The Emergence of Islamic Finance, career opportunities in Islamic Finance, and what the industry is looking for (Career briefing to International Islamic University of Malaysia IIUM in April 2017)

1. THE EMERGENCE OF ISLAMIC FINANCE
IN MALAYSIA
AMIR ALFATAKH YUSOF
ISLAMIC BANKING

2. SPEAKER PROFILE
1. Started in Conventional Banking Sales for OCBC Bank Retail, Business Banking and
Corporate Banking, Kuala Lumpur Main Branch (1997-2003)
2. Grabbed opportunity to become OCBC Bank Islamic Banking Windows (IBW) Product
Developer (2003-2005)
3. Led the Islamic Banking Personal Financial Services to build business (2005-2006)
4. Jumped : Kuwait Finance House (2007), ABN AMRO for IBW (2007-2009), Al-Khaliji
Commercial Bank Qatar (2009-2011), AmIslamic Bank (2011-2012), Standard
Chartered Saadiq (2012-2015)
5. Now Acting Country Head for IBW UOB Malaysia (2016-Present), recently launched IBW
business (July 2016)
6. Committee Member of AIBIM’s Qard WG, Investment Account WG, Tawarruq WG.
Industry awareness task-force with BNM. IBFIM trainer (Deposits & Financing products).
7. Maintains a free-to-use website Islamic Bankers Resource Centre
(https://islamicbankers.me/)
AMIR ALFATAKH
UITM, HULL (UK), IIUM

3. INTRODUCTION TO ISLAMIC
BANKING INDUSTRY
OUTLOOK BEYOND 2017

4. INTRODUCTION
On Par
Recent developments on
Shariah views or
Business Practices = on
par with conventional
features & global
standards
Islamic Banking to the Forefront
For some time now, Islamic Banking has been the focus of the
Banking world, arising from greater acceptance and faster
growth in the industry than the conventional space. There is
also greater awareness on the structures being offered
Ethical Banking
Desire to include Islamic
Banking as “Ethical Banking” in
practice puts responsibility to
Shariah Committee to re-look at
banking rules more carefully
Segment Banking, Not Religion
Better understanding that Islamic Banking is NOT religion banking,
especially for non-Muslim customers. It is an alternative model or
infrastructure, that follows certain rules which complies with the
requirements of the Shariah

5. THE GLOBAL ARENA
Islamic Assets in 6 core markets (Qatar, Indonesia, Saudi Arabia,
Malaysia, UAE, Turkey) set to show double digit growth in 2016.
The YOY growth is expected to sustain at 16%-17% growth until
2020.
Malaysia is expected to sustain the 2015 growth of 11% for 2016-
2017
Source: World Islamic Banking Competitiveness Report (EY2016)
The Global Profit of Islamic Banks set to TRIPLE and is in
line to reach USD$1.6 trillion in Assets by 2020.

6. OPPORTUNITIES ABOUND • Middle East
• North Africa
• South East Asia (+Malaysia)
Highest
Growth
• Eastern Europe / Turkey
• Hong Kong / Singapore
• United Kingdom
Emerging
Markets
• China
• Western Europe
• Russia
Untapped
Potential
 Overseas work opportunities for Islamic Banking
Specialists (4-6 years background)
 Active hiring of experienced individuals esp for
short-term contracts in Middle East
 Consultancy work / start-ups
 Support Areas – Legal / Advisory / Shariah
Consultancy / Operations / IT
 Growth in Islamic Financial Institutions:
 Local Islamic Banks
 Locally Incorporated Foreign Islamic Banks
 Islamic Subsidiaries of Local / Foreign Banks
 Development Financial Institutions (DFI)
 Islamic Banking Windows of Conventional Banks
 Islamic Investment Banks
 Takaful Companies

