While the world’s financial systems are shaken to their foundations, global stock markets tumble and thousands of bankers are made redundant, one area of finance goes from strength to strength.

Islamic banking and finance principles may be a thousand years old but they have attracted the attention of Western financial services companies only recently. Now business schools are offering specialist masters programmes on the subject.

Islamic banking and finance must comply with Islamic law, or Sharia. This is governed by a number of fundamental principles and prohibitions and there are many differences from conventional finance.

“There is the absolute prohibition on the charging of interest,” says John Board, director of the International Capital Market Association (ICMA) Centre, part of Henley Business School at Reading University. ICMA runs an MSc in investment banking and Islamic finance, taught jointly with the International Centre for Education in Islamic Finance in Kuala Lumpur. “This leads to the question: how do you raise money in a way that is commercially sensible but does not involve paying interest?

“And on the investment side, there is a range of prohibited activities. For example, Islamic investors may not invest in businesses that trade in alcohol or pork-related products, or are involved in certain types of entertainment.”

Other restrictions include not being able to sell something unless you own it, or to invest in companies with high levels of debt. Taking all the restrictions into account, many conventional financial products, such as deposit accounts, mortgages, credit cards, insurance, bonds and many derivatives, such as futures and options, are out of bounds to Islamic investors.

Until recently, certainly in non- Islamic countries, there was little on offer for people who wanted Sharia-compliant banking and finance. However, substantial growth in this market over the past five to ten years, partly driven by Middle Eastern countries investing oil revenues, means more institutions are beginning to offer appropriate products and services. Islamic assets under management are about £400 billion, according to the Islamic Financial Services Board, an industry body.

Today Islamic finance and banking touches everything from large capital infrastructure projects to retail banking. HSBC in the UK, for example, has Sharia-compliant bank accounts and mortgages. And the increase in Islamic finance activity means there is a need for postgraduates with knowledge in this area. “There is a big demand for Islamic finance as a professional activity,” Board says.

Bangor Business School, at Bangor University in Wales, has launched a one-year full-time Islamic banking and finance MSc. “The aim is to provide students with an understanding of the key principles, products and services,” says Philip Molyneux, professor of banking and finance and the school’s head.

“The Islamic banking module, for example, starts by looking at the theoretical foundations and development of Islamic banking practices, the key features of different types of products and how products are offered without charging interest.”

Another module focuses on Islamic finance. “That looks at financial instruments, for instance investing in mutual funds, and what are and are not permitted investments.”

The Bangor programme also covers conventional banking and finance, as does the programme delivered at the ICMA Centre. Several other business schools offer an Islamic financeorientated elective as part of a general finance MSc.

Employment prospects are looking good. Despite the fallout from the credit crunch, Islamic finance specialists are much in demand, both in the Islamic world and in non-Islamic financial firms.