The Maldives is in the early stages of forming a Shariah compliant sovereign wealth fund to support its Islamic finance ambitions, amid work on its maiden US dollar sovereign Sukuk offering and first Halal tourism resort to be financed in a Shariah compliant manner.

Part of its multipronged strategy to elevate itself as a regional reference point and hub for Islamic finance, the Muslim tropical nation is banking on its homogenous society, political stability and regulatory flexibility to attract regional Shariah dollar flows. The game plan is to carve the Maldives as an Islamic finance offshore center instead of adopting a domestic-focused approach as practiced by its neighbors.

“If we want to develop domestically, we will be a small player as we cannot compete with other countries in the region based on population,” Dr Aishath Muneeza, the chairperson of the Maldives Center for Islamic Finance (MCIF), explains. “But if we can create a platform to facilitate regional players to conduct transactions in our country — this is something we can be good at, and we can grow from there. This is the strategic vision we have now.”

The Republic of less than half a million people is cognizant of its relative disadvantages when it comes to Islamic finance: its populace is small, its experience in Islamic finance is green as compared to that of seasoned players like Bangladesh and Pakistan and its capital market is tiny and comparatively underdeveloped. However, President Abdulla Yameen’s government is also aware of its unique advantages and is playing to its strengths to build its Islamic finance proposition: its strategic location cradled between the Arab Gulf and China, its 100% Muslim population and its booming tourism industry.

And the country has seen swift progress: in less than 15 years since the first Islamic financial institution was launched in 2003, the Maldives now has over 13 Shariah finance service providers and has introduced a number of Islamic instruments including Takaful, Shariah treasury bills and a local privately-placed Sukuk facility. A fully-fledged Islamic sovereign wealth fund is the next step.

“It has always been the vision of the president to create a Shariah compliant sovereign wealth fund. But this needs a lot of expertise and instruments, and we need to start from scratch,” Dr Aishath shares, adding that the MCIF is currently formulating a national Islamic finance roadmap to support the president’s vision. “The MCIF had developed its own strategic plan but this is not enough to embark on such a huge endeavor especially since the vision is not to only develop a domestic sovereign wealth fund, but to have a sovereign wealth fund strong enough to support infrastructure projects in the region. Our domestic market needs to be developed first if we want to develop such a resilient fund.”

Concurrent with the engineering of this national blueprint, the MCIF is also running a feasibility study on the country’s first fully Shariah compliant holiday resort, which will be built on an island allocated by the government to the MCIF for the purpose of developing Islamic finance-funded Halal tourism. The center is looking at securing a strategic partner for this project before the end of this year, during which the government is also expected to make its debut in the international sovereign Sukuk space.

For more exclusive insights and details on the Maldives’s upcoming global sovereign Sukuk sale, Halal resort and Islamic finance regulatory reform measures being undertaken, log on to IFN Podcast.