7. GROWTH OF ISLAMIC
BANKING
BECOMING AN ISLAMIC
BANKING HUB
There is an on-going push by BNM to
position Malaysia as the foremost leader
in Islamic Banking products and services:
 Clear Guidelines
 Business-Friendly
 Close Supervision
 SAC Oversight
BNM target for the industry : 40% of all
Banking Assets to be booked under
Islamic Banking by 2020
ISLAMIC BANKING FINANCIAL
INSTITUTIONS (MALAYSIA)
excluding DFI & IBW
1. Affin Islamic Bank
2. Al Rajhi Banking & Investment Corp
3. Alliance Islamic Bank
4. AmIslamic Bank
5. Asian Finance Bank
6. Bank Islam
7. Bank Muamalat
8. CIMB Islamic
9. HSBC Amanah
10. Hong Leong Islamic Bank
11. Kuwait Finance House
12. Maybank Islamic
13. OCBC Al Amin
14. Public Islamic Bank
15. RHB Islamic Bank
16. Standard Chartered Saadiq

8. BUT WHY IS ISLAMIC BANKING GROWING?
BNM
Push
Strong support and
incentives given by
government to support the
BNM vision and desired
infrastructure
Market
Demand
There is a sizeable
demand for Islamic
products, based on a more
ethical & fair adoption of
banking practice
Shariah
Compliance
Shariah requirements allow
for “compliant” activites
which allows for a bigger
access to investors.
 Asset Backed transactions – Not
overly-geared as deals are based
on real assets
 Prudent products – the limited
range of “sophisticated” products
limits the risks
 Financing of stable activities – real
economies
 Growing Confidence – removal of
many contentious conventional and
“old skool” Islamic Banking
practices
 Demand by Customers

9. DEMAND BY CUSTOMERS
MUSLIM CUSTOMERS
i. Greater awareness of Shariah
requirements in Banking
ii. Comfort of being involved in
Shariah-compliant businesses only
iii. Good measure of fairness
iv. Prefers “simple to use” products
NON-MUSLIM CUSTOMERS
i. Attractive features of Islamic
Products (at par)
ii. Reasonable treatment for penalties
on their financing
iii. Fair terms and conditions = maximise
financial benefits
iv. No inclination to religion, just on
features and benefits
FUN FACT : ON AVERAGE, NON-MUSLIMS MAKES UP TO 80% OF CUSTOMERS-BASE FOR ISLAMIC BANKING
Excluding the top 6 local banks such as Maybank, Public Bank, CIMB, Hong Leong, Bank Islam & AmBank
11%
54%
35%
Non-Muslims

10. BANK NEGARA MALAYSIA AS THE DRIVER
ISLAMIC FINANCIAL SERVICES ACT
2013 (IFSA)
i. The Islamic Financial Services Act 2013 (IFSA)
was introduced to re-align all the existing Acts
governing Islamic Banking into a single Act.
ii. The scope of business has been re-defined to
encompass all entities offering Islamic products
and services
iii. Some contractual nature was also re-defined
iv. The responsibilities of all the stakeholders in
an Islamic Banking business is emphasized,
especially Shariah Committee
BNM POLICY DOCUMENTS &
GUIDELINES
i. Since 2013 when IFSA was introduced, BNM
had released multiple Guidelines and
Concept Papers to be discussed with the
industry players
ii. Comments and feedback on the intended
guidelines were received from the various
industry players
iii. Shariah Advisory Council (SAC) of BNM is
also consulted before the paper is finalised.
iv. The final version : Policy Documents are
introduced to Banks to comply

11. SHARIAH AS THE ULTIMATE LINE OF DEFENSE
WITH GREAT POWERS COMES
GREAT RESPONSIBILITIES
i. IFSA 2013 outlined the roles and
responsibilities of bank’s Shariah Committee
ii. Shariah Committee are required to discuss,
deliberate and decide on all matters
pertaining Islamic Banking in the bank
iii. Responsibility is on the Shariah Committee to
make quality decisions, backed by proper
research and robust deliberations
iv. Stiff penalties for negligence : RM25 million
fine and/or 8 years jail
SHARIAH GOVERNANCE
FRAMEWORK (SGF)
i. One of the important requirements by BNM
on the operations of Islamic Banking business
is the establishment of the Shariah
Governance Framework (SGF)
ii. SGF governs the operations of the Islamic
Banking business including all review and
oversight functions in the bank
iii. SGF outlines the roles and responsibilities of
Shariah Committee and all other internal
committees for Islamic Banking
iv. Detailed requirements to be set by bank.

