Malta - A rising opportunity for Islamic Finance

The worldwide Islamic financial services industry is thought to be worth in excess of US$1.5 trillion and, despite current global economic uncertainty, continues to demonstrate strong signs of growth as investors (Islamic and conventional) look to tap into the alternative source of liquidity offered by Shari’a compliant financing structures and products.

Today, there is a concrete drive to promote and drive Islamic finance in Malta. Last February, the Malta Stock Exchange launched an Islamic equity index aimed to attract business from Middle East firms, a move which pre-empted the government considering the issuing Islamic bonds (sukuk).

Sukuks are investment products that rely on payments from an underlying asset, like real estate, rather than paying back a loan with interest like a traditional corporate or government bond, because the Koran forbids usury.

Islamic Finance in Malta
Mr David Pulis, Exante's Senior Account Manager at recent conference in Dubai

The MSE has certified the stocks of a number of listed companies whose activities are Shariah-compliant. The Stock Exchange continues discussions with Islamic finance institutions which can now generate funds through listing on the exchange. Malta has an interest for small listings and there is an immediate market which is still largely untapped. Various companies are realizing this and through another initiative of the MSE, many are accessing finance through facilitated listing ‘prospects’.

Malta is increasingly perceived as an attractive gateway for Islamic finance, a sector which currently sees a yearly expansion. Malta’s proximity to North Africa – 55 minutes from Libya and 45 minutes from Tunisia – are reasons that Islamic financial institutions consider Malta an ideal platform for business.

The suite of investment vehicles offered by Malta as an International Financial Centre also resonates well with Islamic investors, who may set up their funds as Special Purposes Vehicles, Undertakings for Collective Investment in Transferable Securities, Alternative Investment Funds or Professional Investor Funds. Having a regulatory framework in place that allows for protected cell companies and incorporated cell companies, ensures Malta is well placed to accommodate charitable collective funds, better known as Takaful insurance solutions.

But in order for Malta to stay concrete as a hub for Islamic finance, it has to well-promote itself with international Islamic investors. The government should invest its resources and issue a Sukuk so as to place Malta on the map of Islamic finance, while using it to complement the Individual Investor Programme.

Malta can also play a significant role in the development of North African countries. Islamic finance in Malta does not require any alterations to its financial reporting regulations; however, expertise and knowledge within the sector must be imported. Malta must also embrace and take over the likes of Luxembourg which is flourishing considerably in the Islamic Funds sector; Malta has an advantage over this country as it only opts for considerable large amounts in funds.

 

Patrick J O Brien
Exante’s Communicator Director

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