Malta is the southernmost country in Europe and it has always promoted itself as a gateway to Europe and North Africa. In 2010, it was stated that Malta could become the Bahrain equivalent in the Mediterranean.
Malta has over the years done little in order to take this vision forward. However, in 2016, a new era started which could result in Islamic finance receiving a major boost in the coming years.
Review of 2016
In 2016, Islamic finance activity in Malta continued to grow as more Islamic finance institutions have been using Malta, particularly due to the trust legislation that Malta has aligned with its advantageous tax environment.
An important step forward was the launch of the Shariah Equity Index by the Malta Stock Exchange, with eight Shariah compliant companies listed. In the same period, the Malta Stock Exchange also launched a program called ‘Prospects’ which encourages companies looking for finance to list on this program which have fewer reporting commitments and reduced costs.
Preview of 2017
In November 2016, the Malta Stock Exchange launched its National Capital Markets Strategic plan with Islamic finance development one of the main pillars in the plan where the Malta Stock Exchange sees Islamic finance as a massive opportunity for Malta and for Shariah compliant companies.
In Malta, there is excess liquidity which, if properly utilized, can enable one to raise capital. Usually every call for capital is oversubscribed which gives a clear indication of the potential for Islamic finance.
With the Shariah index, the Malta Stock Exchange is giving Shariah compliant companies from around the globe an opportunity to access finance. This is particularly so for SMEs that are not in a position to list on larger stock exchanges due to fees and compliance costs. The Malta Stock Exchange through Prospects has also become accessible for microenterprises which may start using this list to gain experience and subsequently list on the main market.
The government of Malta is expected to concretely support the Malta Stock Exchange as this measure is also seen to boost even further the citizenship scheme promoted by Malta. This is in view of the fact that to date, Muslims cannot apply to this scheme due to its requirements. However, if the Maltese government finally launches its long-awaited sovereign Sukuk, this challenge would be addressed. In this sense, the government has left the market waiting for the last two years following its intention to look into Sukuk in 2014.
Conclusion
The country is currently in a good economic moment although growth is seen mostly in the construction industry rather than in long-term sectors. However, this means that currently the government does not need cash although huge long-term infrastructure projects seem to be lacking in the country. Perhaps a forward-looking government may tap into the Sukuk opportunity to address certain national concerns. If the government of Malta launches such Sukuk, then the stock exchange would be in a better position to promote its Shariah listings and the Maltese government would have sent a strong message to the Islamic finance world.
Malta will hold the EU presidency in the first six months of 2017 which gives it the opportunity to lead the EU in addressing matters that are of interest to the Islamic finance world. There are two million Muslims in Europe who are not being allowed to properly practice their beliefs in spite of the rights given by the European Convention of Human Rights. Malta may lead in this and give Muslims as well as persons who believe in this method of financing a better future tied with opportunities that Europe may be open to if it puts Islamic finance on a level playing field as conventional finance.
Valletta 2018 is also an opportunity for Malta to promote its history and culture as Valletta will be the cultural capital city of Europe. If one analyzes the history of Malta, one will find strong links to the Arab and Muslim world. It is claimed that throughout the ages Malta had a number of Islamic finance transactions and the foundation of one of its mid-tier banks finds its origins in transactions similar to Takaful. Perhaps Malta will use Valletta 2018 as an opportunity to promote itself better in encouraging Islamic finance in the country.
Reuben Buttigieg is the president of the Malta Institute of Management. He can be contacted at [email protected].