12. MISCONCEPTIONS ABOUT ISLAMIC BANKING
More
Expensive
Name
Change
Back
Door
1. Is Islamic Finance more expensive
due to Selling Price?
2. Additional Documents = More
Legal Fees?
1. Is Islamic Finance just a change in
terminologies?
2. At the back end, is it still the
same processes used?
1. Are the products really Islamic in
nature?
2. Are the end result all the same
as a conventional Product?
1. No. Rebate (Ibra’) guidelines
bring us to par as conventional
2. No. Additional legal fees will be
a small nominal stamping costs
1. It is a revamp of documents and
clauses consistent with Shariah
2. No. 80% are same processes,
additional Shariah process exists
1. The tenets of each contract,
Maqasid and intention are met
2. End Result is the same, with
operationalising Shariah rules

13. EXAMPLES OF KEY
DIFFERENCES (BANKING
MODEL)
A conventional bank is designed to have 2 main functions i.e. 1) Collect
Deposits and 2) Give Loans. As such, income and pricing becomes
important when introducing their products.
In Islamic Banks, while income and pricing remains important, there is also
consideration on why a product is launched and the impact it has on customers.
Not all fees can be charged, and not all features can be used in Islamic
Banking. The Islamic Banking Model itself is not a standalone arrangement.
There is linkage between Sources and Application of Funds
Sources of Funds
Pool of Funds
Application of
Funds
Islamic Banking
Contracts
Income from
Activities
Distribution of
Income (less
Expenses)
TREASURY
• Manage liquidity end to
end
• Invest in compliant
instruments
• Manage cost of funds
OPERATIONS
• Detailed workstream
• Commodity Desk
• Sequencing & Aqad
Completion
LEGAL
• Contractual Relationships
• Aqad & Transactional
Documents
• Islamic Terms &
Conditions
SHARIAH REVIEW &
AUDIT
• Execution of documents
• Completion of Aqad
• Shariah Non-Compliant
Events
SHARIAH COMMITTEE
• Deliberation of New
Products & Issues
• Decisions on SNC Events
• Approval of Products,
Processes, Structures

14. EXAMPLES OF KEY
DIFFERENCES (PRODUCT)
While most of the features between Islamic Banking and
Conventional Banking products are the same, there are
differences arising from Shariah requirements that provides
better justice and fairness to the customers.
Shariah Committee plays an Important role to regulate the rules
against business requirements. Consideration of fair-play and
justifiable charges forms part of the decisions made by Shariah
Committee
For each product, Shariah Committee is responsible to assess
the features, conditions, operations, and fees & charges.
Calculation of Installment and Profit
Calculation based on Base Rate + Margin Calculation based on Base Rate + Margin,
capped to the Maximum Ceiling Rate
Facility Amount Over Financing Period
Increases as amount is compounded and
capitalised as new Principal Amount
Capped at the Maximum Selling Price
agreed in the Aqad
Early Settlement Charges
Based on Lock-in period, ES charges =
1.0% of the Amount Settled
Not Allowed (unless to recover actual
costs incurred)
Penalty Rate (Punitive) on Non Performing Accounts
Pre-Judg: Up to BR+3.5% x new Principal
Post-Judg: Up to 8.0% x new Principal
In-Ten: Up to BR+3.5% or CR x O/S Princ
Off-Ten : IIMM Rate x O/S Balance
Late Payment Charges
1.0% on the amount in arrears
compounding into new Principal
1.0% on the amount in arrears non-
compounding into new Principal

