Interviews

An Interview With Dr. Sayd Farook Global Head Islamic Capital Markets , Thomson Reuters

Dr. Sayd Farook (Global Head Islamic Capital Markets) is responsible for leading the Islamic markets value propositions for the Thomson Reuters group, providing knowledge and information services to governments and businesses in relation to their strategies related to Islamic markets. Before joining Thomson Reuters, in May 2010, Dr Farook was responsible for structuring and legal advisory at Dar Al Istithmar, a boutique Islamic Finance advisory firm based in Oxford, UK. He regularly consults and advises standard setters such as Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) on their standards and professional education. Dr Farook holds two First Class Honors’ University degrees in Law and Business and a PhD in Financial Economics, with a special focus on Islamic banking, from the University of Technology Sydney. Currently, Dr Farook is based in Dubai, United Arab Emirates – by Muath Mubarak

IslamicBanker (IB) : As a Global Head of Capital Markets for Islamic Finance at Thomson Reuters, what are your aspirations for Islamic Finance in 2014?
Dr. Sayd : Quite simply, my aspirations for Islamic finance is that it achieves true relevance to the billions (not only Muslims) that could benefit from its underlying (and arguably enduring) socially responsible ethos, i.e. in simple terms, democratise access for anyone anywhere to a new form of Islamic finance that is based on social responsibility first and that is profitable by being the leader in doing good finance. This may sound altruistic and utopian. But it is not. In business schools and boardrooms, we are all taught about strategies to inure a lasting and differentiated proposition so that you can achieve a premium to all other offerings: think Apple. Islamic finance needs a road map to define its proposition to the common layman on the street. This, I argue, needs to be the following:
1. Accessible by anyone, anywhere (scale)
2. Socially responsible (relevance) though this is a very significant challenge, there are bits and pieces that need to be achieved to get to that goal, the first of which should be served by cleaning up house, i.e. fixing the problems that are hindering the industry from achieving scale and relevance. For 2014, the key challenges that the industry should be addressing are the following:
a. Shari’a governance and standardisation: A very significant thorn on the back of the industry is its high costs of governance. fiis serves as a hindrance to deploying services and scalability. As a result, Islamic finance remains a niche phenomenon that is barely able to service its captive demand from Muslim customers, let alone attract non-Muslim customers. One way to solve this is by commoditising Islamic finance products so that any financial institution anywhere can provide these services, without having to incur significant set up expenditure, as is the case now. Commoditising will involve two distinct elements: a. Template-ising as many of the common and much needed Islamic finance products as possible, so that 80-90% of products are standard and that innovation only occurs where a perceived need is not being addressed by the existing suite of products.
b. Reconfiguring the role of Shari’a governance to that of being a check and balance on the bankers, similar to the role of auditors and lawyers in their respective functions in the financial services industry. This means that as the first objective of templateising is achieved, the dependency on Shari’a scholars to sign o on product structures should be

2. Connecting with socially responsible investment industry: In 2013, the industry took the first steps to move away from our ‘Islamic’ moniker which hinders adoption of Islamic services. A number of banks launched their new identities to appeal to everyone (and not just Muslims), while Thomson Reuters and ADIB launched the debut Ethical Finance Innovation Challenge
and Awards (EFICA). This is not enough. The industry now needs to actually connect in real terms with the thriving $4.3 trillion socially responsible investment industry, as it has much to gain from such a connectivity, the most important of which is that it will begin to be perceived as part and parcel from the SRI industry and therefore benefit from those fund inows to give Islamic asset management a significant social impact boost in terms of assets under management (AUM). This will have a number of ripple eects that could have very dramatic eects, not least moving the industry closer to being measured by impact criteria and attracting impact investment funds. As you can see, the former relates to supply side issues (i.e. reducing costs and scaling to enhance capacity) and the latter relates to demand side issues (i.e. increasing fund ows). If these two aspirations of mine get kickstarted this year, I believe we will see some major changes in the next few years

