Daud Vicary

Richard Thomas

The Changing Islamic Finance

L a n d s c a p eIn this interview, Joy Abdullah taps two leading personalities in the field to get their views on the changing landscape of Islamic Finance

As the global Islamic finance industry shoots to the stars approaching USD 2 trillion in terms of its total assets and London, Dubai, Bahrain and Kuala Lumpur are busy jostling for the title of global Islamic finance hub, a couple of critical issues have emerged.

Growth has brought about many a pressing need—adapting to technological changes; cultural approach to work & life from the new generation of talent going into the workforce; knowledge and understanding of governance—to name a few. These needs are making the industry and academia re-look at how qualifications and skill developments take place. Yet unlike other professional qualifications there is, as yet, not one single global standard that the industry can use.

To get an understanding on how these critical needs can be addressed jointly by the global industry and academia I met two renowned industry leaders—Mr. Daud Vicary Abdullah— President & CEO of INCEIF-The Global University of Islamic Finance and Mr. Richard Thomas—Chief Representative of Gatehouse Bank Kuala Lumpur.

Daud Vicary Abdullah has been in the finance and consulting industry for over 40 years, across Asia, Europe, Latin America and the Middle East. He started his career with Lloyds Bank and served for almost a decade as Director of Deloitte Consulting where he was responsible for setting up the firm's Global Centre of Excellence for Islamic Finance based in Malaysia and involved in developing and running Shariah Review Programs and the transformation of financial institutions to provide Islamic financial services. Since 2002 he has focused exclusively on Islamic finance and is the co-author of the book “Islamic Finance: Why It Makes Sense”.

Richard Thomas has spent the last 30 years focusing entirely in 'Islamic Financial Services', and has devoted himself to establishing the Islamic economic model as a viable alternative in the heart of the City of London as well as in an international context. He worked for Saudi International Bank, United Bank of Kuwait and Arab Banking Corporation, helping set up the Islamic asset management units in each one. He is Chairman of the working groups of the UK Islamic Finance Secretariat and a member of HMG Islamic Finance Task Force. In 2010, he received the Order of the British Empire from Her Majesty Queen Elizabeth II, in recognition of his contribution to the UK Islamic Financial Services industry.

INTERVIEW

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Q: Both of you have had long careers in conventional and Islamic finance, can you share some of the highlights of your career that has impacted on your leadership styles?

Daud:Having worked across the globe, the variety of experiences has provided me a rich repertoire of learnings. This has been helpful when managing or interacting with global audiences who come from various walks of life.

One of my career highlight that's still fresh in my memory is the challenge of leadership and its functional role as I moved from being a supervisor to manager and onto being a Partner and CEO. A boss of mine, in my first managerial role, encouraged me to listen more and not to assume that I should know everything. His advice stands good even today.

Secondly building a good team around you is of paramount importance. As a leader you look good when you have a good team that functions well.

The first time I worked out of Britain was a shock. It was Switzerland and English was not that widely understood and the office was much stricter than the UK.

Richard: At the first point when responsibility for success or failure seems to lie entirely on your shoulders, that's when the risk of vertigo can set in, do I become difficult and dogmatic or do I embrace a style of trust and mutual management support, that is the time you truly assess the merits of your leadership style, your governance structures and your team. At this point trustworthy and reliable senior executives and excellent Board communications become evidently your 'best friends' in management.

Simultaneously you also suddenly recognise the critical importance of continuous professional development to back up early training and education. My style has always been to lead confidently because there is nothing that I am asking others to do that I can't do myself. In the increasingly complex world of finance, IT, regulation and mathematics I have found that that maxim has limits. The point comes when you ask, 'could I actually run that model myself without a team to support me' and then your leadership style starts to mature from a purely 'executive' perspective to one worthy of a Board Room.

I found the transition from CEO to Chairman harder than the road to CEO. These are very different leadership positions, even when the Chairman position is an executive one. Leading Cross Border is a much bigger challenge than anyone expects. The differences in working cultures can be so dramatically different that entire leadership tool sets have to be set aside.

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To adapt to change you have to stay in touch, to stay in touch you need a common language and this is best done again via CPD with a broad base of workforce. It's no good speaking Latin in the Board if the workforce is speaking Visual Basic 6!

Q: You've worked in several countries; could you give us a snapshot view of some of the differences in working practices amongst them?

Daud:I've been fortunate to have lived and worked in over 40 countries. One advice that is good to follow is go where the locals go and assume nothing. Cultures across countries and organisations are very different and therefore what may be correct in one place could be a major error in another. Some cultures like hierarchy and to be told what to do every day, while others at the other extreme, need freedom of expression and hands off approach. Being able to adapt rapidly from one to another can be a challenge.

Richard:I have worked in too many countries to be able to count and recall. I have staffs who tell me that they have been led by Brits and Americans and the difference between the two is pretty big. The criticism that I hear most often laid at the Brit's door is 'we can't work out what you want, Brits give clues but are too polite to be direct, and this is not a problem for Americans'. I think that this is very true and we can all, from every country, spend time to study where our own local cultural norms can inhibit the growth and expansion of our business into new markets. I also consider generational gaps as 'new countries'. There are very different working practices being applied by Millennial's and Gen Z to the generation that I trained with.

Q: Based on your experience, do you feel there is a significant difference in organisational management and culture of a conventional financial institution and that of an Islamic finance institution?

Daud:There can be. For a subsidiary that's in the Islamic finance sector, much of the culture of the mothership has to be followed and it can be difficult for the Islamic values and culture to be expressed. Joint initiatives on the social side can be difficult when different types of food, drink and entertainment divide rather than close gaps. However a stand-alone Islamic financial institution has a better opportunity to express itself and lead by demonstration and example although this is not always the case.