15. EXAMPLES OF KEY
DIFFERENCES (STRUCTURE)
The way a Conventional Banking Product
is designed and launched is as follows:
1. There is a market demand
2. There is a competitor product
3. The same structure is copied
4. Main document : Loan Agreement or
Deposit Application
5. Submission to Senior Management
6. Submission to BNM
7. Launch Product
8. Review Product
9. Amend if necessary
The way an Islamic Banking Product is
designed and launched is as follows:
1. There is a market demand
2. There is a competitor product
3. The structure is researched by Shariah
team for suitability and issues
4. The structure is deliberated by Shariah
Committee for a decision and resolution of
issues
5. Main Documents : Depending on the
approved structure (Murabahah,
Wakalah, Ijarah, BBA, Tawarruq, etc)
6. The structure is assessed internally to
ensure ability to meet Shariah
requirements, including operations
7. Submission to Senior Management
8. Submission to BNM (including Shariah JPIT)
9. Launch Product
10. Review Product, including Shariah Review
11. Amend if necessary, with Shariah
Committee approvals

16. CHALLENGES AND ISSUES MAKING THINGS WORK
WITHOUT COMPROMISE

17. EVOLUTION OF ISLAMIC
BANKING
Since the introduction of Islamic Banking Act
in 1983, the industry has slowly evolved in
terms of the following:
 Guiding principles of Islamic contracts
by BNM
 Suitability of products towards
customers needs
 Operational efficiency of Islamic
products and services
 Shariah increased depth and quality of
decision making
Principles
discussed
with industry
Draft
Robust
discussion on
structure
Concept
Detailed and
specific
instructions
Policy
Looking at
Market
Needs for
design
Idea
Based on
principles
and
competition
Develop
Catering for
specific
needs via
new design
Enhance
Shariah looks
at existing
regulations
Guided
Questions the
status quo
and directs
compliance
Discuss
Provides
solutions
based on
specific
research
Research

18. OPPORTUNITIES
Becoming
• SHARIAH COUNTER
Development
• ISLAMIC REGULATIONS
New Channels
• FINTECH
 Islamic Banking & Finance is Expanding at Rapid Rate
 11% growth in 2015
 Companies wants to access Islamic Investors (30%) by
becoming Shariah Compliant Counters on Bursa
 Demand for “fairer” product terms and machanism
 Clear Guidelines by BNM
 Development of Investment Account Platform (IAP)
 Close Collaboration with Middle East
 Fintech for Islamic is being developed

19. OPERATIONALISING REQUIREMENTS
EXTERNAL
• BNM Policy Documents
• IFSA
• Laws of Malaysia
• Best Practices
INTERNAL
• Shariah Rules
• Internal Guidelines
• Custom (Urf)
• Customer Needs
UNDERSTANDING
REQUIREMENTS
Policy & SOP
Product Design
Processes & Controls
Documents
Operations
System
Accounting & Finance
Ensuring the requirements are captured into the products and processes

20. BUSINESS CHALLENGES IN ISLAMIC BANKING
The key challenge in Islamic Banking is the
BALANCE between Shariah Requirements &
Business Needs
Additional Shariah Requirements becomes a
RISK for the Bank if fail to be observed
Inadequate Controls, Human Error and
Wrong Understanding of Requirements often
leads to SHARIAH NON COMPLIANT
EVENTS (SNCE)
With IFSA 2013, Banks do not have a
choice but to comply
Shariah Business