IB : You are responsible for full spectrum leadership for Thomson Reuters Islamic Finance business and have led many successful initiatives, Could you brief your journey at Thomson Reuters and the vision of its Islamic finance business?
Dr. Sayd: Interestingly, I started my journey o at Thomson Reuters as responsible for facilitating treasury capital markets solutions for Islamic finance, hence the moniker Global Head Islamic Capital Markets still remains. I’d like to acknowledge my long term friend and guide, Rushdi Siddiqui, someone who believed in me and recognised my potential to really change things. He started talking to me in 2009 to join him in his ambitious goals for Thomson Reuters. As soon as I joined, I somehow assumed the 2IC (Second in Command) position for the Islamic finance business in its entirety, doing all the operational execution of the Islamic finance business to get it o the ground. I was not really interested in doing so, as my goal was getting the treasury solutions o the ground. However, there was very little talent available internally to fill the role of executing the broad spectrum of Islamic finance requirements and someone needed to do the dirty grunt work to really get Islamic finance to achieve its scale. We were also being frustrated with the amount of internal bureaucracy (as is the case with most MNCs), that we needed to deal with to get solutions o the ground, particularly as they related to treasury trading platforms. Along the way, Thomson Reuters as an organisation, had several bouts of restructuring to streamline the businesses and our fate as a unique proposition was consistently challenged, as it was in several other global MNCs. Frankfully, the constant challenging allowed us to refine our proposition (and our powerpoint skills!!) and we only came out stronger. We were moved in 2012 from the Treasury division (which was one of the largest revenue earners for Thomson Reuters and now called Marketplaces in the Financial and Risk division) to a new division tasked with rapidly developing economies, and named Global Growth and Operations. Rushdi Siddiqui, Global Head of Islamic Finance & OIC Countries, moved on around the end of 2012. It was then that I was tasked to take charge of the entire portfolio / proposition of Islamic finance formally and devised a new strategy that saw us pivot our model slightly to focus more on the information side of things, cognisant of the realities of the relatively underdeveloped marketplace. This strategy has been tremendously successful for us and marked the start of a new approach to how customers and the market perceived our contribution to the industry, although there is much more to be achieved. During 2012, I also personally oversaw and expanded our core team from just 5 resources to more than 25 full time dedicated stafocused on dierent specialisations, from product development and content to community, business development and client service.In 2013, I expanded our mandate to not just covering Islamic finance, but cover the entire spectrum of the emerging Islamic economy and this enabled us to target governments and institutions playing in the broader space. In terms of vision for Thomson Reuters Islamic finance business, it is quite simply explained as making Islamic finance and markets accessible to anyone anywhere through the democratisation and commoditisation of knowledge and transaction resources. The First phase of this involves addressing the needs of the professional market, in which we have been building capacity for the past 4 years. The second phase involves reaching the retail market and this involves building specific capabilities to service the needs of every non-professional consumer of Islamic finance content. We are just starting out in this phase and I am extremely excited about the prospects and impact we will have.

IB : You have been actively engaged in many important ground breaking projects. Could you brief us on the important projects that you are handling at the moment?
Dr. Sayd: Let me split my role into two, the first of which is overseeing every aspect of the broader strategy of the Thomson Reuters Islamic markets business, while the second of which is seeding new projects that could have the potential to enhance our proposition in a significant manner in the future. In the latter role, I am now in the process of ‘seeding’ three very interesting projects that could have dramatic eects on the accessibility and capacity of Islamic markets. However, as with any Greenfield project, which one will be successful and achieve its desired objectives is uncertain, at least for now. That said, we have a good track record of execution and delivering on our projects, so I am quite confident that we will see them to fruition, God Willing

1. SME Development Initiative with the private sector arm of the Islamic Development Bank ICD, International Finance Corporation (IFC), Dubai Financial Market (DFM), Silatech – As part of our survey / research of the market, we found that Financial institutions are struggling to serve the SME segment, despite the recognition that these businesses will be the major backbone of economic development plans of their countries. The concept behind the SME development initiative is to set up a separate entity that will be responsible for scaling support services to SMEs across multiple markets in a ‘commoditised’ approach, enabling a support eco-system to develop in each country that takes advantage of the international bodies specialist capabilities but customised to each country’s needs.

2. Islamic Economy Portal with the Government of Dubai’s Dubai Islamic Economy Development Center (DIEDC) – One of the key objectives that the Government of Dubai has is to become THE knowledge reference for Islamic economy. This aligns very nicely with Thomson Reuters objectives of enhancing accessibility to Islamic markets. As part of this, we will be looking to build a mobile
online platform that will serve as a reference for all things related to the Islamic markets, from investment funds to lifestyle content for consumers to statistical and reference data for Islamic economy professionals.

3. Shari’a Source with the Islamic Legal Studies Program (ILSP) at Harvard Law School: The ILSP under the leadership of a new Director and Deputy Director will be initiating a new platform to
collate and gather Islamic law materials from all over the world and digitise them for access by both professional and research users. Again, this lends itself nicely to our strategy and therefore
we will be looking to support them as a strategic partner with our knowledge and skills in content gathering, ordering, technology and our vast array of existing legal content for the Islamic markets.