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Richard:Organisational management within an Islamic Finance institution does have specificities that are different to conventional banks and these can be quite self-evident. I tend to dwell on the covert rather than overt differences. At a general level of Corporate Governance the role of the Shariah committee is oft debated by regulators and the risk of 'shadow boards' exists. The relationship between depositors and shareholders in Islamic Banks is different to that in conventional and the impact of that is only just being properly explored. The role of transparency, trust, mutual respect and what needs to be done to earn it within an organisation also differ immensely. At the height of the 2008 crisis the regulators perceived that it was essentially cultural issues at the heart of the real wrongs and behind the dangers exposed to society from within the financial system.

Q: Looking at the picture from bottom up-in your opinion, do you feel organisational culture has a significant role and impact, not just upon the organisational goals but upon the global industry and the country goals?

Daud:In my experience yes it has. That is why it is so difficult to change cultures from the top down unless you have a third party intervention or a person to focus on as a leader in leading organisational cultural change. For example in M&A's sometimes the most difficult thing to manage is the integration of the joining cultures. If the big boy consumes the small boy then the big boy's culture will take over, although the shareholders may well have wanted to adapt some of the culture of the smaller guy. In my experience it is better to create a new entity and get all parties to focus on that and thereby create a new culture.

When organisations have a growth or performance oriented culture that leads to the industry, as a whole, delivering real economic growth. This, in turn, impacts upon society and therefore assists a country's national agenda.

Richard:without any shred of doubt organisational culture has a huge role and impact. The empirical evidence is entirely overwhelming. My own personal experience tells me that it is the critical difference between true success and certain failure. Good teams are built on trust and transparency and sharing goals and objectives. It's simply not worth joining a team that does not exhibit trust amongst its members and transparently share its true goals with all its stakeholders.

Q: There have been significant changes in global economy, technology and business environment in the past six years which has impacted on all industries. In your opinion do you think the global Islamic finance industry has taken on board these changes?

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Daud:In part yes. On the economic front we have moved too slowly to embrace all the opportunities that the global financial crisis has presented us with. The page is only turning now as the next crisis looms. In general the industry has been a slower adopter of technology but is now gaining momentum. Building rapport between Shariah scholars and industry has been a challenge in the past but is now much more productive.

Richard:The IRTI / IFSB mid-term review highlighted this as a threat to development of Islamic Finance. Islamic banks have had to lag behind in product growth as they have been caught up with the conventional players where technological innovation is concerned. But I have seen and heard enough from peers in the industry to know that this issue is very well understood in the Board and changes in areas such as digital banking are coming through in Islamic finance now.

Q: Do you feel that globally we have effective collaborations between industry & academia that benefits the industry organisations, the academia and the talent seeking to make a career in Islamic finance?

Daud:Effective collaborative efforts are starting to show but there are still gaps that need to be filled. Industry needs to establish sustainable professional standards, academia need to build in flexibility and build bridges towards industry and the talent needs to develop skills beyond just technical competency. Soft skills such as effective communication and leadership for example are much required to be available within academic curriculum for generating good quality managerial talent.

Richard:This is always a yes and no answer. I was pleased to accept a position on the INCEIF International Governing Council (IGC) and have been keen to bring a practitioners eye to gatherings such as the SC-OCIS roundtable events, the UK Government Taskforce on Islamic finance, or the FSPB(Financial Services Professional Board). But the Islamic finance industry needs to do more collectively to bridge the gaps between practical and applied economics and the Islamic economic model.

Q: A key need of the global Islamic finance industry is talent. What are your views on how the global industry and the numerous educational institutions can collaborate to effectively produce a pipeline of talent?

Daud:One key element is building and applying Global Professional Standards for the industry and having them accredited. Then a university can develop courses and deliver talent that is a consistent good fit with what the industry requires.

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Richard:Talent can certainly be stifled in the mega corporations of which Islamic Finance may be one of many windows or in environments where regulation is becoming dominant rather than protecting or supporting framework. Will the big innovative breakthroughs come from Islamic crowdfunding or Islamic Private Equity? When you hear about these stories in the conventional markets they are so often attached to some university campus influence, either directly or indirectly. Enabling this is crucial for the global Islamic finance industry.

Q: In ending, what would be your three key take-aways- for industry, academia and the talent pool out there- that you would want to share with us?

Daud:EPL—Education, Perception & Liquidity.We need education to change Perceptions and our business needs the availability of cross-border liquidity.

Richard:I am from a generation that still likes to have little motivational quotes about the place. I have had one I like attributed to a Russian MIG fighter pilot- “The plane doesn't care if you are a general or a private, if you want to stay in the air, learn how to fly”. Confident leadership in finance can only be really underpinned by up to date knowledge of your industry, its people and its technologies.

Being worthy of trust in the Board and the C Suite and assembling a team that trusts and respects its peers and is transparent in its goals and motives is a basic prerequisite for success, not an optional extra.

Islamic Finance could be perceived to offer globally relevant ethical and sustainable principles of finance and behaviour in the workplace and the boardroom. If you work in this industry it behoves you to know what these are and to apply them.

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Joy Abdullah is the Head of marketing and communication at INCEIF, the Global University of Islamic Finance. A highly accomplished strategy & brand marketing executive, he works as a strategic advisor in developing people-value experiences. He is also a frequent speaker and blogger on topics of leadership, communication, brand management & organisational culture.