21. THE ISLAMIC BANKING CAREER WHY CHOOSE SUCH A
CAREER?

22. CAREERS IN ISLAMIC
BANKING
Regulatory
Changes
New
Shariah
Structure
New
Markets
Innovation
Alternative
Career
Market
Demand
1. CHANGING REGULATORY ENVIRONMENT
New development in the way Islamic Banking is being
operationalised
2. SHARIAH STRUCTURE & REQUIREMENTS
Constructive development of new requirements based on new
opinions
3. NEW MARKETS & GLOBAL INCLUSION
Regional opportunities, global growth and demand for expansion
4. INNOVATIVE TECHNICAL PRODUCTS
Adapting to new challenges and requirements for innovation
5. ALTERNATIVE CAREER DEVELOPMENT
Shift from Conventional Banking into Islamic Banking
6. MARKET DEMAND
Customers seeking Shariah Compliant products

23. YOUR FUTURE AHEAD OF YOU
What happens
after I
graduate?
Which interest
should I go for?
Is there a long-
term future?

24. TOP 10 ISLAMIC BANKING
POSTS (IN ORDER)
• Operationally aware of the structuresTrade Financing
• Research and solutions providerShariah Dept
• Knowledge of civil law and Shariah
requirementsLegal Dept
• Sophisticated solutions for treasury &
money marketFinancial Markets
• Syndication structuring & Sukuk
structures
Corporate
Financing
• Deposits solutions for retail and
corporates
Wealth
Management
• Understanding intrinsic Shariah risks
Risk (Ops /
Market)
• In-depth understanding of products and
servicesSales
• Detailed understanding to comply with
rulesAudit & Review
Product Development
The Product Development remains a
key component in an organisation. It
remains highly specialised and in
demand. Small pool of talent.
However there are also other areas
where candidates may consider, and
equally in demand.

25. GETTING INTO PRODUCT DEVELOPMENT
The Perception that Product Development role is
difficult, with limited growth prospects.
However, personnel in the role often experience:
1. Understanding of impact of products on Sales
& performance
2. Increased technical abilities
3. Appreciation of compliance to regulations
4. Improved strategic thinking

26. EYE OF THE STORM : PRODUCT DEVELOPMENT
Originate Design &
Develop
Governance Implement Comply
Sales
Customer
Legal
IT / System
Finance
Accounting
Business
Shariah
Risk
BNM / S-C
Branches
Channels
Operations
Audit
Compliance
ReviewCompetitor
Research
A Product Development role allows for invaluable access to almost ALL functional areas in a
financial institution, as well as industry regulators.

27. WHAT WE LOOK FOR IN A CANDIDATE?
Banking
Experience
Energy
Solve
Explore
Learn
PDT
INNOVATORS – Adapt to the fast pace
RESEARCHERS – Learn & Explore possibilities
NEGOTIATIORS – Understand resource limitation &
improvise
PROBLEM SOLVERS – Analysis of feedback &
rectification / enhancements
CRITICAL THINKERS – Fastest / Most Efficient solutions
DAMAGE CONTROLLERS – Ability to dissect problem &
identify root cause
STRATEGY ENABLERS – Close relationship with all
levels of management and support units

28. WHAT IF I CANNOT GET IN?
Graduate as Qualified student
then Intern in Islamic Banking
Department
Get Involved / Recognised in
Industry Events, Seminars and
build strong network
Gain Banking Experience is key
areas, even if with Conventional
Bank, but with intention to move
to Islamic Banking
Difficult to enter into a Product Development position directly, as it is a senior position (with
relevant experience). Existing talents “circulate” within the industry with little exits.
TRY TO DIFFERENTIATE YOURSELF AND CREATE A VALUE

29. BREAKING THE BARRIER ALTERNATIVE STRATEGIES
ENTERING INTO THE INDUSTRY

30. ISLAMIC SALESMAN
VITAL SKILLS LEARNED VIA A SALES
FUNCTION:
1. Proper Communications
2. Understanding Product Details
3. Learn Customer Behaviour
4. Teaches Analytical Skills
5. Build Strong Character
6. Provide actual Operational Skills &
Experience
There’s a perception that sales is a lower
ranking job that do not provide prestige to
the personnel. But that is the opposite of the
truth.

