian market but also the global market, should be the legacy that the current Islamic finance industry leaders should leave behind.