Tourism is the lifeline and the golden goose of the economy of the Maldives, the number one honeymoon destination in the world. Tourism is a sector that has shown progressive growth in the country and the largest contribution to the GDP of the country comes from this sector, proving that tourism is the most profitable sector in the country to be invested in.
However, although the Maldives is a 100% Muslim nation, the country is alien to the concept of Islamic tourism. With the rapid development of the Islamic finance industry in the country, the urge to test the practical applicability of Islamic tourism in the Maldives has grown. The year 2016 has proved that Islamic finance is here to stay and the country has novel developments that will hopefully realize in the next year which will lead to the sustainable development of Islamic finance in the country.
Review of 2016
2016 can be summarized as a prosperous year for Islamic finance which brought joy to the patrons of the industry as new players joined the market and new products were introduced. 2016 can be viewed as the year that marked a new development in Islamic finance in the Maldives and in the region as President Abdulla Yameen Abdul Gayoom formed a 100% government-owned company named the Maldives Center for Islamic Finance with the primary objective of working toward developing the Maldives as the hub for Islamic finance in the South Asian region.
Simultaneously, Hazana Maldives was also incorporated to act as the SPV in the issuance of securities as there is no legal and regulatory framework in place for the creation and operation of SPVs. This development proves the commitment and political will of the government in the development of Islamic finance. For a country aspiring to develop a fully-fledged Islamic finance industry, this is indeed a huge achievement that will attract foreign institutions and investors to come and set up their business in the Maldives.
The year began with the news that Litus Automobiles, a private company offering Islamic hire purchase products to the public, and the Housing Development Corporation have introduced the option to choose a Shariah compliant solution for all of its existing customers who have conventional home purchase agreements. The Housing Development Corporation also announced that all of its future products for home purchasing will be Shariah compliant. The first investment project to generate sustainable income was the mosque cash Waqf fund initiated by the Ministry of Islamic Affairs for the Darul Eman Project which became successful with the whole building completed this year and rented out, proving that Waqf can be sustained in an economically feasible manner in the country.
The government of the Maldives also issued Islamic treasury bills and for the first time the Musharakah Mutanaqisah structure was used. The Maldives Center for Islamic Finance also announced its intention to lay the foundation to develop an Islamic tourist resort to generate sustainable income to create a sovereign wealth fund. In the last quarter of the year, the Bank of Maldives opened a dedicated branch for Islamic banking services and proved once again the popularity of Islamic finance in the Maldives. They also announced the offering of Islamic home financing facilities and Islamic visa debit cards were introduced for the first time in the country.
The Islamic University of Maldives also signed an agreement with the International Center for Education in Islamic Finance (INCEIF) to design and offer Islamic finance programs in the Maldives, including Master’s in Islamic Finance Practice programs. It was announced that these programs will be offered starting from January 2017. MoUs were also signed between the AlHuda Center of Islamic Banking and Economics, the Islamic University of Maldives and the Maldives Center for Islamic Finance to collaborate in the development of the Islamic finance sector in the Maldives especially in developing the required talent pool.
Ayady Takaful introduced Family Takaful to the Maldives for the first time in 2016. Initiatives were taken by the Ministry of Islamic Affairs to acquire recognition of the Halal certification process and the Halal logo of the Maldives from JAKIM in Malaysia and a team from JAKIM came to conduct an inspection and audit required for the process.
Maldives Islamic Bank, the only fully-fledged Islamic bank operating in the Maldives, celebrated its fifth year of operation in the market and expanded to other islands of the country including Hulhumale’ and Thinadhoo. Maldives Islamic Bank also offered the first Education Financing scheme for students and signed an MoU with the Islamic University of Maldives to provide financial and technical support to develop Islamic finance education programs. The most significant event that happened at the end of 2016 was the announcement by the Housing Development Finance Corporation of its second Sukuk, the second corporate Sukuk of the country worth MVR200 million (US$12.69 million). Inter-Islamic financial institution placements on Wakalah were also made between institutions to manage liquidity.
The Maldives Islamic Banking and Finance Industry Conference was held for the third time this year focusing on Islamic tourism. The Islamic finance players in the Maldives also received recognition and awards for their outstanding performance in Islamic finance during the first Annual Islamic Finance Forum of South Asia Awards ceremony held in Sri Lanka where for the first time in the South Asian region, the work of a woman to drive the Islamic finance industry in the region was recognized. This was indeed a remarkable development in the global Islamic finance industry to increase female participation. At the national level, the highest award conferred on women was also given this year to a recipient in recognition of her work in the Islamic finance industry – the first time a person has received an award to recognize work conducted to develop Islamic finance, proving that Islamic finance is a field that is recognized in the country. Overall, it can be said that 2016 was a year that has opened doors for Islamic tourism to link with Islamic finance in the Maldives.
Preview of 2017
The year 2017 will definitely mark a new era for the development of Islamic tourism in the country linked with Islamic finance. The largest bank in the country, the Bank of Maldives, will start offering Islamic financing products that will help the population in other islands to use Islamic finance since accessibility is the most critical issue. Islamic microfinance schemes via Maldives Islamic Bank like ‘Faseyha Madadhu’ and other similar programs are expected to be successfully implemented.
The Islamic University of Maldives will start offering foundation, diploma and Bachelor-level courses in Islamic finance with assistance from INCEIF and hopefully this would resolve the problem of human resources shortages in the Islamic finance industry of the Maldives. This would be in addition to the Master’s degree in Islamic finance practice of INCEIF offered by the Islamic University of Maldives. The year 2017 will hopefully bring new players to the market and introduce new innovative products like crowdfunding mechanisms.
Conclusion
It is foreseen that the year 2017 will bring more optimistic growth to the Islamic finance architecture of the country. Islamic finance will flourish in the country and the success of Islamic tourism will be evident. Although the Maldives is a small island nation with a 100% Muslim population and with limited resources, it is proving to the world that if there is a will, there is a way and the dream to become the hub of Islamic finance in South Asia can be achieved soon.
Aishath Muneeza is an associate professor at INCEIF who is also the chairperson of the Maldives Center for Islamic Finance. She can be contacted at [email protected].