Nestled in a tree-lined gorge on the main railway line between London and Scotland, Durham University is the unlikely seat of Islamic finance teaching in the United Kingdom.
Here, in the third-oldest university in England, a world heritage site, students have been coming to learn the principles of Islamic finance for more than a quarter of a century.
Now other UK universities want to emulate the worldwide reputation for Sharia finance that Durham has achieved. A swathe of universities – University of East London, Reading University, Aston University, Warwick University, Bangor University to name just a few – are launching Islamic finance courses.
With Islamic finance investments forecast to exceed US$3.4 trillion by 2018, the UK government wants to make London one of the centres for Sharia-compliant finance of the world.
Fifty-nine schools across Britain are teaching Islamic finance up from fewer than 10 a decade ago, according to the University of East London. Courses range from short, executive education programmes, designed for people already working in finance, to full undergraduate degrees, masters and PhDs.
“There is a proliferation of programmes in Islamic finance – opening up at universities,” says Nora Ann Colton, the deputy vice chancellor at the university in East London. “There are people who are already working in finance who see Sharia-based banking as an opportunity.”
Mehmet Asutay, a professor of Middle Eastern and Islamic political economy and finance in the business school at Durham University, says: “When the 9th Islamic economic forum came to London in October 2013, and both the [UK] prime minister and the mayor of London spoke at it, that encouraged a lot of other universities to move on this. The prime minister spoke about financial education, training, and ethics of Islamic finance.”
At Durham, as well as the 25-year old PhD programme, a prestigious summer school has been running every August for the past decade and there are 36 masters students, working full time.
There were about 260 applications for the courses last year, with demand expected to increase.
Prof Asutay says students apply to Durham from around the world – he has Chinese, South Korean and Malaysian students among the current cohort – partly because of the well-established reputation that UK universities have for teaching critical thinking. “This is what sets our Islamic finance teaching apart from that in other countries,” he says.
While 95 per cent of the students are from overseas, they are not all Muslims.
Durham competes with Malaysia for students, but Prof Asutay says the heart of Islamic finance remains the Arabian Gulf – where the volume of assets and wealth gives it the momentum to grow and flourish.
Despite this, he says, the Gulf region has not strongly pushed to develop the education offerings in Sharia finance, which, he says, is weaker than it should be.
Almost all the Durham students will go on to work in the financial sector, rather than remain in academia.
“They will take jobs for new graduates where they can, whether in conventional finance or Islamic finance,” Prof Asutay says. “Many will go back to their own countries or go to Malaysia, the Gulf or South East Asia.
Germany born Sandra Ernst, 26, studied in the UK before moving to South East Asia. “My time at Durham enabled me to gain the theoretical foundation for a career in Islamic Finance,” she says.
“I am in Kuala Lumpur now where I work for an Islamic REIT [real estate investment trust] that is currently setting up a new business arm in private equity real estate.”
Prof Asutay is doubtful the number of courses that have sprung up is simply because of the UK government’s decision to promote Islamic finance in London.
“In terms of finance, the Arab market has always trusted the London market. London will be an important centre for Islamic finance, but it will not be the global centre,” he says.
“The country that could challenge the Gulf is Indonesia.”
His point is echoed by Harris Irfan, the managing director at European Islamic Investment Bank.
“Islamic finance qualifications by themselves are not proving helpful at this point in time, just because of the size of the institutions,” he says. “The Islamic finance sector in the UK is very small and dedicated Islamic banks are also small. They don’t have the space for graduate trainees.”
There are now five Sharia -compliant banks with a presence in the UK. These are Abu Dhabi Islamic Bank, Qatar Islamic Bank, Al Rayan (formerly the Islamic Bank of Britain), Gatehouse Bank and BLME. But the total assets under management in those banks is just US US$19 billion. In comparison, Barclays has assets of £1.4 trillion.
Inevitably, it seems many British universities have introduced these courses as a way of attracting foreign students, who pay significantly higher fees than home-grown students.
The second and third tier of smaller British universities want to increase their student numbers and they do this by launching degrees for niche markets.
Wayne Evans, who is an adviser on international strategy to the City UK organisation, which promotes the financial services sector in the capital, says the availability of university courses have not yet been a factor in the growth of the Islamic finance sector in London.
“Most of the people in the sector have come from a conventional background,” he says.
“But we are all hoping that Islamic finance will continue to grow and that there will be opportunities for the younger people who are now graduating fromthese courses.”
Mr Evans sits on the board of the Islamic finance centre at the University of East London, which is located in a region with a population that is almost a 33 per cent.
“The university is reaching out to the sector and always looking for people to take interns. But they could do more to integrate with the profession,” he says.
There is also a worry that in a couple of years time, there will be more university graduates leaving Islamic finance courses than there are jobs available.
Still, if graduates cannot find a job in Islamic finance, Mr Evan says he is confident conventional finance will still sweep them up.
“A lot of places want people with qualifications in both. Realistically, that is good for young people. Are you going to go and work for a small company or go to a Standard chartered or an HSBC, where there are lots of opportunities for you to get on?” he says.
Unlike Prof Asutay, Mr Evans is more upbeat about London’s ability to become an Sharia-based finance centre.
“We are the western hub for Islamic finance –no one else is competing. Since 2001 the government has put in place a lot of legislative changes so that we can do this – and it is now the biggest centre,” he says.
“There are some assets under management in Ireland and Luxembourg, but nothing in comparison with London.”