IB: As you have been involved with different stakeholders of this industry as a Leader, Lecturer, Speaker and Advisor, how do you see the conduciveness of the market in GCC?
Dr. Sayd: The market in the GCC has tremendous potential, simply because the fundamentals are in its favour. Billions of dollars pour into the coers of both governments and financial institutions every day and the drive by the populations in these markets to embrace Shari’a compliant investment means that Islamic finance is becoming the de facto choice now when it comes to raising financing. However, there are major challenges in the development of the market in the GCC, the first of which relates to human capital, despite the fact that this is not only an issue for Islamic finance, but for the broader GCC economies. We have a very shallow knowledge base in the GCC, most of which is imported by South and South East Asia and the broader MENA region. The talent base is also utilised for reactive short sighted business opportunities as opposed to longer term strategic infrastructure development.

MM: In your view, how do you see the progress of Islamic banking & finance globally? What are the pressing issues and challenges faced by the industry and how it can be resolved?
Dr. Sayd: I may have referred to these before when we discussed my aspirations for Islamic finance, but I will do so briey for the purposes of clarity. Despite the enormous demand for Shari’a compliant products and services, Islamic finance is nowhere near achieving critical mass. Although strong progress has made by visionaries in the industry, it is still growing in a fragmented manner and lacks a unified approach to solving the key challenges. In my mind, the key challenges relate to:

1. Accessibility for Muslims and non-Muslims alike – Much of this relates to positioning and branding but also to how we connect and integrate our propositions with our socially responsible investing brethren. This requires concerted strategies by industry bodies such as CIBAFI, AAOIFI and other government bodies to specifically reach out to the socially responsible investing industry to co-invest or derive common investment strategies. We need to also think about how we integrate socially responsible practices in all of our activities, particularly through the adoption of the AAOIFI Governance Standard on Corporate Social Responsibility Conduct and Disclosure

2. Scale – As previously discussed, we need to break down the barriers hindering scale in service provision. This requires a rapid acceleration in template-isation and professionalising the Shari’a governance. Islamic banks also need to think about adopting new strategies such as technology based service provision (icking funds B2B, mobile-only banking and POS transactions and adopting technology solutions for financial intermediation between borrower and lenders).

IB: As a Moderator of Finance Accredited Agency of Malaysia responsible for reviewing the standard of educational programmes, how do you see the standard of Islamic finance educational programmes?
Dr. Sayd: I think Islamic finance education is a mixed bag. On the one hand, we have too many Islamic finance programs focused on the basic theoretical knowledge, failing to make the bridge to relevant practical knowledge. On the other hand, there are too few programmes that integrate the Islamic finance component into a wider curriculum that teaches the work ready finance skills and knowledge that employers prefer. This is not necessarily a major issue for employed finance professionals who just need to get acquainted with Islamic finance, but have a good understanding of contemporary finance. But it is for fresh graduates, who need a qualification that can be recognised by employers, as being relevant to the workplace. As such, many ‘Islamic finance’ graduates are struggling to find employment within the Islamic finance industry. The reason for this gap is because the standards that apply to Islamic finance education are mixed and varied across the world. Anyone and everyone can oer a masters or bachelors programme, diploma or certificate. While in some jurisdictions, local or international quality standards apply, most don’t assess the depth and relevance of the Islamic finance specific content. As such, I believe that for the development of the Islamic finance industry, we require independent institutions to accredit the quality of programs taught to finance professionals, according to academic quality standards. This is where I believe that the Finance Accreditation Agency performs a very critical role.

IB: You have been responsible for preparing and delivering the AAOIFI’s CIPA qualification training programme. Could you briefly describe it and the advantages of doing the programme?
Dr. Sayd: The AAOIFI CIPA qualification is focused on preparing accounting and finance professionals to understand the rationale and need for unique accounting standards for Shari’a compliant transactions and financial institutions, while training them to apply such accounting rules to Shari’a compliant transactions and Islamic finance institutions. The advantages of doing the program is that it gives accounting and finance professionals the required depth of knowledge and skills to effectively account for Islamic finance transactions, although it cannot be considered an entry level
programme.

IB: Based on your areas of expertise including Law, Business & Islamic Finance, what message / advise would you like to convey from the industry leaders to the youngsters who are aspiring to enter the industry? What are your plans for contribution to this industry in the near future, and also how you would like to be remembered in this industry?
Dr. Sayd: The one message I would like to convey to youngsters is that you should not be driven by achievement for the sake of achievement alone or a high paying salary or even a high profile job in Islamic Finance as your end goal. If that is the case, you will likely achieve it but that’s where it will end. Instead, your focus should be on contributing the maximum amount that you can to a higher purpose in the limited span of your career. There is no shortage of opportunities for those who have determination and grit. Along the way, you need to have the pragmatism and realism to know that not everything will be as utopian as you visualise it to be and that you will be most certainly be disappointed with what you confront while trying to be an agent of change. The reason I got into Islamic finance and why I continue to be involved is because I would like to make a real and meaningful impact to the lives of ordinary people with a particular focus on disadvantaged and poor people all over the world. I would hope that at the end of the day, my contributions amount to some level of contribution towards that objective

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