31. ISLAMIC FINANCIAL
TRADER
VITAL SKILLS LEARNED VIA A FINANCIAL
MARKET ISLAMIC TRADER FUNCTION:
1. Enhanced Analytical Skiils
2. Learn about Risk and Returns
3. Discipline when trading
4. Quick Decision Making
5. Performance Based Incentives
6. Understand Shariah principles for
Compliant trades
In Islamic Financial Markets, an Islamic Trader
or Dealer is a rare species. That explains
why their salaries are the best in the market!

32. SHARIAH DEPARTMENT/
COMMITTEE
VITAL SKILLS LEARNED VIA A SHARIAH
COMMITTEE FUNCTION:
1. Understanding Product Details
2. Learn Industry Behaviour
3. Enhance Analytical Skills
4. Inquisitive Frame of Mind
5. Engaged Discussion amongst Peers
6. Improved Research for Understanding
There’s high expectations for Shariah
Committee to ensure their decisions are
based on the right facts and considerations

33. ISLAMIC LEGAL
VITAL SKILLS LEARNED VIA A LEGAL
DEPARTMENT FUNCTION:
1. Understanding Product Details
2. Understand Current Decisions on Islamic
Banking
3. Continuous improvement of Islamic Legal
Documents
4. Incorporation of Shariah requirements into
Legal documents
The role of the Legal Department of an
Islamic Bank cannot be underestimated. It
builds up the backbone of a valid Aqad.

34. ISLAMIC COMPUTERS
VITAL SKILLS LEARNED VIA AN ISLAMIC IT
SPECIALIST FUNCTION:
1. Understanding Product Details
2. Unique & Robust Design for Islamic
Products
3. Control Mechanism in System complying
with Shariah
4. Alternative calculation method such as
Ibra, Tawidh
5. Additional Processes to cater for Aqad
requirements
6. Islamic Fintech
One of the cornerstone of Islamic Banking is
the reliance on evidence for the transactions
completed. With Computers retaining these
trails and evidences, job of Shariah is simpler

35. OTHER OPTIONS TO CONSIDER
Consultancy
AcademicRegulator

36. FOCUS PLAN YOUR APPROACH AND
STICK TO IT

37. KEEP EYES ON THE PRIZE
1. BUILD YOUR PERSONAL BRAND
2. LEARN UP & READ
3. KEEP IN TOUCH WITH THE INDUSTRY
4. HAVE MEANINGFUL DISCUSSIONS
5. HAVE YOUR OWN OPINION BUT LISTEN TO
OTHERS
6. TAKE A JOB AND MOVE WHEN SUITABLE
7. TAKE AN INTEREST IN CURRENT ISSUES
Many graduates coming into Islamic
Financing and Banking lack the
understanding of what is required in terms of
approach and knowledge. They gave up.

38. OUR WISHLIST
Robust Alignment between BNM SAC & BNM Policy
Makers
Increased Exposure of Malaysia's Shariah
Committee to International Standards
More "Ethical Banking" & "Value Based"
Banking model, not purely profit driven
More Constructive discussions between
Academia & Practitioners
More Entrants from Academia & Shariah
Background into Banking & Finance (and vice versa)
Islamic Banking Journey is a long journey yet.
100+ years of conventional
banking
vs
40+ years of Islamic Banking
We need your support from all levels.
Everyone plays a role in Islamic Banking
1
5
2
4
3

39. SUMMARY
1. There are huge opportunities in Islamic Banking as it is growing globally
2. Strong support from regulators and Shariah community
3. There are challenges that needs to be addressed and resolved
4. Make a career in Islamic Banking, be part of the SOLUTION
5. Position yourselves for the job before entering the job market
6. Identify which areas that interest you the most and focus
7. Most of all, SUPPORT ISLAMIC BANKING

40. THANK YOU FOR LISTENINGL E T ’ S W O R K T O G E T H E R T O B U I L D I S L A M I C B A N K I N G
QUESTIONS AND ANSWERS