Along with the COVID-19 pandemic, 2020 saw increasing priority given to health matters and maintaining economic stability. Being exposed to the same conditions, Malta experienced slow growth within various sectors, including Islamic finance, as investment projects were shelved in order to handle the undesirable situation.
In contrast to 2020, 2021 provides a glimpse into a more fruitful agenda with respect to Islamic finance projects, which may indeed pave the way to the introduction of fully-fledged Shariah compliant investment projects.
Review of 2020
The outbreak of the pandemic has not only shocked the entire world, but challenged many countries and governments to respond adequately in order to flatten the curve and keep the pandemic under control. While such efforts may have been beneficial from a medical viewpoint, economic conditions have worsened.
This was also true for Malta, and the government took prompt action to reduce the spread of the pandemic. As such, a soft lockdown and social distancing policies were put into force. Like other religious establishments, the Mariam Al-Batool Mosque in Malta also had to shut its doors, and consequently Muslims had to practice their prayers from the safety of their own home.
Teleworking proved to be an effective tool and quickly became the norm, and Islamic finance courses have been delivered through such channels and thus the pandemic did not cause much hindrance with respect to delivering Islamic finance awareness.
Discussions with the Maltese government with respect to Islamic finance transactions had to be postponed in order to tackle the more pressing economic matters with respect to stimulus packages and financial aid to local businesses as well as trying to safeguard employment.
Preview of 2021
While 2020 took an unexpected turn for the worse, it was not all gloom and doom. A particular start-up company within Malta is expected to start operating in 2021 and is also in talks to launch a miniature form of Sukuk.
This Maltese start-up company within the manufacturing sector will be producing electric vehicles (EVs) for the local market. These EVs will be available to both end consumers and commercial entities, as the platform on which these EVs are built upon allows for a modular design to deliver the specific vehicles to the appropriate customer.
With growth in mind, this company will be launching a digital pseudo-Sukuk facility in order to obtain further investments. This form of Sukuk will be used as a pilot run, and funding will be driven by crowdfunding.
This pilot run will serve as a means for ethical investment, as this will not manifest itself in the structure of a conventional bond, but merely in the form of assistance from the general public, including commercial entities. The online-based crowdfunding structure can either be equity-based or reward-based.
The equity-based crowdfunding option will allow potential investors to purchase shares in the company, and it is very similar to some conventional Sukuk structures, in which case both parties will participate in losses or gains, commensurate to the investment value.
On the other hand, the reward-based crowdfunding option will ask the community to help in exchange for a reward which is proportional to the financial support. Participants within this project are considered more as contributors rather than as full-blown investors.
Both crowdfunding options shall serve as studies to ascertain and test not only whether there is a market for such a product, but also to provide a practical basis on which Sukuk may be based. This type of digital pseudo-Sukuk will also be the first of its kind within the region and may also prove to be an incentive to other countries to move to digital platforms.
If the results provide a promising outcome, the following stages would be to launch and list Sukuk on the Malta Stock Exchange in order to capture a wider market with respect to investments, as well as be a catalyst to provide exposure to Islamic investments within Malta.
With Islamic finance activity put on hold in 2020, 2021 looks promising and we could see the launch of digital pseudo-Sukuk that may pave the way to better Shariah compliant investments within Malta.