The Federal Shariat Court’s (FSC) groundbreaking decision in April 2022 signalled a major shift in Pakistan’s financial sector by aiming to eliminate interest from the economy by December 2027. As the financial sector prepares to transition to an Islamic financial system, the effort to establish an interest-free banking and financial framework encounters several challenges. One of the primary obstacles is the need to improve the expertise of human resources within the financial sector, ensuring they have a thorough understanding of Islamic finance principles and the necessary depth of knowledge. Additionally, enhancing the knowledge and skills of current banking professionals is a top priority.

According to the latest Islamic banking bulletin of the State Bank of Pakistan (SBP), Islamic banking deposits market share has reached 23.2 per cent, totaling over Rs 6.75 trillion, while the asset base has grown to Rs 8.99tr. Financing shares have also increased, reaching Rs3.33tr, accounting for 27.4pc of the market size. The number of banking branches and windows has surged to over 6,870.

According to banking insiders, over 85pc of the new branch licenses issued for 2024 are allocated to Islamic banking branches, indicating a substantial shift in Pakistan’s banking landscape. Industry experts estimate that this transition will require the retraining of around 150,000 banking professionals and the annual hiring of approximately 7,000 new employees.

In this context, preparing human resources for the Islamic finance sector requires a coherent strategy consisting of four main components: a) Extensive retraining of current banking professionals in Islamic banking and finance to enhance their knowledge and skills. b) Training recruits in Islamic finance principles and products to meet industry demands. c) Integrating Islamic finance into the curriculum of business schools and academic institutions, ensuring it is part of educational frameworks. d) Ongoing learning and skill development for existing staff.

Industry experts estimate that transitioning to Shariah-compliant finance will require retraining about 150,000 banking professionals and annual hiring of 7,000 new employees.

Firstly, retraining the existing staff involves a blend of specialised training and unlearning outdated concepts to embrace the principles of Islamic finance. This requires implementing tailored educational programmes and workshops that cover Sharia-compliant financial practices, ethical considerations, and specific regulatory frameworks associated with Islamic finance.

Secondly, training recruits encompasses providing orientation programmes that cover fundamental concepts of Islamic finance, understanding products offered by Islamic financial institutions, education on Sharia compliance and regulatory requirements, and the ability to distinguish between Islamic and conventional banking systems and products.

Integrating case studies with practical examples, role-playing activities, simulations, and on-the-job training are vital components of this approach. Furthermore, implementing hiring filters to prioritise graduates with studies in Islamic finance and banking subjects is necessary to ensure the recruitment of individuals with the right mindset for the sector.

The third facet of the strategy entails integrating Islamic finance, banking, and economic principles into the educational framework, beginning from primary education through to the curriculum of business schools as core subjects. This guarantees that graduates acquire skill sets that match contemporary market needs, departing from obsolete theories of conventional financial systems. Realising this goal demands substantial reassessment within academic spheres.

In schools and colleges, it’s crucial to establish dedicated modules that concentrate on Islamic finance literacy, highlighting ethical principles and the foundational concepts of Islamic trade and business regulations.

Conversely, at the university level, it’s imperative to offer specialised courses and advanced pathways in Islamic finance, Islamic banking, and Islamic accounting within business, finance, and accounting programmes.

In this context, the Sindh Higher Education Commission (HEC) has initiated action by issuing directives to all universities in the province, mandating the inclusion of Islamic finance as a core subject and integrating Islamic finance components into relevant courses.

Recently with the support of SBP, the Punjab Higher Education Commission has also issued a letter to the Universities in the province to introduce Islamic Finance as part of their course offering in view the national requirement. Similar endeavours are crucial from the federal HEC and other provincial bodies to guarantee the holistic integration of Islamic finance education throughout educational institutions.

The fourth aspect of this strategy emphasises ongoing learning and skill enhancement for staff already involved in the sector, aiming to enhance the quality of services provided to customers. This involves giving precedence to professional development programmes, leadership pathways, refresher courses, and active participation in conferences, webinars, and workshops to stay updated on industry trends.

In Pakistan, the Centre of Excellence in Islamic Finance (CEIF) at IBA Karachi has played a crucial role in fostering human capital for Islamic finance, backed by support from the SBP and the Islamic finance sector.

Furthermore, the National Institute of Banking & Finance, the training wing of SBP, spearheads the delivery of Islamic finance courses for bankers and finance professionals.

Several universities, such as the Institute of Management Sciences Peshawar, Lahore University of Management Sciences, and Comsats, operate vibrant Islamic finance centres, aiding in sectoral advancement. Additionally, other universities are ramping up efforts to meet modern financial sector requirements.

By executing these strategies, we can diminish the human capital disparity necessary for transitioning to Islamic finance, cultivating a collaborative atmosphere that mutually advantages both sectors and equips students for successful careers in Islamic finance.

The writer is the director of IBA’s Centre for Excellence in Islamic Finance.

Email: aasiddiqui@iba.edu.pk

Published in Dawn, The Business and Finance Weekly, June 10th, 2024